April 2023

The Polish Penal Fiscal Code introduced four categories of the tax crimes:

1. crimes against tax obligations and settlements in respect of grants or subsidies,
2. crimes against customs duties and rules of foreign trade in goods and services,
3. crimes against foreign exchange,
4. crimes against organizing gambling games.

Most of the crimes related to the tax settlements are in the first category and the most commonly committed tax crimes are:

• failure to disclose the subject or tax base
• the tax fraud - i.e., incorrect disclosure of the tax base
• persistent non-payment of the tax settlements,
• ·no book-keeping or wrongfully book-keeping
• fraudulent tax refund
• failure in fulfilling the duties of the tax remitter
• breach of the tax filing requirements.

Certain amounts of a tax adjustment trigger the type of the tax crime and the maximum penalty to be sentenced.

There are two categories of the tax crimes:

• a minor offence - which is committed if a tax amount subject to the crime amounts to no more than five times the minimum wage specified in the law at the moment of committing the act (January - June 2023: PLN 17.450, ~EUR 3.787, from July 2023: PLN 18.000, ~EUR 3.906) or if according to the law the act is qualified as a minor offence as such and
• a criminal offence - other acts punishable according to the criminal fiscal regulations by fine, restriction of liberty or imprisonment.

The range of amount of fine or time frame of restriction of liberty or imprisonment depends on a tax fraud amount in some specific crimes. For example, for the most common crime - a tax fraud - specified in article 56 of the Polish Penal Fiscal Code the penalties are regulated as follows:

• for a basic type of a criminal offence the maximum penalty is 720 fine rates or imprisonment,
• for a privileged type of a criminal offence, i.e. when the tax assessment is of a "small value" which means that a tax amount subject to the crime amounts no more than 200 x the minimum wage specified in the law at the moment of committing the act (January - June 2023: PLN 698.000, ~EUR 151.469, from July 2023: PLN 720.000, ~EUR 165.243) - the maximum penalty is 720 fine rates,
• for a minor offence if a tax amount subject to the crime amounts no more than five times the minimum wage specified in the law at the moment of committing the act (January - June 2023: PLN 17.450, ~EUR 3.787, from July 2023: PLN 18.000, ~EUR 3.906).

No, the penalties imposed within tax proceedings and criminal tax proceeding are not related. Additionally the criminal liability is a personal liability only. It means that if a taxpayer is not a natural person then the tax penalties are imposed on the taxpayer and the criminal penalties on the natural person only responsible for financial matters of the taxpayer (for example member of the board or head of accountant - depending what exact person is sentenced as guilty of intentional committing a crime).

The general rule is that a fiscal crime is committed only when a person acted intentionally - which means that the person wants to commit it or, foreseeing the possibility that the crime may be committed accepts it. The overwhelming majority of crimes related to tax obligations may be committed only intentionally.

The crime may be committed unintentionally only when it is indicated for the specific crime. Committing a crime unintentionally means that it is as a result of a failure to exercise the care required under the circumstances. The example of such crime that may be related to tax obligations is the so-called supervision fault which is a minor offence and may be committed when the supervision fault resulted in committing a criminal fiscal crime.

According to the article 16a of the Polish Fiscal Code no punishment can be imposed to any person that committed the crime related to the mistake in the tax return if a committed crime is related to the information presented in the tax return and:

• a taxpayer efficiently submitted an adjusted tax return,
• a taxpayer paid a tax arrears with penalty interest and
• any criminal proceedings have been initiated with respect to this tax return or the crime has been revealed within criminal proceedings.

This possibility of amendment of a tax return is limited during the time when any tax proceedings are opened. Then a taxpayer have to wait for a specific time slots within the tax proceedings when it obtains a right to submit an amendment of the tax return.

The Public Prosecutor and other accusation authorities (i.a. the Head of the Tax Office, the Head of the Fiscal Administration, the Border Police, the Police etc.) can on his own initiative initiate a proceedings if any of them has a suspicion that a fiscal crime has been committed. As a rule, the Public Prosecutor is entitled to conduct all tax fraud proceedings and the other authorities are competent with respect to the matters that are subject to administrative proceedings conducted by these authorities. The Public Prosecutor can also take over the tax criminal proceedings conducted by any other authorities.

The tax fraud offence proceedings can be initiated without any formal motion from the Polish tax authorities (PTA). However as a rule it is PTA initiative to inform the Public Prosecutor or other authority on the suspicion on committing the tax fraud which result in opening a tax criminal proceedings.

The accusation authorities are not obliged to follow the findings made and evidence collected within a tax proceedings. On the other hand the PTA and tax administrative courts are bound by the final criminal judgement of conviction. In practice the accusation authorities are waiting for final settlement of a tax case and attach the tax case files to the criminal tax case to follow PTA's findings.

According to the Polish law the Public Prosecutor is not limited by any PTA's actions to initiate criminal fiscal proceedings and submit in indictment to the criminal court. The criminal judgement takes a precedence over a tax decision or a tax judgements. However in practice the Public Prosecutor is not very proactive and even if it opens the criminal proceedings it suspend them until final tax decision before taking any actions.

For criminal offences the statute of limitation period is:

• 5 years - if the maximum penalty for committing a crime is fine, restriction of liberty or punishment up to 3 years and the period may be prolonged for the next 5 years if the authority presents charges against a suspected person,
• 10 years - if the maximum penalty for committing a crime is punishment for longer than 3 years and the period may be prolonged for the next 10 years if the authority presents charges against a suspected person.

For minor offences the statute of limitation period is 1 year and the period may be prolonged for the next 2 years if the authority presents charges against a suspected person.

Also, the statute of limitation period is expired if the tax arrears are expired according to the tax law.

Starting from March 2020 because of COVID restrictions the statute of limitation period is suspended until the 6 months from recalling the public state of epidemic / state of epidemic threat.

As a rule the statute of limitation period starts on the day of committing the crime. In case of crimes related to the tax arrears the limitation period starts on the last day of the year when the payment deadline of the tax liability occurred.

Penalties for committing a tax crime does not cover tax arrears or other tax administrative penalties (these are imposed directly on a taxpayer which may be an entity other than a natural person).

General rule for measuring the criminal penalties is that it should be taken into account the level of harm resulted from the crime (i.e. for tax crimes it is mostly the amount of the tax arrears) and the personal situation of the person committing the crime. The circumstances related to the personal situation are the motivation, the way of doing, the level of guilt in committing the crime, the general commitment to self-improvement as well as the life situation (family / financial etc.).

The criminal penalties that may be imposed for committing a fiscal criminal offence are:

• a fine imposed as daily rates payments: (i) the range of rates is between 10 and 720, (ii) the amount of the exact rate may be between PLN 116,3 (~EUR 25) and PLN 46.520 (~EUR 10.095) - which means that the fine amount range is between PLN 1.163 (~EUR 252) and PLN 33.494.400 (~EUR 7.268.406) from January 2023 to June 2023,
• a fine imposed as daily rates payments: (i) the range of rates is between 10 and 720, (ii) the amount of the exact rate may be between PLN 120 (~EUR 26) and PLN 48.000 (~EUR 10.416) - which means that the fine amount range is between PLN 1.200 (~EUR 260) and PLN 33.560.400 (~EUR 7.282.728) from July 2023,
• a restriction of liberty imposed in months or years between 1 month and 2 years,
• an imprisonment imposed in days, months or years between 5 days and 5 years.

Aside from the criminal penalties additional punitive and protective measures may be also imposed.

There are following punitive measures to be imposed depending on the type of crime that has been committed and a personal situation of the convicted person:

• a voluntary submission to liability,
• a forfeiture of objects related to committing the crime,
• an execution of money equivalent of objects that should be subject to the forfeiture,
• a forfeiture of a financial gain reached by the person committing the crime,
• an execution of money equivalent of a financial gain reached by the person committing the crime,
• a limitation to carry out a certain business activity, practice a certain profession or have a certain position,
• a public announcement of the convincement judgment,
• a loss of the public rights;
• a probation measures, i.e. a conditional discontinuance of criminal proceedings, a conditional suspension of execution of the conviction judgement, a conditional release of the convicted person.

As protective measures may be imposed: an electronic monitoring system, a therapeutic treatment, an addiction therapeutic treatment, a psychiatric treatment as well as a forfeiture of objects and a limitation to carry out a certain business activity, practice a certain profession or have a certain position.

The penalty that may be imposed for committing a fiscal minor offence is a fine imposed as one-off payment amounting between PLN 349 and PLN 69.800 (~EUR 76 - 15.147) from January 2023 to June 2023 and between PLN 360 and PLN 72.000 (~EUR 78 - 15.624) from July 2023.

Additionally to the penalties, the court may impose the following punitive measures:

• a voluntary submission to liability,
• a forfeiture of objects related to committing the crime,
• an execution of money equivalent of objects that should be subject to the forfeiture.

The compliance or risk mitigation program in the Company may be helpful to be better prepared to support the Company's employees that are suspected of committing a tax crimes.

According to article 16 of the Polish Penal Fiscal Code the person who committed a fiscal crime cannot be punished for committing the crime in case of submitting the self-disclosure to the accusation authority. It means that in case of submitting effective self-disclosure the accusation authority cannot impose any punishment to the person that committed the notified crime.

To submit an effective self-disclosure the following requirements must be met:

• the notification should indicate the relevant circumstances of the act, including other cooperating persons,
• a taxpayer must pay a tax arrears with penalty interest,
• an accusation authority cannot have any documented information on committing the crime before receiving the notification or opened any criminal proceedings leading to revealing committing the crime.

The self-disclosure cannot be effectively submitted if the exact person was managing in committing the crime, led other persons that depended to this person to commit the crime or managed the criminal group committing the crime.

According to the article 16a of the Polish Fiscal Code no punishment can be imposed to any person that committed the crime related to the mistake in the tax return if a committed crime is related to the information presented in the tax return and:

• a taxpayer efficiently submitted an adjusted tax return,
• a taxpayer paid a tax arrears with penalty interest and
• any criminal proceedings have been initiated with respect to this tax return or the crime has been revealed within criminal proceedings.

This possibility of amendment of a tax return is limited during the time when any tax proceedings are opened. Then a taxpayer have to wait for a specific time slots within the tax proceedings when it obtains a right to submit an amendment of the tax return.

No, but the full payment of a tax assessment is one of the requirement to meet to benefit from an effective tax return amendment, self-disclosure and voluntary submission to liability.

Initiation of the criminal fiscal proceedings and informing the taxpayer on the proceedings which are related to the tax settlements under a tax audit result in suspension of the statute of limitation period for tax proceedings. This regulation results in opening numerous fiscal criminal proceedings artificially only to achieve the result of suspension of the tax statute of limitation period which usually is shorter (for most common fiscal crime regulated in article 56 of the Polish Penal Fiscal Code it is 10 years comparing to 5 years for tax statute of limitation and it may be prolonged by the next 10 years). Such criminal proceedings are mostly discontinued after closing a tax audit.

The practice of artificial initiation of criminal fiscal proceedings is very controversial in Poland and numerous judgements of the Supreme Administrative Court were issued in this matter. According to the current position of the Supreme Administrative Court (from 24/05/2021, ref. I FPS 1/21) if the criminal fiscal proceedings have an artificial character the tax court may decide that the tax statute of limitation period has not been suspended.

As a result the PTA's practice has been developed in such a way that there are some evidence actions taken or even charges against persons responsible for finance matters are presented to justify the non-artificial character of criminal fiscal proceedings. Such actions defend PTA's position that initiation of the criminal fiscal proceedings was justified.

Yes, the tax liability and criminal liability are separate ones and are subject to different proceedings conducted by different authorities. The aim of the tax proceedings is to decide on the tax settlements and impose to the company (the taxpayer) the obligation to pay tax due together with interest and other penalties. In case of the criminal proceedings, the aim is to punish the natural person who committed a crime and the criminal penalties are imposed to such person according to its level of guilt, the level of harmfulness of the act and personal aspects related to the convicted person.

The suspected person may apply for a voluntary submission to liability according to article 17-18 of the Polish Penal Fiscal Code if:

• any circumstances of committing a crime by a suspected person are not questionable,
• any tax arrears were paid by a taxpayer,
• the suspected person paid a minimum amount of fine,
• the suspected person accepted forfeiture of property related to a crime,
• the possible maximum penalty for the exact type of crime is only a fine (not restriction of liberty / imprisonment) - which means that the measure is applicable only to the lesser crimes,
• there is no circumstances for applying by a prosecutor for an extraordinary punishment.

As a result of accepting the voluntary submission to liability by the criminal court the amount of the imposed fine is significantly lower and the sentence is not entered to the criminal register (which means that officially the convicted person is not criminally convicted).

The general rule for a criminal law in Poland is that only natural persons are liable for criminal (including fiscal criminal) liability.

With respect to entities other than natural persons there are regulations put in the Law on Liability of Collective Entities for Criminal Acts which introduced the rules of imposing criminal penalty to collective entities. Any penalty may be imposed to the collective entity only if the natural person has been convicted before. In practice authorities do not impose criminal penalties on collective entities according to this regulation because technically this procedure is very complex.

Yes, the penal fiscal liability may be imposed also on foreign employees / directors if they commit a crime against the Polish fiscal matters even if these persons are not in the Polish territory at the moment of committing the crime.

The liability for criminal offence is a personal liability imposed to a natural person who is responsible for committing a tax crime. The imposed penalty are of a criminal nature and their purpose is not to satisfy the Company's tax arrears but to punish the convicted person. Any fine imposed to a natural person must be paid by a convicted person. Payment a fine or granting funds to pay a fine by any other entity or a person is not allowed (it is a minor offence as such) and does not result in effective payment of the fine.

The liability for tax settlements together with penalty interest and other potential tax sanctions is imposed on the Company only. There are some exceptions when other entities may be subsidiary liable for tax arrears but this liability is also imposed within the tax proceedings rather than within any criminal proceedings.

Yes, we see the increase of criminal prosecution for tax offenses which is mostly related to the tax frauds cases.