EU Council Directive 2018/822 of May 25, 2018 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements – this is where the title definitions and the related discrepancies come from this act.
The legislator, implementing the directive into the Polish legal system, made a separation, it can even be said that the EU definition of an “intermediary” was significantly extended to include the promoter and supporting entity. Such a division is not provided for in the MDR directive, which entered into force on June 25, 2018.
The Directive defines an ‘intermediary’ as a person who develops, markets, organizes or makes available for implementation a reportable cross-border arrangement or manages the implementation of such an arrangement.
We read further that the intermediary must meet at least one of the conditions provided for by the directive:
- be resident for tax purposes in a Member State;
- have a permanent establishment in a Member State through which the services with respect to the arrangement are provided;
- be incorporated in, or governed by the laws of, a Member State;
- be registered with a professional association related to legal, taxation or consultancy services in a Member State.
For comparison, in the Polish legal system, legal definitions can be found in the Tax Ordinance (hereinafter: “TO”) in Art. 86a paragraph. 1 point 8 for the promoter and in art. 86a paragraph. 1 point 18 for the supporting person. A promoter within the meaning of Polish standards is a natural or legal person without legal personality, most often performing one of the several listed professions, such as: tax advisor, attorney-at-law, advocate, bank employee or employee of a financial institution that prepares, offers, provides or implements the arrangement or manages the implementation of the reconciliation.
A supporting person within the meaning of the TO will be a natural or legal person without legal personality, in particular practicing the following professions: auditor, notary, accountant, financial director or, in general, any person who has access to or keeps the company’s books of accounts. It is an entity that has undertaken to provide, directly or through others, assistance, support or advice to develop, market, organize, make available for implementation or supervise the implementation of the arrangement.
National vs EU definitions are certainly slightly different. The Polish edition details the professions that would be performed by the support and promoter, but of course it is an open catalog. The EU directive specifies more framework conditions, but the assumptions are very similar.
The greater doubts now arise when cross-border tax schemes will have to be reported again. This is due to the mismatch between the Polish scheme and the EU scheme, which will involve a retrospective verification that we wrote about:
At this point, a certain discrepancy appeared in the translation of the provisions of EU law into national law. The “intermediary” and the “relevant taxpayer” are required to report backwards, and not necessarily the user, promoter and supporter. In the explanatory memorandum for publication 208 (the currently adopted act), it is explained that by understanding intermediaries, promoters and assistants defined in chapter 11a of the TO should be considered.
It would also be worth considering whether the scope of the directive could be extended in such a way. The implementation of directives is a necessary process, and intra-Community acts must be reflected in national law. In the literature, the concept of implementation is characterized as all activities aimed at effective application and control of compliance with EU standards in national law. Therefore, we can distinguish two phases: the implementation phase and then the phase of the directive execution.
The main disadvantage of such discrepancies in definitions will be frequent understatements and doubts as well as problems with proper law transposition. On the other hand, from the point of view of tax authorities, this increases the number of entities that potentially need to be screened under the guise of the alleged introduction of EU regulations. However, it can be considered a permissible practice as each Member State undertakes to implement the directive in order to provide information effectively.
However, no one is surprised by such an expansion of the Polish legislator. It should be mentioned that the Polish provisions on MDR are the most restrictive, and their scope also covers national schemes, which is part of the general trend of expanding procedures in which the tax authorities collect more and more data on taxpayers.