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In late 2020, the Cairn Tribunal concluded one of the largest investor-state arbitration disputes to date. The core of the dispute was retroactive taxation of offshore indirect transfers of shares of companies with underlying assets situated in India (crude petroleum and natural gas fields). The Tribunal decided that India had violated the fair and equitable standard under the UK–India bilateral investment treaty by the retroactive taxation without a specific justification for doing so. Notably, India failed to persuade the Tribunal that the retroactive tax law aimed against abusive tax avoidance. In the article, the authors aim to partly respond to a call of Professor Thomas Wälde for a systematization of the red flags arising from the conduct of host states in taxation matters viewed against investment protection mechanisms. By analysing the Cairn Tribunal’s reasoning, the authors identify and examine two red flags: (i) retroactive taxation and (ii) prevention of tax avoidance. Their conclusion is that states should exercise caution with such red flags rather than rush to terminate international investment agreements or carve out tax measures from the fair and equitable standard in remaining and prospective international investment agreements.

The article tries to demonstrate the fallacy of applying a restrictive interpretation. This attempt takes place on the basis of the restrictive interpretation of exemption from corporate income tax of income earned by non-profit organisations, as applied by the tax authorities and administrative courts. To this end, a critical analysis of the interpretative chaos concerning the manner of allocating income for statutory purposes is undertaken by the authors. The analysis of the relevant jurisprudence of the administrative courts shows that the courts often apply the so-called interpretative shortcuts, reaching conclusions without convincing justification of the interpretative claim. As a result, the correct interpretation of tax law is replaced by intuitive findings by the courts. Such approach is mainly based on the necessity to apply a restrictive interpretation of provisions on tax reliefs and exemptions, which has no sufficient justification in the Polish legal system. Artykuł stanowi próbę wykazania błędnego stosowania wykładni zawężającej na przykładzie zwolnienia z opodatkowania podatkiem dochodowym od osób prawnych dochodów uzyskiwanych przez organizacje non profit. Autorzy krytycznie analizują chaos interpretacyjny do-tyczący sposobu lokowania dochodów na cele statutowe, w szczególności w zakresie wydatkowania bezpośredniego i pośredniego. Analiza orzecznictwa sądów administracyjnych ukazuje, że często stosują one interpretacyjną „drogę na skróty”, tj. rozstrzygają spory bez przekonującego uzasadnienia twierdzenia interpretacyjnego, np. dotyczącego zastosowania wykładni zawężającej. W efekcie właściwa wykładnia przepisów prawa podatkowego zastępowana jest ustaleniami intuicyjnymi, opar tymi głównie na niemającej dostatecznego uzasadnienia w polskim systemie prawa konieczności stosowania wykładni zawężającej przepisów o ulgach i zwolnieniach podatkowych.

This article addresses a largely unchartered interdisciplinary research area of the global investment regime and European Union (EU) law with an emphasis on the prevention of international tax avoidance in the EU. It focuses on the intersections between newly proposed anti-tax avoidance legislation by the European Commission that is known as the Unshell Directive (UD) and international investment agreements (IIAs). In this article, the author sets a stage for the intersections by discussing the Court of Justice of the European Union (CJEU) case law and the commission’s actions aimed against the most powerful enforcement tool in the global investment regime, i.e., the investor-state dispute settlement (ISDS) mechanism, by attempting to render it illegal and ineffective within the EU. The corresponding reactions from the arbitral tribunals are also addressed. The discussion evolves to identify and analyse the interplay between the proposal of the UD (also the Unshell Proposal or UP) and the IIAs to reveal that the impact of the former on the latter is ambiguous by design in order to minimalize legal certainty vis-à-vis protection of foreign investment in the EU via shell entities. This constitutes a foundation for potential, seismic tensions between the UD and the global investment regime that are not beneficial for marketing and development of the EU internal (single) market and may thus weaken the EU’s global competitiveness in the area of foreign investments. international investment law, EU law, good faith, ISDS, tax avoidance, shell entities

In order to ensure uniform application of the tax law by tax authorities, the minister responsible for public finance (Minister of Finance, MoF) may issue general interpretations of the tax law ex officio or at the request of a taxpayer. When issuing general interpretations, the MoF is subject to the same rules of interpretation as any interpreter. In particular, when interpreting tax law, the MoF cannot change the content of the interpreted provisions of law, as such action would exceed the limits of interpretation and encroach on the territory reserved for the legislator. This article positively verifies the hypothesis that the MoF, in its general interpretation of 25 October 2019, while clarifying the scope of the exemption from taxation of income from activities in the Polish Investment Zone, added to the provisions of the income tax laws a condition of “close connections” for such exemption, which never existed in tax law. Thus, it unlawfully took over the role of the legislator. The article thoroughly analyses the reasons and consequences of such an action, including the most recent legislative changes implemented within the framework of the so-called Polish Deal.

The article pertains to the tax issues arising from the COVID-19 pandemic in respect of cross-border workers. The main issue is the impact of the restriction in cross-border movements during the pandemic on the determination of the place of work. The authors refer to two situations. The first is when a Polish worker employed by a Polish employer and working abroad cannot return to Poland. The second is when he or she performs work at home in Poland instead of at the normal place of work abroad. The authors consider the legal fiction of carrying out work in the place where it would have been done before the pandemic as a rational solution. However, they are strongly critical of the introduction of such solution via the Mutual Agreement.

The Court of Justice of the European Union has taken an evolutionary approach to the understanding of an EU standard for the prevention of abuse of tax law under EU primary law (the free movement of capital) in a landmark case regarding the rules on German controlled foreign companies (CFC rules). This case note contrasts the narrow understanding of wholly artificial arrangements under Cadbury Schweppes Overseas Ltd v Commissioners of Inland Revenue with a seemingly broader one in X-GmbH v Finanzamt Stuttgart – Körperschaften. The note then examines the link between the genuine exchange of tax information with third countries as a way of ensuring effective fiscal supervision, and the prevention of tax avoidance. Finally, the significance of X-GmbH is highlighted to all the Member States in respect of the transposition of Articles 6, 7 and 8 of the Anti-Tax Avoidance Directive, and for third countries, and the compatibility of the UK's diverted profits tax with EU law.

One of the most potent legal instruments for preventing tax avoidance is Article 6 (general anti-avoidance rule, EU GAAR) of the Anti-Tax Avoidance Directive (ATAD). This article analyses Poland’s very restrictive implementation of EU GAAR to demonstrate that the implementation, although permissible under Article 3 ATAD, has led to the protection of the Polish tax base at the cost of constitutional and EU principles. The main purpose of this article is to reveal the incompatibility of the Polish GAAR with the constitutional and EU principles of legal certainty and proportionality and to draw consequences from it. Furthermore, the article aims to show that the EU should have taken a different approach to the EU standard for abuse of tax law. GAAR, ATAD, tax avoidance, Poland, constitution, EU primary law, CJEU, proportionality, certainty, repressive.

Potrzeba znalezienia środków z podatków na finansowanie funkcjonowania państw oraz coraz większa nieufność polityków i opinii publicznej wobec schematów optymalizacji podatkowej przedsiębiorstw wielonarodowych (multinational enterprises, MNE) i najbardziej majętnych osób fizycznych (high-net worth individuals, HNWI) wywołały bezprecedensowy entuzjazm polityczny dotyczący przeciwdziałania międzynarodowemu unikaniu opodatkowania. Ten entuzjazm przerodził się w mandat polityczny udzielony OECD przez G20 w 2012 r. Wśród mnogości propozycji środków prawnych przeciwdziałających unikaniu opodatkowania opracowanych przez OECD w ramach projektu BEPS, za kluczowe należy uznać: test jednego z głównych celów (principal purposes test, PPT) z MLI i ogólną klauzulę przeciwdziałania unikaniu opodatkowania (general anti-avoidance rule, GAAR) z unijnej dyrektywy przeciwdziałającej praktykom unikania opodatkowania (anti-tax avoidance directive, ATAD). Celem niniejszego artykułu jest znalezienie odpowiedzi na główne (tytułowe) pytanie badawcze: Czy GAAR (ATAD) i PPT (MLI) powinny być stosowane w podobny sposób? Hipotezą pozytywnie zweryfikowaną w ramach niniejszego opracowania jest to, że: im bardziej zbiegające się (koherentne) będzie stosowanie GAAR i PPT, tym mniej praktyk unikania opodatkowania i sporów wynikających z tego zjawiska będzie występować między podatnikami i organami podatkowymi. Istnieje jednak poważne zastrzeżenie: GAAR i PPT powinny być stosowane zgodnie z ogólną zasadą przeciwdziałania nadużyciom (general anti-abuse principle, GAAP) wynikającą z orzecznictwa Trybunału Sprawiedliwości Unii Europejskiej (TSUE), a nie zgodnie z PPT zaprojektowanym przez OECD. Tylko takie podejście do stosowania GAAR i PPT może zapewnić właściwą równowagę między interesami fiskalnymi różnych państw a swobodami gospodarczymi podatników. Konstatacja ta wynika z analizy treści i struktury GAAR i PPT, celów polityki podatkowej wyrażonych w preambułach do MLI i ATAD, orzecznictwa Trybunału Sprawiedliwości Unii Europejskiej (TSUE), Komentarza OECD do Modelu Konwencji OECD oraz literatury.

The author presents the origin and evolution of the definition of the concept of beneficial ownership (BO) in Polish legislation. The critical analysis focuses on the change in the definition of the concept of BO effective from 1 January 2019 and its subsequent modification from 1 January 2022 as part of the Polish Order. One can observe that the actions of the drafter of the proposed legislative changes, i.e. the Ministry of Finance, as well as in the almost unreflective acceptance of them by the legislature, are characterized by chaos and elementary lack of consistency and coherence in the understanding of the concept of BO in domestic tax law as compared to international tax law, from which the concept of BO originates. This state of the law results in reducing the predictability and stability of the application of double taxation treaties (DTC) and EU directives and in eroding citizens’ confidence in the state and the law in Poland.

In this article, the author explores and advocates the use of an artificial intelligence tax treaty assistant with regard to resolving issues and problems in respect of the principal purpose test as proposed in relation to the OECD/G20 Base Erosion and Profit Shifting initiative. As the PPT is very complex and ambiguous, what AI learns in dealing with those cases could be put to use regarding other rules of a similar degree of complexity and ambiguity and with a largely similar purpose and nature. For instance, domestic GAARs could be addressed by an approach very similar to that as presented in this article. AI could eventually be applied to all types of anti-tax avoidance legislation. By augmenting the power of AI, a very effective means of preventing tax avoidance on a global scale should be possible. The question is only whether countries and jurisdictions across the world would welcome AI. AI could help them draft the most effective anti-tax avoidance laws and enforce them accordingly. In the author’s opinion, the application of AI in the domain of international tax avoidance is likely to be a “game changer” by not only improving the work of tax advisers and tax administrations across the world, but also the performance of tax systems globally.

This article demonstrates that tax avoidance via controlled foreign companies (CFCs) established in the most favourable tax environments among EU Member States such as Ireland, Luxembourg, the Netherlands, and Cyprus, remains a considerable problem. Not only does it affect taxpaying residents in the Member States but, indirectly, all taxpayers regardless of their EU affiliation, US multinational enterprises (MNEs), for example. Focusing on the use Polish taxpayers make of CFCs, this study undertakes a detailed legal analysis of the problem of tax avoidance under EU law by examining empirical data and EU law on tax avoidance. The choice of this topic is largely justified by the exponential rise in tax avoidance schemes through CFCs involving Polish taxpayers since the country’s accession to the EU. The legal analysis brings to light a series of weaknesses in the current EU law that make it possible for both EU and non-EU taxpayers to avoid taxation. As a solution to this problem, the author suggests that CFC rules should be designed so as to tax only “tax avoidance income” from CFCs. This would ensure their compliance with EU law as well as an effective prevention of tax avoidance via CFCs within the framework of EU law. Interestingly, the solution follows from the author’s interpretation of the concept of “wholly artificial arrangements” in favour of the internal market rather than from Action 3 of Base Erosion and Profit Shifting (BEPS) project or Anti-Tax Avoidance Directive as adopted by the Council on 12 July 2016.

This paper essentially concentrates on a potential of an application of artificial intelligence (AI) to tax law. The main research question is as follows: whether taxpayers, tax authorities and courts may receive a support of AI in their task associated with tax law? The purpose of the article is to take an attempt to answer to that question by the analysis of the origin of AI and law, the present stage of development of AI applications to tax law, and the prospective applications of AI to tax law. Artykuł koncentruje się przede wszystkim na potencjale zastosowanie sztucznej inteligencji do prawa podatkowego. Główne pytanie badawcze dotyczy możliwości uzyskania wsparcia ze strony sztucznej inteligencji przez podatników, organy podatkowe i sądy w zakresie stosowania prawa podatkowego. Celem artykułu jest próba odpowiedzi na to pytanie badawcze poprzez przedstawienie genezy, obecnego stanu oraz potencjału rozwojowego zastosowania sztucznej inteligencji do prawa podatkowego.

This article deals with the problems of taxation of controlled foreign companies (hereinafter: CFC) in the light of the contemporary process of economic integration, international tax law and the European Union law. In general, the Controlled Foreign Companies rules (hereinafter: CFC rules) can be defined as specific anti-tax avoidance measures that grant the right of the shareholders’ country to attribute certain income generated by CFC to its shareholders and subsequently levy tax on it. The CFC rules may be applied either by regarding the company as a transparent entity (disregarded legal entity/piercing the veil approach), or deeming a distribution of the undistributed profits generated by the foreign company to the shareholder (deemed dividend approach). It should be noted that without the CFC rules, taxation - in the shareholders’ country - of income generated or received by a CFC is deferred until the distribution of profits by the CFC to its shareholders. Furthermore, if the CFC is established in a jurisdiction that does not impose taxes or imposes taxes at the very low rates, for instance a tax haven, or in a state or territory with a lenient tax regime, and the dividends are never distributed to the shareholders, the income is not subject to tax eventually. Thus, in nutshell, a common feature of the CFC rules is not to lose tax revenue in high tax countries by curbing the abuse of companies established on an international level for the sole purpose of avoiding taxation.

This authoritative book provides a structural, global view of evolving judicial and doctrinal trends in the understanding of beneficial ownership in international taxation. Despite attempts by the OECD to clarify the concept, it remains ambiguous to tax authorities, courts and scholars alike, which has detrimental effects on the functioning of tax treaties. Błażej Kuźniacki presents a route towards an international autonomous meaning of beneficial ownership in international taxation, while also offering a comprehensive explanation of the divergent understandings and tax policy arguments underpinning its continuing ambiguity.

This article demonstrates that after the seemingly incorrect implementation of Articles 7–8 of the ATAD, the Polish CFC rules have become blatantly incompatible with the free movement of capital to the extent of their application to companies from third countries (the Polish black list). This study, moreover, confirms the thesis that the incompatibility of the Polish CFC rules was most likely caused by two elements of the ATAD: (1) minimum level of protection in Article 3; and (2) the option under Article 7(1)(a) which leaves the decision regarding the exemption from taxation of the CFC’s income if a CFC is established outside the EU/EEA and carries on a substantive genuine business activity there to Member States themselves. The analysis also reveals that the CJEU appears to consider that the lack of a factual possibility to exchange of tax information can justify the irrefutable presumptions of tax avoidance or tax evasion by reference to the need to ensure effective fiscal supervision only in respect of the relations between the Member States and third countries. Accordingly, not only the ATAD, but also the CJEU’s case law trigger a hidden form of protectionism of Member States at the cost of third countries.

Published online: 02 September 2022 Tax administrations globally increasingly rely on artificial intelligence (AI) systems for automation. However, automation has a huge potential impact on the rights of taxpayers subject to algorithmic assessments, which is compounded by the opacity of complex AI systems. This article argues that adequate protection of taxpayers’ rights demands the use of eXplainable AI (XAI) technologies that can render the functioning and decisions of tax AI systems understandable for taxpayers, administrative appeal bodies and the courts. This demand follows from the constitutional principles that guide taxation. Still, it is insufficiently addressed by soft and hard law instruments on AI, which do not address the particular information needs of the tax domain. To address this gap, the authors conclude the article by mapping technical and legal challenges for the proper application of explanation techniques to tax AI to ensure that automation does not come at the expense of taxpayers’ rights.