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a ruling of 18 July 2013 (case file number SK 18/09) the Constitutional
Tribunal challenged art. 20 paragraph 3 of the Law on Personal Income
Tax, which defines the way income from undisclosed sources is
established. The Constitutional Tribunal found that there had been a
breach of art. 2 in connection with art. 64 paragraph 1 of the
Constitution and that the provisions regarding undisclosed sources of
income have serious legislative defects with regard to their
construction and content. The legislature introduced a particularly
restrictive institution for the taxation of undisclosed income, which it
regulated in three terse regulations that have proved in the main to be
imprecise and ambiguous. It may therefore be ventured that because this
institution was to a significant extent only formalised in practice,
these provisions in reality create only a framework for it.
The
tribunals ruling concerns the wording of the regulations as they
applied until 31 December 2006. However, the article that was challenged
has a similar construction after that date, which therefore means that
the ruling should also refer to the regulations that applied in the
years following on whose grounds the tax authorities issued defective
administrative decisions. It is necessary in view of the above to
consider whether the tax authorities can impose tax on earnings from
undisclosed sources by reference to the wording of the provisions in
force after 31 December 2006. If a regulation is to be constructed that
will enable the tax authorities to continue to be able to classify
certain earnings as originating from undisclosed sources a very exact
and wide-
Pensions
The
Constitutional Tribunal (13 November 2012; case file number K 2/2012)
ruled that art. 28 of the Law of 16 December 2010 Amending the Law on
Public Finances and Certain other Laws in connection with art. 103a of
the Law of 17 December 1998 on Retirement and other Pensions provided by
the Social Insurance Fund where it is applied to individuals who became
entitled to a pension before 1 January 2011 with no requirement to
terminate their employment contracts, is inconsistent with the principle
of the protection of citizens trust in the state and its laws arising
from art. 2 of the Constitution of the Republic of Poland. This ruling
constituted the grounds for applying to the pensions institution for
proceedings to be reopened. In practice, as a result of the reopening of
administrative proceedings, the social security institution (Zakład
Ubezpieczeń Społecznych) indicated that the necessity to pay the
suspended pension is applied exclusively from the date the ruling of the
Constitutional Tribunal of 13 November 2012 was published in the
Journal of Laws, that is, from 22 November 2012. The failure of the
social security institution to understand that the regulations were
unconstitutional and its issuing of detrimental decisions made it
necessary to appeal against them. It was the opinion of the ordinary
courts that as the resolution contained in the decision was based on the
provisions of art. 103a of the Law of 17 December 1998 on Retirement
and other Pensions provided by the Social Insurance Fund, which was
judged unconstitutional, it could not have formed the grounds for
ceasing to pay a pension to an applicant from 1 October 2011 (so ruled
the Lublin Court of Appeal on 29 May 2013, III AUa 378/13). It was the
appeal courts opinion that a different understanding of the consequences of the Constitutional Tribunals
decision regarding the unconstitutional regulations would have breached
the principle of the state under the rule of law enshrined in art. 2 of
the Constitution of the Republic of Poland.
VAT
The
right to deduct input tax or, as specified by the Law on the Tax on
Goods and Services of 11 March 2004 (Journal of Laws no. 54, item 535),
the right to reduce the sum of the output tax due by the sum of the
input tax, is a fundamental right enjoyed by taxpayers that results from
the very construal of the tax on goods and services as a tax on added
value. The practical essence of this construction is that the tax paid
by VAT payers when buying goods and services that are used in taxable
activities will not be incurred by them as actual costs. Taxpayers
right to deduct input tax is in no way a privilege but instead
represents a fundamental and basic entitlement resulting from the very
construal of tax on goods and services as a tax on added value. In so
far as the goods and services are used to perform taxable activities,
taxpayers enjoy the right in accordance with art. 86 paragraph 1 of the
Law on the Tax on Goods and Services to reduce the sum of output tax due
by the sum of the input tax.
The tax authorities often question the
legitimacy of deducting input tax by referring to errors of
documentation or fictional transactions. In the assessment of the
Supreme Court of Administration in Warsaw, it is not sufficient in the
matter of demonstrating a failure on the part of taxpayers to exercise
due commercial diligence (which, had it been exercised, would have
allowed them to avoid the mutually agreed and fraudulent use or lending
of a business name perpetrated by the lender of a business name and the
user of that name) to say that it is common knowledge that these kinds
of situations often occur in the scrap metal trade. It is necessary
to unambiguously identify the concrete actions taxpayers have failed to
give due care and attention to and which, if they had been performed or
taken into account, would have allowed them to determine that the
invoices under suspicion had originated from an entity created or lent
in a form of identity fraud as a device for the purposes of the
transactions, while the actual supplier of the goods received was
another entity (the user of the entity created or lent in this way) (so
ruled the Supreme Court of Administration on 12 March 2013; I FSK 260/12). As
a consequence of the above ? given that there are no applicable
findings regarding the due diligence of the applicant in the scope set
out above ? it must also be recognised that it is justified to raise the
objection that, in finding that the applicant cannot exercise the right
to reduce the sum of output tax due by the sum of input tax when
purchasing goods and services with reference to the disputed invoices
when no grounds exist to deny the applicant that right, there has been a
breach of the substantive law (art. 86 of the Law on the Tax on Goods
and Services) involving its incorrect application.
Organised part of an enterprise
According
to art. 6 paragraph 1 of the Law on the Tax on Goods and Services of 11
March 2004 (Journal of Laws, 2004, no. 54, item 535 as amended) the
provisions of the law are not applied to transactions involving the
acquisition of an enterprise or an organised part thereof. This means
that transactions involving the acquisition of an enterprise or an
organised part thereof are not subject to goods and services tax.
Defining the concept of an enterprise and of an organized part thereof
is an important factor in establishing, based on the Law on the Tax on
Goods and Services, the tax position of an acquisition transaction. An
organized part of an enterprise is an organisationally and financially
separate unit within an existing enterprise that is made up of tangible
and non-
The
lack of a legal definition of an organised part of an enterprise has
meant that the tax authorities have interpreted the term in a variety of
ways. This generates the risk for taxpayers acquiring an organized part
of an enterprise that a given transaction will not be recognised as the
acquisition of an organized part of an enterprise. The dominant view in
the case law is that an organized part of an enterprise does not have
to include all of the elements defining an enterprise for it to be
regarded as existing independently. On 28 April 2011 the District
Administrative Court in Warsaw (Wojewódzki S
Kontakt
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Legal Consultancy - Legal Consulting
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