This article aims to summarize the widely reported this year by the author practical problems concerning the seafarers employed aboard a ship in 2014 by norwegian shipowners (with the exception of the work on the Norwegian shelf, or under the flag of NOR).
The main objective of this publication is the desire to identify some of the problematic issues in the application of seemingly "technical" tax law which quite surprisingly have caused some serious complications of interpretation to some of the tax authorities in Poland.
The Law Office maintains its position: polish seafarers employed in this model in 2014 are entitled to abolition relief, regardless of whether they have paid taxes in 2014 in Norway or not. The Law Office represented hundreds of seafarers in Poland in the above cases, also joining the cases in which the seafarers performed without a professional agent and received negative decisions (the Tax Office in Lodz, the Tax Office in Wroclaw, some tax offices in Warsaw).
It should be noted that many of the tax offices in the country, including in Pomerania, were not prepared for the changes in the Agreement on the avoidance of double taxation between the Polish and Norway, which came into effect on 1 January 2014. These caused many of practical complications in the course of proceedings aimed to limit the advances for seafarers working for the norwegian shipowners and a significantly longer waiting for the decision.
Applications to limit the advances and the practice of Tax Offices in Poland
In the first phase of the applications to limit the advances, in some parts of Poland the tax offices refrained from issuing a decision, which was most likely to develop a uniform line of interpretation, and deepen by the employees of the tax authorities the knowledge in this regard. This action resulted in prolonging the proceedings on the issue of the relevant decision or unjustified request to provide non – existent documents e.g. official confirmation of the effective management of the owner. Unofficially known that the reason for the excessive length of the proceedings was the lack of any guidance from the competent Tax Chamber or the Ministry of Finance to limit advances in 2014 for seafarers working for norwegian shipowners.
In February and March 2014 the majority of tax offices in Poland, in the above matters, began issuing positive decisions limiting the advances in 2014 to "0". Still, at the end of February and March 2014 the tax authorities in Pomerania, where it was the most applications, have not taken a formal position.
Only in April 2014 in Pomerania tax authorities began to issue massively positive decisions limiting the advances to polish seafarers employed in this model (in the case of some of the applications submitted in January 2014 decisions were taken only in July 2014). On the margins should be noted that these decisions were issued after a very burdensome for taxpayers proceedings. Moreover, the tax authorities have recognized arbitrarily and in contrary to the law, that the conditions must be proved by the taxpayer to obtain a positive decision to limit the advances to "0".
What if you receive a negative decision concerning limitation of advances in 2014?
It should be noted that many of the tax offices began issuing positive decisions limiting the advances in 2014, and that the tax offices who have issued negative decisions in the first phase of the proceedings (for example First Tax Office in Gdynia, the Tax Office in Gdansk ,the Tax Office in Pruszcz Gdański, the Tax Office in Łódź and the tax Office in Wrocław) changed their position or their decisions were annulled by the competent Tax Chamber only after the dozens of applications and numerous writings addressed by the Law Office to The Chief of the tax office.
The main exception in this case is the Tax Office in Puck, who refused to the seafarers the right to limit the advances and unduly challenged the arguments and evidence submitted by tax payer or by proxy. This tax office relied on questionable evidence, such as for example online portals vtexplorer.com or marinetraffic.com, who haven’t a legal force. At the same time the Tax Office in Puck didn’t take into account the documents submitted by the representatives of shipowners or taxpayers. The Tax Offices in Puck admitted as evidence a note from a conversation with an employee of the Maritime Office in Gdynia who reportedly confirms that the ships aboard which seafarers worked, aren’t operated in international traffic, although in fact the conversation was related only to the portals. Moreover in the proceedings the seafarers were required to submit the documents impossible to obtain e.g. a document confirming the taxation of profits earned by the shipowner in Norway.
These treatments had no probative value since they were not taken in accordance with the procedure provided in the Tax Ordinance, which became the basis for the appeals brought by the Law Office.
What is interesting, with a growing number of applications submitted by seafarers even the Tax Office in Puck has changed, in some cases, its position. The first positive decision concerning the limitation of advances to 0 was issued by Tax Office in Puck on 5 July 2014. However, the Tax Office in Puck issued both positive and negative decisions concerning the limitation of advances in July 2014.
In turn, after bringing appeals to the Director of the Tax Chamber in Gdańsk from negative (refusing to limit of advances to PIT) decisions of the Chief of the Tax Office in Puck, the Director of the Tax Chamber in Gdańsk unreasonably maintained them in force, repeating de facto arguments of the Tax Office in Puck. The above raises serious doubts due to the fact that the other tax offices and the other tax chambers in the case of identical situation and based on the same documents, considered applications by seafarers concerning the limitation of advances (e.g. the Tax Chamber in Warsaw, the Tax Chamber in Wrocław) and they have recognized the right of seafarers to abolition relief in 2014.
Unfortunately, the Tax Chamber in Gdańsk and the Tax Office in Puck present a different view on certain issues relating to limitation of advances in the case of the Norway in 2014.
In some cases the tax authorities justified their position by the fact that the other party managed a ship than it is indicated in official documents submitted by the owner and the taxpayer or the tax offices arbitrarily indicated that a ship is not operated in international traffic, what is inconsistent with the facts and documents submitted by the owner and seafarers. In extreme cases, the tax authorities recognize that in the case of norwegian shipowners in 2014 the polish seafarers are not entitled to abolition relief if they didn’t pay tax in Norway. It is a curious because this fact causes tax obligation in Poland and allows the use of abolition relief. The Law Office filed a complaint to the Regional Administrative Court in Gdańsk in order to protect the legal interest of the few seafarers who received a decision refusing the limit advances in 2014 from the Tax Office in Puck and the Tax Chamber in Gdańsk. There has yet been no hearing relating to these complaints.
It should be emphasized that among the hundreds of cases in Poland, only a few percent of cases required referral of complaints to the administrative courts due to gross violations of tax law by the tax offices and tax chambers. In other cases, the seafarers finally received positive decisions limiting of the advance of PIT in 2014 to "0". However, these proceedings were, in most cases, were relatively cumbersome and relatively long (from 1 month to 6 months).
Moreover, the information obtained from the seafarers from different parts of Poland shows that there is a many seafarers who did not appeal negative decisions concerning limitation of advances or there is a many seafarers who have not applied for limitation of advances. These seafarers have the right to use the abolition relief, but they have to make a tax settlement in Poland until 30 April 2015.
Discrepancies in interpretation - place of residence of the seafarer
It should be stressed again that other tax offices throughout the country have issued decisions limiting advances to polish seafarers working aboard a ship managed by shipowner in Norway in 2014 with identical facts and based on identical documents as in the case of negative decisions (including the Tax Office in Chelm, the Tax Office in Kętrzyn, tax offices in Warsaw, the Tax Office in Szczecin, the Tax Office in Lodz, the Tax Office in Dąbrowa, the Tax Office in Koszalin, the Tax Office in Kolobrzeg, the Tax Office in Gdynia, the Tax Office in Gdansk, tax offices in Kartuzy, the Tax Office in Pruszcz Gdansk, the Tax Office in Radom, the Tax Office in Slupsk, the Tax Office in Malbork, the Tax Office in Elblag, the Tax Office in Jelenia Gora, the Tax Office in Gorzow Wielkopolski, the Tax Office in Trzebnica, the Tax Office in Tczew, the Tax Office in Wejherowo, the Tax Office in Chojnice, the Tax Office in Wołomin, the Tax Office in Zgierz, the Tax Office in Stalowa Wola, the Tax Office in Sopot, the Tax Office in Starachowice etc.).
The situation in which a part of the tax offices issue positive decisions, and part of the tax offices appears negative decisions must be considered bizarre, especially in the case of seafarers performing work for the same companies and on the same ship, on the basis of the same agreements. In such a situation leads to discrimination against a certain group of seafarers by issuing wrongful decisions by the tax offices in the region, and by recognizing these differences of interpretation by some Tax Chambers, which violates the provisions of constitutional law and the tax law. Irregularities were signaled to the Ministry of Finance by the Law Office.
We can only hope that in 2015 tax offices finally harmonize their positions concerning the limitation of advances and abolition relief to polish seafarers working about a ship for norwegian shipowners and to polish seafarers working aboard a ship for singapore shipowners and for other shipowners, which are entitled to abolition relief in Poland (eg. Guernsey, Jersey, Qatar, Saudi Arabia, Australia, India).
Submission of the application and checks the tax authorities
Unfortunately, the application to limitation of advances in 2014 often entailed further checks the tax authority in relation to the seafarers. The tax authorities caught wind of the explanation of the circumstances failure to file tax returns for the years indicated in the tender offer tax and direct queries where seafarers hold cash eg. to buy property in case of no-show, in Poland, foreign income. The Law Office also represented the seafarers on these matters and, except individual cases where the matter is still pending, those cases were completed positively for polish seafarers ie. tax authorities have not found a basis for taxation of the subject to verification
The Law Office recommends a contact with a professional attorney to determine your tax situation firstly after receiving a call of the tax office, and then a contact with the tax authorities, which very often have selective information about a taxpayer what may have an impact on an erroneous assessment of his tax situation.
Many of the investigations to the seafarers were initiated by the polish tax authorities because of information obtained in the exchange of tax information between Polish and Norway. This exchange becomes more effective each year and now is the main source of information of the seafarers working abroad for the polish tax authorities.
What are the additional responsibilities of the seafarers employed by norwegian shipowners in the years 2014 and 2015?
Unfortunately, in the last weeks of 2014, some employees of tax offices in Poland (including Second Tax Office in Gdańsk) and the Polish National Tax Information erroneously reported to the seafarers that though obtaining a decision limiting the advances in 2014 in the case of Norway, seafarers are not entitled to abolition relief because they do not have paid tax in Norway.
Do not rely on the incorrect information from the tax authorities, because they are not in support of the polish tax law. Seafarers who have decisions limiting the advances in 2014 or who did not receive these decisions in general, they should file a tax return in Poland until 30 April 2015 in order to benefit from the abolition relief. The same decision limiting advances is not a sufficient basis for benefit from the abolition relief. It should be noted that Law Office encountered, in some cases, a certain resistance to the tax authorities in granting abolition relief, making settlements for the polish seafarers working for the shipowners from other countries eg. Guernsey, Qatar, Saudi Arabia, Brazil what is inconsistent with the provisions of Polish tax law .
It should be emphasized that the polish seafarers working for norwegian shipowners in this model in 2015 will also be entitled to relief abolition in Poland on the same basis as in 2014.
Polish seafarers who have a positive decision limiting advances in 2014, who will continue work for the Norwegian shipowners in the same model of employment, which causes tax liability (work outside the Norwegian shelf and under a flag other than NOR) must submit another application to limit the advances in 2015. In 2015, application must be submitted to the 20th of the following month after the first revenues from the Norwegian shipowner in 2015 or the 20 of the next month after returning seafarer to Poland (if a seafarer stays out of Poland from the beginning of 2015). An application suspends the obligation to pay the monthly advances for the PIT in 2015 in Poland.
Abolition relief in polish tax law
In recent months, we often described the issue of abolition relief in polish regulations, but for the order, we will discuss the rules for the abolition relief again, the rules who invariably will be in force in 2015.
Polish seafarers who have acquired foreign income from employment aboard a ship in 2014 (and who will acquire in 2015) for which we use the method of proportional deduction, have the right to deduct from income tax abolition relief, which is the amount representing the difference between the tax calculated using the method of proportional deduction and the tax calculated according to the method of exemption with progression.
In accordance with Art. 27g paragraph. 2 of the PIT Act shall be deducted the amount of the difference between the tax calculated in accordance with Art. Paragraph 27. 9 or 9a of the PIT Act (ie. the method of proportional deduction) and the amount of tax calculated of income from sources referred to in paragraph. 1, using the principles laid down in Art. 27 Paragraph 8 of the PIT Act of the Act (ie. the method of exemption with progression).
The ability to take advantage of the abolition relief is not dependent on whether the income earned abroad are taxed in the source country, ie. in the State in which the taxpayer obtains the income. There is also no matter whether Poland has concluded or not an agreement with that country for the avoidance of double taxation. The bottom line is that the foreign income is taxable in Poland, using the method of proportional deduction. This method is also applicable in case of a State, with which Poland has not entered into an agreement for the avoidance of double taxation. Deduction does not apply only if certain revenue have been obtained in the territory of the countries listed in the Regulation of the Minister of Finance on the determination of the countries and territories using harmful tax competition for the purposes of income tax from individuals, so-called. tax havens. To sum up, the taxpayer in a situation where he is entitled to abolition relief, is obliged to settle his income in Poland. In Poland, the Article 27 g of the PIT Act provides for relief Abolition will be applied, or the taxpayer will be able to reduce your tax by the amount being the difference between the tax calculated using the method of proportional deduction and the tax calculated using the method of exemption with progression, which usually leads to "reset" the tax in Poland.
It should be noted that the polish tax authorities unjustifiably refused the right to abolition relief to seafarers working in 2014 for shipowners with management in Norway only in certain cases. Income earned in connection with an employment aboard a ship operated by the company with the effective management in Norway absolutely entitles polish seafarers to benefit of the abolition relief in Poland in 2014 and will entitle them to benefit of the abolition relief in 2015.
In conclusion, it should be noted that in 2014 Law Office represented hundreds of seafarers in Poland working for norwegian shipowners and almost of seafarers have received from the tax offices positive decisions, but only in relation to a few percent of the cases, these decisions were negative. It should be remembered that the negative decisions will still be subject to verification by the competent administrative courts.
Radca Prawny Mateusz Romowicz