Taxpayers’ concern is in the air
The National Revenue Administration is continuously expanding its competences and improves its work with new tools. For better detection of potential abuses, for example, the recently launched register of work contracts or the obligation to use SAF-T. Fearing penalties for even unconscious violations of tax regulations, entrepreneurs and employees of accounting departments independently began to pay more attention to penal fiscal insurance, guaranteeing compensation for the penalty paid.
The tax system is subject to frequent changes, leaving taxpayers in almost permanent tension and uncertainty. Regarding matters that raise doubts and involve the taxpayer’s potential responsibility towards the State Treasury, they often face refusal to give instructions or interpretations by tax authorities or ministries.
In the ranking of the tax system’s friendliness and competitiveness carried out by the Tax Foundation among the 36 surveyed OECD countries, Poland has remained in the bottom of the ranking for many years. In 2020, it took 34th place, leaving only Chile and Italy behind.
A subsequent draft of legal changes also does not give rise to optimism. In particular, the law draft that denies the possibility of refusing to accept a penalty notice or the law introducing the evidence preclusion in tax proceedings, which will prevent taxpayers from presenting new facts after the end of the fiscal audit.
|Tax authorities have more advanced tools for controlling taxpayers and do not hesitate to use them extensively. That currently concerns entrepreneurs:Tax authorities have more advanced tools for controlling taxpayers and do not hesitate to use them extensively. It currently concerns entrepreneurs:
• From October 1, taxpayers face fines of PLN 500 for every single error in filling in the new SAF-T file.
• From January 1, an obligation to submit work contracts to the Social Insurance Institution (ZUS) has been in force. The auditors will examine whether, instead of non-contributing work contracts, mandate contracts or even employment contracts should be concluded based on the new register.
• On January 11, fiscal inspections started, which will also affect entrepreneurs who suspended their actions during the pandemic.
Where to seek help? One of the answers is tax insurance. It protects against the financial consequences of errors in settlements with the Tax Office, and it is gaining popularity day by day. When looking for such protection, it is worth relying on an experienced insurance broker who will help you find out about the nuances that distinguish individual companies’ offers and adjust the insurance program to your needs. Moreover, a broker using a negotiating power, gained from regular contacts with insurers and knowledge of the market, will provide us with the best possible contribution.
Who is protected by the tax policies?
This insurance protects people who perform accounting or payroll activities in the organization and conduct management or supervisory activities in this area. The insurance may cover specific persons, indicated by their first and last names, or an anonymous group of persons described in their positions, e.g., the accounting department’s employees. The insurance contract may also be concluded by a person running a business.
What support does tax insurance provide?
Under the policy, standard coverage consists of two sections: liability insurance for the employer, errors or omissions in the performance of accounting obligations and the penal and fiscal clauses. In the case of persons running a business, the employer’s civil liability insurance section is excluded. However, following the terms of the penal and fiscal clause, a person may count on covering all costs of defence in criminal or penal-fiscal proceedings and reimbursement of punitive and fiscal fines imposed on such a person.
It should be noted that the clause does not exclude the willful misconduct of the insured person. Without it, the protection would be pointless, as the vast majority of criminal and fiscal cases, unfortunately, end with a judgment of willful misconduct. Moreover, last year an additional clause – anti-covid aid – was introduced to the market, designed for all entrepreneurs using one of several available forms of public assistance.
What makes the anti-covid aid clause in a tax policy valuable?
This extension covers responsibility for errors in preparing applications, monitoring the use or settlement of the obtained public assistance, and extending the penal and fiscal clause to initiate fiscal and criminal disciplinary proceedings under Art. 233 of the Criminal Code (penal code) (submitting a false declaration) and Art. 297 of the Penal Code (extortion of public aid). Under this clause, claims cannot be covered due to incorrect preparation of the application, resulting in the not granting public aid at all or in incomplete amount.
Currently, prices for individual insurance start from several hundred zlotys per year of coverage. With group policies and higher amounts, for instance, PLN 5 million premiums usually oscillate between thirty and fifty thousand Polish zlotys. The open question is how long such rates will last, given the increased risk of penalties.
Is it worth having a D&O policy?
In addition to the tax insurance, one should also consider the liability insurance for board members, including liability for public-law obligations under Art. 116 or 116a of the Tax Code. Combining these two types of insurance – tax and D&O – due to their complementary nature, provides comprehensive protection against errors. Entrepreneurs interested in the more extensive minimization of the risk of error should also pay attention to tax and advisory insurance, which may be compared to an affordable subscription to a prominent tax office’s services.
Łukasz Górny, attorney-at-law, Director of the Development Department of EIB SA.
Last Updated on February 12, 2021 by Łukasz