Just as the Tax Authority issued the first judgment on MDR in Poland, the Polish Constitutional Court released a judgment on MDR.
July 23, 2024, the Constitutional Court of Poland determined that the provisions related to Mandatory Disclosure Rules (MDR) are unconstitutional. However, the reporting obligations remain in Polish tax law despite this judgment.
Specifically, the Constitutional Court found these provisions to be in violation insofar as they compel tax advisors to disclose information protected by professional secrecy to the tax office (case no. K 13/20).
BACKGROUND ON THE MDR REGULATIONS
The contested regulations, part of the Tax Ordinance effective from January 1, 2019, were instituted to comply with EU directives mandating tax advisors to report tax schemes to the authorities. The National Council of Tax Advisors challenged these regulations in 2019, arguing that they breached the confidentiality obligations of tax advisors and had a broader scope than the EU directive.
CONSTITUTIONAL COURTS FINDINGS ON PROFESSIONAL SECRECY
The Constitutional Court concluded that the provisions requiring tax advisors to disclose confidential information about tax schemes lack clear conditions and procedures for exemption from professional secrecy. It also ruled that the requirement for tax advisors to report tax schemes predating the Act of October 23, 2018, was unconstitutional.
The Constitutional Court underscored that imposing such disclosure obligations on tax advisors fails to meet the criterion of proportionality. Moreover, the judgment emphasized that according to Article 217 of the Constitution, taxpayers should ascertain their obligations from statutes rather than from explanatory documents.
IMPACT ON TAX ADVISORS
The Constitutional Court’s judgment specifically addresses tax advisors due to the nature of the complaint filed by the National Council of Tax Advisors. The judgment implies that any legislative amendments to professional secrecy must adhere to the highest standards of proper legislation and proportionality. The only method for the state to obtain information on tax schemes from tax advisors is through the advisors providing this information to users, who are then responsible for reporting.
ONGOING REPORTING OBLIGATIONS
Despite the judgement, the Constitutional Court discontinued proceedings regarding other aspects of the complaint, meaning the reporting obligations under MDR remain in force for Polish taxpayers. The judgment is limited to tax advisors because the National Council of Tax Advisors submitted the application to the Constitutional Court. Consequently, the Constitutional Court’s decision is confined to the scope of this specific complaint. As a result, the judgment does not extend to other parties, such as advocates and legal advisors, or other service providers, such as accountants.
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