Revolutionary changes in MDR reporting in Poland

The draft amendment to the Tax Ordinance Act and certain other acts runs to 52 pages, and more than half of its contents are changes to the Mandatory Disclosure Rules (MDR) provisions. The proposed changes to the MDR provisions are comprehensive and, in some aspects, revolutionary.

Several of the proposed changes are structural in nature and will result in an overhaul of the existing mandatory tax arrangements reporting system in Poland.

Exemption of tax advisors from MDR

The Explanatory Memorandum to the Proposal indicates that it is primarily intended to align the provisions on professional secrecy with the changes resulting from the DAC – 8 Directive and the CJEU judgment in case C-694/20 [Orde van Vlaamse Balies case and others], and to align the wording of the Polish provisions, including legal definitions, on cross-border arrangements with the provisions of the DAC – 6 Directive. This purpose is to be served by the explicit exemption of tax advisers, attorney at laws and advocates from the obligation to report ‘non-standardized” arrangements.

Key changes in MDR regulations

Highlights of the planned changes after a preliminary reading of the draft:

• change the definition of the hallmark as such – an arrangement will be reportable if its typical element or characteristic indicates a potential risk of tax avoidance;
• change the definition of the main benefit test- the assessment of the expected effect of the arrangement is to be the key one;
• Allowing MoF to issue an ordinance that will:
  • include a list of arrangements which, despite meeting the hallmarks, will be excluded from MDR reporting – so called white list
  • exempt certain type of entities, especially those performing a public task, from mandatory reporting non-cross-border arrangements;
• exclusion of reporting obligations where the reportable tax arrangement have already been reported to the competent authorities, e.g. with transfer pricing information, or information regarding distributions to non-residents subject to WHT.

The above changes indicate that the Ministry of Finance has recognised that the regulations as they currently stand lead to the reporting of economic events of which it already has knowledge from other sources, or lead to prudential ‘over-reporting’.

Changes in the definition of recognizable features

The legislator has decided to amend the legal definitions of almost all hallmarks. The draft also provides for a number of specific changes, the most important of which are:

1. removal of general hallmarks that did not derive from the DAC-6 directive;
2. a change in the design of another specific hallmark – for this to occur, the main benefit test must be met at the same time;
3. change to the existing hallmark referring to a change in the source of revenue or a change in the taxation rules – the proposed wording, like the original DAC-6 directive, refers only to a change in the source of revenue. Thus, there will be an end to doubts about, for example, the reporting of “agio” (share premium).
4. unifying a promoter and “facilitator” functions;
5. Penalization of failure to submit MDR – 3 nformation within the statutory period
6. a reduction in the maximum penalties in the Fiscal Criminal Code for failure to comply with, or failure to comply on time with, MDR obligations to 240 daily rates
7. exclusion of MDR provisions from the subject matter of requests for individual tax ruling.

Positive changes, but not sufficient

The changes in principle are to come into force on 1 January 2026.

Although the proposed changes to the MDR rules are not cosmetic and generally go in the right direction, they leave a considerable gap.

The efforts to align definitions from national legislation with those of the DAC – 6 Directive and, above all, the attempt to align the scope of reporting with ‘aggressive tax arrangements’ as in the Directive, deserve a positive assessment

On the other hand, it is disappointing to see the extent of the restriction on the reporting of non-cross-border arrangements and, in particular, the lack of withdrawal of other specific hallmarks that are not known to the EU legislator. At the same time, the draft is not free of vague wording, which is bound to translate into numerous interpretative doubts.