Word of advice: Avoid the one about the fish

This week I plan to follow the tradition set by my predecessor of not boring you with technical issues at holiday time but rather to reflect on the past year and look forward to the New Year to come.

It certainly was an interesting year, more so the last few months of 2001 than the first, with various speculations about what would or would not be taxed this year. Not surprisingly, we will be paying more tax on pretty much everything from income to savings interest to children's items. This is a personal bugbear of mine, as with two small children, who have a tendency to grow out of their clothes and shoes before I can get them home from the store, it was expensive enough without the VAT. With an additional 22% on prices I may have to dust off my trusty sewing machine and refresh my basic sewing skills. As for toys, advertising should be banned!

On the whole, however, changes to the tax law for 2002 have been fairly sensible and pretty fair. Any temptation to disclose just a little less than the whole truth to the taxman should be singularly avoided, unless you want to go down the route taken by one creative taxpayer. Let me set the scene during a tax enquiry, when the following conversation took place:

" … How have you managed to buy such a luxurious villa while your income is so low?" asked the tax inspector.

" … Well," the taxpayer replied, "while fishing last summer I caught a large golden fish. When I took it off the hook, the fish opened its mouth and said, ‘I am a magical fish. Throw me back to the sea and I'll give you the most luxurious villa you have ever seen.' So I threw the fish back to the sea and got the villa."

" … How can you prove such an unbelievable story?" asked the tax inspector.

" … Well, you can see the villa, can't you?" replied the taxpayer.

I have a strong suspicion that the above scenario would result not only in the finding of overdue taxes and penalty interest but also in a 75% penalty for non-disclosure, potentially also the imposition of fines and penalties on the basis of the Fiscal Penal Code. Unless, of course, the tax inspector has a particularly good sense of humor.

On a more cheerful note, a practical change and not specifically tax related, the work permit issue. Having thought long and hard about how to bring the work permit regulations up-to-date and more in line with EU policy, the law that was passed - in fairness, only specific aspects of it rather than the whole - threw up more confusion and panic than before. Mainly, it failed to resolve any of the outstanding issues it had set out to do. It seems, however, that those particular aspects of interest to me, board members and expatriates on assignments to Poland on a home country contract, were effectively revised.

Ministerial decrees were passed just before year's end. They confirm that only those board members who spend any length of time in Poland, that is more than 30 days in a calendar year, should have to require a permit to perform their duties as board members here in Poland. What this means is those foreign individuals who only come to Poland for specific meetings of the board randomly in the year, effectively spending most of their time outside of Poland, will not be required to obtain a permit each time they travel.

Furthermore, there had been a fear that the concept of a foreign assignment, that is a non-Polish contract but assignment to work here, might no longer be possible. However, a ministerial decree canceled out these concerns. Similar to the provisions dealing with board members, short-term assignees (up to 30 days) will no longer require a permit at all. If the assignment is to last longer than 30 days a calendar year, then either the foreign principal or the Polish entity to whom the individual is being seconded will have the right to apply for the necessary permit.

All of this may be a proverbial pain, requiring you to obtain multiple permits in order, effectively, to allow you to do one job of work. Much work will be required on all our parts therefore to persuade the authorities in time that a single permit, covering all your legal titles to work and/or perform duties in Poland should suffice. However, with budgets being what they are, don't expect this to happen in a hurry. What authority in its right mind would pass up the chance of charging you three fees for three separate applications!

On that cheerful note it just remains for me to wish you all a prosperous New Year … but beware of any of those little golden fish bearing expensive gifts, the taxman has a hard time with those!

Anna Szymanska is a tax senior manager in the Warsaw office of Andersen.

Anna Szymanska