Institution Tribunal: Reporting of MDR by tax advisors is unconstitutional

Table of Contents:

1. What Did the Constitutional Tribunal Rule Regarding MDR?
2. Are the Tax Scheme Reporting Regulations Constitutional?

The professional secrecy of tax advisors is inviolable, which means that the regulations on reporting tax schemes (MDR) in this regard are unconstitutional, ruled the Constitutional Tribunal (case no. K 13/20). For several years, the National Council of Tax Advisors (KRDP) has pointed out that the regulations introduced in Poland in 2019, mandating the reporting of tax schemes, are flawed and violate the confidentiality of tax advisors. Therefore, KRDP challenged them before the Constitutional Tribunal, citing their inconsistency with the Constitution.

What Did the Constitutional Tribunal Rule Regarding MDR?

The Tribunal’s ruling leaves no doubt that the professional secrecy of tax advisors is inviolable, and clients can entrust their confidential information to tax advisors with the assurance that it will not be disclosed to anyone. It is also not possible to release a tax advisor from professional secrecy to report a tax scheme. The Tribunal’s decision clearly indicates that the client does not have the authority over the professional secrecy of the tax advisor and cannot release the tax advisor from this obligation.

Are the Tax Scheme Reporting Regulations Constitutional?

The Constitutional Tribunal ruled that the tax scheme regulations (Articles 86b, 86d, 86e, and 86f in connection with Article 86a of the Tax Ordinance, and in connection with Article 37(4)(2) of the Act on Tax Advisory Services) are unconstitutional to the extent that they impose an obligation on tax advisors bound by professional secrecy to provide information about a tax scheme and fail to sufficiently specify the conditions and procedures for exclusion or exemption from the obligation to maintain professional secrecy (violating Articles 2, 17(1), 49, and 51(2) in connection with Articles 31(3) and 47 of the Constitution).

The Tribunal also agreed that the provisions introducing the obligation to report domestic tax schemes retroactively violated the principle of lex retro non agit and, as such, are also inconsistent with the Polish Constitution. The Constitutional Tribunal judges also decided to dismiss the remaining part of the complaint filed by KRDP. This means that the provisions regarding the reporting of tax schemes have not been entirely eliminated from Polish tax law, and the reporting obligation still applies to Polish taxpayers.

In the legal framework that will exist after the ruling, the only way for the state to obtain information about tax schemes prepared by tax advisors will be through the transmission of information by advisors to the tax scheme beneficiaries (clients), who are responsible for reporting them, according to the Tribunal’s statement.