On April 18, the government adopted a draft law amending the Commercial Companies Code and some other laws and sent it to the Sejm. The planned changes aim to enable and harmonize cross-border operations on the EU market - cross-border divisions, transformations, and mergers. According to the adopted regulations, the most important stage of the entire process, alongside the division plan, is obtaining a certificate of compliance with the law. Especially since the government plans to introduce an additional body in the form of the Chief of the tax authority, who will examine the merger for compliance with tax regulations. This additional request for a tax opinion will probably be the most complicated element of the entire operation. It is linked to the necessity of conducting a comprehensive comparative analysis of tax systems (countries relevant to the cross-border operation).
Directive 2017/1132, in its new wording, extends the scope of the examination aimed at issuing a certificate of compliance with the law for a given cross-border operation to issues related to assessing whether the given cross-border operation is carried out for the purpose of committing abuse or fraud causing or aiming to evade or circumvent EU or national law or for other criminal purposes.
Article 35 of Directive 2019/2121, which provides that in certain circumstances a cross-border operation may be used for abuse or fraud, such as circumventing workers' rights, social security payments or tax obligations, or for criminal purposes. Furthermore, this article indicates that the purpose of this regulation is to prevent companies from being used as "cover" for the purpose of avoiding, circumventing or violating EU or national regulations.
In this regard, one should not lose sight of the rich jurisprudence of the CJEU, which emphasized, for the purpose of specifying the principle of freedom of establishment, that carrying out a cross-border operation to take advantage of more favorable provisions in itself does not constitute abuse (for example, CJEU judgment of October 25, 2017, C-106/16, Polbud, para. 62).
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As it was the case with cross-border mergers, the management board of the company submits an application to the register court for issuing a certificate of compliance with Polish law regarding cross-border division within the scope of the procedure subject to this law. Such an application will have to contain a number of documents, including the resolution on cross-border division itself. As a curiosity, it can be mentioned that the application will also have to contain a certificate from the Social Insurance Institution on the number of insured persons and non-arrears in paying contributions.
An important novelty is that together with the application for issuing a certificate, an application to the competent tax authority must be submitted for issuing an opinion in accordance with the provisions of the Tax Ordinance.
The deadline for considering the application should not exceed 3 months. If the register court has serious doubts indicating that the cross-border division serves to commit abuse, violation or circumvention of the law, it may request an opinion from the competent authorities to examine the specific scope of the company's activity.
The project provides for expanding the competence of the register court, consisting in the fact that in a situation where the register court has serious doubts indicating abuses in this area, based on the documents and information submitted to this body, as well as employees' comments, it may consult the competent authorities and appoint an expert. In addition, the project provides for the possibility of submitting comments by the State Labour Inspectorate as part of the procedure for issuing a certificate of compliance with the law of a given cross-border operation.
According to the justification for the proposed changes: "Expanding the scope of compliance review of a given cross-border operation related to the abuse clause means that this control has an interdisciplinary nature (registration, tax, employment, criminal issues), which prompts involving other specialized authorities in the procedure for issuing certificates of compliance with the law of cross-border operations. Due to the fact that the register court is not the competent authority for assessing abuses in tax matters, this project provides for the need to issue an opinion by the competent tax authority in this respect."
The purpose of submitting the application is for the Chief of the National Tax Administration to assess whether there is no reasonable suspicion that carrying out a cross-border transformation, merger, or division of a company may constitute an act or an element of an act related to tax evasion, or whether a cross-border transaction may be the subject of a decision using measures limiting contractual benefits. Additionally, the Chief of the National Tax Administration evaluates whether the cross-border transformation, merger, or division may constitute an abuse of law referred to in Article 5(5) of the Act of March 11, 2004 on Goods and Services Tax.
As part of the opinion, the Chief of the National Tax Administration also confirms that the monetary obligations of the company towards tax authorities or non-tax budgetary receivables of a public law nature, as defined in Article 60 of the Act of August 27, 2009 on Public Finance, for which the collection or recovery is the responsibility of the National Tax Administration, have been satisfied or secured.
The application to the tax authority must include, among others:
• A comprehensive description of the transaction, including an indication of the relationships between the entities involved in the division;
• The Tax Scheme Number (NSP) reported in connection with the division, or an explanation of why the agreement was not subject to reporting for the purpose of assigning the NSP number;
• Indication of the objectives that the cross-border division is intended to serve;
• Indication of the economic or business rationale for the transaction;
• Determination of the tax implications, including tax benefits resulting from the cross-border division;
• Indication of other tax benefits not subject to assessment under the double taxation avoidance clause, the achievement of which is dependent, even indirectly, on the division;
• Indication of other planned, initiated, or completed transactions, the achievement of tax benefits of which is dependent, even indirectly, on the transactions mentioned above.
• The application must be accompanied by a certificate of no tax arrears (including information on enforcement proceedings or proceedings aimed at revealing tax arrears), as well as a statement by members of the company's management board regarding the location of real estate owned by the company on the territory of the Republic of Poland.
The application for a tax certificate concerning a cross-border transaction is subject to a fee equal to 50% of the minimum wage in force on the day of submitting the application.
The Chief of the National Tax Administration issues an opinion without undue delay, no later than one month from the date of receiving the application. If the complexity of the matter justifies it, the deadline may be extended to three months.
The Chief of the National Tax Administration may refuse to issue an opinion if the circumstances of the case indicate the existence of a reasonable suspicion that a cross-border transformation, merger or division may constitute an act or element of tax avoidance. This applies when the transaction does not result in a tax benefit because achieving such a benefit (which is contrary to the subject or purpose of the tax law or its provisions under the circumstances) was the main or one of the main purposes of the transaction, and the method of operation was artificial.
Refusal may also occur if the circumstances of the case indicate the existence of a reasonable suspicion that a cross-border transformation, merger, or division may be the subject of a decision issued with the use of measures limiting contractual benefits.
Similarly, the Chief of the National Tax Administration may refuse if the circumstances of the case indicate the existence of a reasonable suspicion that a cross-border transformation, merger or division may constitute an abuse of law referred to in Article 5(5) of the Act of 11 March 2004 on goods and services tax.
The Chief of the National Tax Administration also refuses to issue an opinion when the circumstances of the case indicate the existence of a reasonable suspicion that monetary and non-tax public-law obligations that are satisfied or secured by the National Tax Administration have not been satisfied or secured, and are not paid, to which the National Tax Administration is responsible for collection or enforcement.
However, as emphasized in the justification for the proposed changes: "This body should take into account that established case law of the CJEU3 shows that the fact that a legal person with a community affiliation intends to benefit from a more favorable tax system in a Member State other than that in which it resides or has its registered office, in itself does not authorize depriving it of the possibility of relying on the provisions of the Treaty. See for example CJEU judgment of 12 September 2006, C-196/04, Cadbury Schweppes, paragraph 36, judgment of 11 December 2003 in case C-364/01 Barbier, paragraph 71."
An opinion or a decision to refuse to issue an opinion may be appealed. The appeal may only be based on the allegation of a violation of procedural rules, an error in interpretation or a misapplication of material law.
As indicated in the justification for the proposed changes: "According to recital 40 of Directive 2019/2121, Member States should provide procedural safeguards in line with general access to justice principles, including the possibility of review of decisions by competent authorities in cross-border transactions proceedings, to enable parties to bring an action before the competent court. Given that decisions issued by tax authorities are subject to judicial-administrative review, it is justified to maintain this type of judicial control in relation to decisions of these authorities."
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