The Tax Ordinance defines three types of schemes that are subject to the obligation to provide information to the Head of the National Revenue Administration:
- tax scheme,
- standardised tax scheme,
- cross-border tax scheme.
In order for a scheme to be defined as a tax scheme, one of the following conditions must be met:
- the arrangement meets the main benefit test and has a general hallmark – both of these conditions must be met cumulatively,
- the arrangement has a specific hallmark – in this case, the main benefit test does not have to be met, or
- the arrangement has another specific identifying feature – in this case, the main benefit test does not have to be met either.
What is the main benefit test in MDR?
The main benefit test, in accordance with Article 86a § 2 of the Tax Ordinance, is considered to be met if, based on the existing circumstances and facts, it can be assumed that a reasonably acting entity pursuing legitimate objectives other than obtaining a tax advantage could reasonably have chosen a different course of action that would not have resulted in a tax advantage reasonably expected or resulting from the implementation of the arrangement, and the tax advantage is the main or one of the main advantages that the entity expects to obtain in connection with the implementation of the arrangement.
For the purposes of tax schemes, a tax advantage, in accordance with Article 86a § 1(4) of the Tax Ordinance, means:
- no tax liability arising,
- postponement of the tax liability,
- reduction of the amount of the tax liability,
- the creation or overstatement of a tax loss,
- overpayment or entitlement to a tax refund,
- overstatement of the amount of the overpayment,
- overstatement of the amount of tax refund,
- no obligation to collect tax by the payer if it results from the non-existence of a tax liability, postponement of the tax liability or reduction of its amount,
- an increase in the amount of excess input tax over output tax within the meaning of the Act of 11 March 2004 on goods and services tax – to be carried forward to the next settlement period,
- no obligation or postponement of the obligation to prepare and submit tax information, including information on tax schemes.
The criterion of the main benefit, as indicated in the Official Tax Guidelines of 31 January 2019. Information on tax schemes (MDR) should therefore be considered from the perspective of three premises:
1. Premises for the occurrence of a tax benefit – which will not be met if the chosen course of action would not result in an actual or reasonably expected tax benefit. However, the tax benefit does not have to be contrary to the subject matter or purpose of the tax law or its provision (as in the case of the anti-tax avoidance clause).
2. Conditions for the tax advantage to be the main or one of the main advantages – this condition is met if the tax advantage is a significant or determining factor in the decision to implement the arrangement and is not merely an incidental or unexpected effect of the arrangement. The main benefit test will therefore, in principle, be met if the arrangement would not have been implemented without the expected tax benefit.
3. Alternative course of action – will not be met, as a rule, if, based on the existing circumstances and facts, it must be assumed that a reasonably acting entity, as a result of applying lawful solutions, does not have or did not have an alternative, rational course of action, even if the course of action results in a tax benefit.
Example: Due to the definition of a tax advantage, a reduction in tax liability in connection with the recognition of an economically justified expense as a tax-deductible cost will also constitute a tax advantage. However, this is not an activity which in itself would fulfil the condition of an alternative course of action, as reasonably acting entities operating with, must incur costs in order to generate revenue or secure its source. Not incurring an economically justified expense is not a rational alternative course of action.
At this point, it is worth noting that tax regulations are one of the most important factors taken into account by entrepreneurs when adopting a business strategy. As noted by the Supreme Administrative Court in its judgment of 8 July 2019 (ref. II FSK 135/19), the taxpayer is not obliged to pay the highest tax.
The Minister of Finance, in a general interpretation of 24 December 2024, ref. no. DTS5.8092.4.2024 (Journal of Laws of the Ministry of Finance of 27 December 2024, item 126) on the classification of operating lease agreements under the provisions on tax schemes, stated:
“A tax advantage is the main or one of the main advantages if it constitutes a significant or determining factor in the decision to implement the arrangement and is not merely an incidental or unexpected effect of the arrangement. The main benefit test will therefore, in principle, be met if the arrangement would not have been implemented without the expected tax benefit.
The main benefit test will not be met, as a rule, if, based on the existing circumstances and facts, it must be assumed that a reasonably acting entity, as a result of applying lawful solutions, does not have or did not have an alternative, reasonable course of action, even if the effect of that action is to achieve a tax benefit.
The main benefit test will also not be met if the taxpayer, faced with a choice between two actions, is not obliged to choose the action involving the highest amount of tax, but, on the contrary, has the right to choose a structure for its activities that will reduce its tax liability. The taxpayer is free to choose the organisational structures and methods of performing activities that he considers best suited to the needs of his business and to reduce his tax burden.
How to correctly verify the main benefit test?
For the main benefit test to be effective, it must be based on objective criteria and not on the subjective knowledge of the person involved in the agreement and their assessment of the facts and circumstances.
When conducting an analysis to verify MDR obligations, it is therefore necessary to verify whether the arrangement has resulted in a tax benefit, i.e. to compare the amount of tax payable by the taxpayer with the amount of tax that would have been payable by the same taxpayer in the same circumstances in the absence of the arrangement in question. The purpose of the transaction is important.
The value of the tax benefit is irrelevant for the purpose of the main benefit test.
Next, the taxpayer’s situation should be compared with a situation in which the entity’s action does not result in a tax benefit.
To sum up, in order to correctly carry out the main benefit test, it is necessary to compare the tax situation of the entity before and after the performance of the activities constituting the arrangement and to consider whether a rational entity would have participated in the arrangement if it had not expected to obtain a tax benefit. This means that the situation of the entity must be examined broadly, if only because of the definition of an arrangement, which is an action or a series of related actions, including a planned action or a series of planned actions, where at least one party is a taxpayer or which have or may have an impact on the creation or non-creation of a tax obligation (Article 86a §1 point 16 of the Tax Ordinance).
Examples
Tax relief and preferences
According to the Tax Explanations, the use of tax reliefs and preferences guaranteed by the legislator, such as research and development relief, Innovation Box, CIT rate for small taxpayers, relief for bad VAT debts and reductions in tax liability in connection with the recognition of economically justified expenses as tax-deductible costs, will not, in principle, be subject to reporting.
The above measures should be considered reasonable and dictated by the need to maintain a competitive position on the market and the development of the company. Therefore, they can be described as typical measures for conducting business activity.
However, if the taxpayer took advantage of the above-mentioned tax reliefs and their main motivation was to achieve a tax advantage, and despite the possibility of choosing an alternative course of action that did not involve achieving an advantage, they did not do so, then the tax authority may consider that the agreement in question meets the main advantage criterion.
Change of form of cooperation from an employment contract to a B2B relationship
As a rule, the above action should not be reported. However, if an entity employs workers on a B2B basis despite the lack of economic justification or changes the form of cooperation during the employment relationship (the entity should consider whether the change has the intended legal effect, because may still bear the hallmarks of an employment relationship), it should be concluded that the main benefit test has been met. When comparing the tax situation before and after the agreement, the following should be taken into account, among other things:
- 50% of the tax-deductible costs of employee remuneration (the right to increased costs in employee settlements applies when an employee performs activities covered by copyright or other related rights. This depends on the determination in the employment contract of the portion of the employee’s remuneration in exchange for the use of these rights, and then the application of increased costs only to this portion of the remuneration)
- the form of taxation and the tax rate.
Application of the preferential 9% CIT rate in the case of related entities
In a situation where an entity has undertaken to perform a contract and has deliberately broken it down into smaller parts to be performed by its related companies which benefit from the preferential 9% rate, the main benefit test is met.
Choice of form of taxation
In my opinion, if the chronology of events prior to the choice of the form of taxation does not contain any element of artificiality in the actions taken and these actions are reasonable, the choice of the form of taxation does not meet the main benefit test.
This is confirmed, for example, by the Tax Explanations of 23 December 2021. Guide to the lump sum tax on company income, which states that the mere notification of the choice of lump sum taxation on company income, in the case of schemes other than cross-border schemes, will not entail such an obligation, provided that the taxpayer, at the time of notification or during the period of using this form of taxation, meets the conditions set out in Chapter 6b of the CIT Act. The mere choice of lump-sum taxation of company income, even if motivated by tax considerations, should in principle be linked to the achievement of a tax advantage consistent with the subject matter and purpose of the Act.
However, in my opinion, any actions taken before choosing the lump sum, after its application or during its application, where the taxpayer’s actions can be considered artificial, should be analysed from the perspective of the main benefit test.
Conclusions: the main benefit test as a prerequisite for a tax scheme
In the context of the main benefit test and the fact that the DAC6 Directive concerns arrangements involving potentially aggressive tax planning, the question arises as to whether obtaining a tax benefit clearly provided for and granted by law should give rise to MDR obligations.
In my opinion, no, although, as stated in the Tax Explanations Information on tax arrangements (MDR):
“(…) the primary objective of the MDR provisions is to obtain information on arrangements that present a high risk of aggressive tax optimisation or of breaching other tax laws, it is also an instrument that can provide valuable information for analysing the functioning of specific tax reliefs or preferences with a view to their ex-post assessment.”
It should be clearly emphasised here that the Polish legislator, in deciding to include domestic schemes in the reporting obligation, should pursue the objective of the Directive.
The DAC6 Directive is part of a larger whole. The whole is the BEPS project and the initiatives taken on its basis, which aim to eliminate aggressive tax optimisation that allows for the complete avoidance or deferral of tax burdens.
It would be good if the legislator explicitly indicated that the main benefit test will not be met in situations where the tax benefit is clearly intended by the legislator and the arrangement does not contain any element of artificiality.
By taking only the tax benefit as the determining factor and downplaying the main objective of the DAC6 Directive, we may end up with information that will treat tax relief, exemptions, choice of taxation or VAT refunds as tax schemes. Such information does not fulfil the objective of the DAC6 Directive and often causes important information to be lost in the flood of data.
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