The Mandatory Disclosure Rules (MDR) on tax scheme reporting, which came into force in Poland on 1 January 2019, were one of the most far-reaching extensions of the implementation of EU Directive 2018/822 (the so-called DAC6). The Polish regulations went well beyond the minimum harmonisation requirements provided for in the directive, inter alia by imposing a reporting obligation also on arrangements that are not cross-border in nature, i.e. domestic arrangements.

After six years of operation of the MDR, the legislator decided to radically reconstruct the system, the most significant element of which is the abolition of the reporting obligation for domestic tax schemes. This change is not merely a technical simplification of the tax reporting system, but reflects a deeper process: a critical review of regulatory effectiveness, compliance with the principle of proportionality and the need to align with European standards.

1. The origins of the MDR regulation and its implementation in Poland

Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation with respect to certain cross-border arrangements (OJ EU L of 2018 No. 139, p. 1, as amended) – hereinafter referred to as the DAC6 Directive – aimed to improve transparency in tax planning, especially in the context of cross-border arrangements which, due to their complexity and the mobility of entities and capital, potentially undermine the effectiveness of Member States’ national tax systems.

When implementing the Directive, the Polish legislator decided to extend its scope by creating its own dualistic MDR model, which covered both cross-border schemes (in accordance with the requirements of the Directive) and domestic schemes, which were not subject to reporting requirements under EU law, but permitted in recital 10 of the Directive as an optional national measure.

In addition, Poland separated the concept of an intermediary by introducing new, autonomous constructs of a “promoter” and an “facilitator”, which significantly distinguished the Polish system from the model adopted in most Member States.

2. Theoretical assumptions and objectives of the legislator

The adoption of the MDR was based on two overarching objectives:

1. To tighten the tax system by creating an early warning mechanism for tax authorities about arrangements that could lead to tax avoidance.
2. To discourage aggressive tax planning by increasing transparency in relations between taxpayers and advisors.

According to the explanatory memorandum to the implementing act, the MDR system was also intended to enable tax authorities to:

• quick access to information about promoters and beneficiaries,
• initiate legislative action in response to tax practices,
• effectively use reporting data in control processes.

3. National MDR as a disproportionate instrument – analysis of effectiveness

After six years of the national scheme rules being in force, empirical and legislative analysis leads to a clear conclusion: the regulatory effects did not meet the objectives set, and the rules themselves showed significant functional shortcomings.

3.1. False alarms and lack of legislative impact

As stated in the explanatory memorandum to the draft amendment of 26 March 2025 to the Tax Ordinance Act and certain other acts^[1])

and the recent amendments of 4 August 2025, the vast majority of reported domestic schemes concerned typical and legal economic activities – sometimes even routine transactions (e.g. intra-group loans, structural reorganisations, shareholder agreements) which, from a legal point of view, did not constitute tax avoidance.

Despite the collection of a significant amount of data, this did not lead to any significant legislative initiatives, which contradicts the original intention of the MDR as an early warning tool.

3.2. Limited use by the administration

MDR reports, both domestic and cross-border, were intended to support the selection process for audits. However, as indicated in the explanatory memorandum, in practice, the authorities focused almost exclusively on cross-border schemes, confirming that domestic schemes were not effectively used operationally.

4. The principle of proportionality as the basis for derogating from the national MDR

In light of the constitutional principle of proportionality, which obliges the legislator to choose measures that:

1. are necessary to achieve the public interest,
2. enable the achievement of the intended objective,
3. do not impose disproportionate burdens on individuals – maintaining the obligation to report national schemes was considered unjustified.

Both taxpayers and tax advisors were required to:

• monitor all potential transactions,
• identify schemes based on imprecise and broad identifying features,
• preparing and submitting reports in a manner and within deadlines requiring intensive organisational involvement.

This resulted in excessive and costly formalisation of an obligation which, as demonstrated, did not generate proportionate benefits for the tax system.

5. MDR 2025 reform: a return to the core of the DAC6 Directive

In response to the above problems, the 2025 MDR reform introduces a number of fundamental changes:

• abolition of the obligation to report national schemes – in accordance with the limits imposed by the DAC6 Directive,
• clarification of definitions,
• reduction of reporting entities – only the promoter and the beneficiary remain; elimination of the “facilitator” and the MDR-2 obligation.
  
  
• single, annual MDR-3 reporting, with the option of indicating the estimated tax benefit,
• clarification of technical rules, including the process of assigning NSPs, submitting supplements and introducing the possibility of signing MDR-3 by a representative,
• elimination of internal procedures,
• reduction of penalties – from 720 to 240 daily rates, while clarifying penalties for delays.

The reform not only streamlines the MDR system, but also restores its compliance with the principle of proportionality, limiting obligations only to transactions that are cross-border in nature and have a high risk of aggressive optimisation.

Conclusions and recommendations

1. It is not the tool that has failed, but its implementation – a critical reflection on the role of tax authorities

In the discussion on repealing the provisions on domestic tax schemes, it is too easy to accept the narrative that their ineffectiveness is an inherent feature of the legislative tool itself. Meanwhile, as I pointed out in my analysis “National MDR – formalism that may (but does not have to) make sense”, it was not the reporting obligation itself, but the lack of institutional support and insufficient activity on the part of the tax authorities that led to a situation where this instrument did not work to its full potential.

“The obligation exists, but effectiveness is lagging behind” – the national MDR system in Poland suffered not from regulatory overload, but from operational immaturity.

From the perspective of financial law, it should therefore be pointed out that:

• the lack of official interpretations and positions of the Head of the National Revenue Administration on the distinguishing features and examples of application resulted in legal uncertainty,
• excessive caution on the part of the administration in analysing the data provided undermined the idea of early warning against tax optimisation,
• the failure to use MDR data for legislative initiatives undermined the very purpose of a mechanism designed as a source of regulatory knowledge.

As a result, instead of a preventive system, a formal reporting system was created, generating burdens for taxpayers and advisors without proportional benefits for the administration.

2. It could have been fixed – alternatives to eliminating national MDR

From the point of view of the principle of proportionality (Article 31(3) of the Polish Constitution), the elimination of excessive regulatory burdens is justified. However, this principle does not automatically require the abolition of a given institution if there are less intrusive remedial measures that achieve the same objective with less burden on the entities concerned.

In the case of national MDRs, there were real alternatives:

• limiting the obligation to selected identifying features with the highest tax risk,
• developing and publishing a map of national MDR risks by the National Revenue Administration,
• a “white list” and an extension of the catalogue of entities exempt from reporting.

The decision to abolish the national segment of MDR obligations, although formally justified by the principle of proportionality and the ineffectiveness of the existing model, should not be interpreted as clear evidence of the unsuitability of the national reporting tool itself. On the contrary, as shown by an analysis of its application in 2019–2025, it was not the structure of the institution that was flawed, but the way it was implemented and used by the tax authorities.

From a research perspective, it is reasonable to hypothesise that the decision to abandon the national MDR was the result not only of a negative assessment of its effectiveness, but also of a balance between the potential costs and available operational alternatives. It can be assumed that the legislator and the Head of the National Revenue Administration, having at their disposal a growing range of modern analytical and control tools, including automatic analysis of JPK data and risk selection algorithms, decided that the effectiveness of the system could be ensured without the need to maintain a general reporting obligation for domestic schemes.

3. The need for institutional maturity and responsiveness

The MDR reform should not be seen as the end of the story, but as an opportunity to build a new, better calibrated reporting mechanism based on genuine cooperation between the administration and taxpayers.

Further actions should include:

• redefining the role of the Head of the National Revenue Administration as an active participant in the MDR, not just a recipient of data,
• creating general interpretations of the distinguishing features and status of promoters,
• public evaluation of the effects of reporting (with a clear distinction between data used and unused),
• the development of analytical tools (AI, big data) to assess high-risk schemes, including domestic ones.

4. What does the abolition of national MDRs mean for the future of compliance?

The decision to abolish national MDRs without implementing their improved version may pose a risk of loosening compliance discipline among taxpayers who have become accustomed to systematically monitoring their activities for schemes.

It is therefore recommended that:

• maintaining internal MDR procedures in large entities (as “good practice”),
• introducing the requirement for MDR analyses only for transactions above a certain materiality threshold,
• continuing training for advisors and businesses on cross-border schemes, whose importance in the system is growing.

Summary

The abolition of national MDR in Poland in 2025 should not be seen as a final judgement on this tool, but rather as a reaction to its misuse, primarily by tax authorities. Justified criticism of the form and effectiveness of the existing regulations does not negate the potential of national schemes as an information tool which, with better coordination, a proportionate scope and realistic use of data, could be a valuable element of the system for protecting the fiscal interests of the state.

“It was not the obligation that was unnecessary, but the way in which it was implemented and administered.”

In this sense, the real challenge for the future of MDR is not to abandon one segment of the system, but the state’s ability to create efficient, useful and adequate tax supervision tools – and to apply them responsibly and proportionately.

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[1]⁾               The Act amends the following acts: the Act of 26 May 1982 – Law on the Bar, the Act of 6 July 1982 on legal advisors, the Act of 26 July 1991 on personal income tax, the Act of 15 February 1992 on corporate income tax, the Act of 5 July 1996 on Tax Advisory Services, the Act of 10 September 1999 – the Fiscal Penal Code, the Act of 11 April 2001 on Patent Attorneys, the Act of 30 August 2002 – Law on proceedings before administrative courts, the Act of 11 March 2004 on goods and services tax, the Act of 6 December 2008 on excise duty, the Act of 16 November 2016 on the National Tax Administration and the Act of 9 March 2017 on the exchange of tax information with other countries.