Taxpayers to face ATAD II challenge

 According to PwC, from April 1, 2020, the provisions of the Act amending the CIT Act, the Act on VAT, the Act on the exchange of tax information with other countries, and some other acts implementing ATAD II directive into the Polish legal order are to enter into force. Although the ATAD II regulations are designed to counteract tax avoidance, their implementation will mean for many taxpayers the need for a thorough analysis of the structures and international transactions in which they participate.

The purpose of the ATAD II Directive is to counteract the emergence of hybrid discrepancies, and therefore, to a certain simplification, situations in which, due to differences in the treatment of an entity or instrument on tax grounds by different jurisdictions, there are:

The ATAD II Directive provides for a number of rules aimed at counteracting the effects of hybrid discrepancies. As a rule, in the case of tax-free deduction, the payer state should deprive him of his right to deduct. If this does not happen, for example, due to the fact that the payer's jurisdiction has not implemented the anti-hybrid rule, the payment should be added to the recipient's income.

The effects of implementing the ATAD II directive in Poland may affect many taxpayers operating within international structures. Although at first glance it may seem that the ATAD II regulations apply only to taxpayers using complicated international tax optimization schemes, it turns out that in practice they raise many doubts as regards entities operating in typical international structures.

(WBJ)