The Limits of the General Anti-Avoidance Rule in Tax Interpretation Proceedings: Related-Party Service Contracts Under the Estonian CIT Regime
A tax authority may not refuse to issue an individual tax interpretation on the basis of the General Anti-Avoidance Rule where it has failed to demonstrate that the taxpayer would derive any tax advantage. The mere existence of corporate links between the parties is insufficient — particularly where the factual description establishes that equivalent services would necessarily be procured from unrelated parties on identical or higher terms. The Provincial Administrative Court in Wrocław so held in its judgment of 26 February 2026 (I SA/Wr 638/25), annulling the Director of National Tax Information’s refusal. The case was adjudicated under the simplified procedure on a closed session (Articles 119(3) and 120 of the Law on Proceedings Before Administrative Courts), confirming that complaints against refusal rulings may be resolved expeditiously, without oral hearing.
The GAAR Mechanism in the Interpretive Context
Article 14b(5b)(1) of the Tax Ordinance mandates the refusal of an individual interpretation with respect to elements of the described factual situation as to which there exists a “justified suspicion” that they may constitute a transaction described in Article 119a(1). Before issuing such a refusal, the interpretive authority obtains an opinion from the Head of the National Tax Administration.
The Factual Configuration
The applicant — a limited liability company established in 2023, operating in the construction sector — managed investment processes from architectural design through occupancy certification. From 1 May 2024, it was taxed under the Estonian CIT regime. Its three shareholders — each holding one-third of the share capital — were simultaneously general partners in three separate limited partnerships conducting construction-related business.
These partnerships provided the applicant with construction supervision, transport, equipment rental, construction works, site management, and cost estimation services. Each shareholder held unrestricted construction management qualifications — credentials mandated by Polish construction law. The company emphasised that contractual terms were arm’s-length, remuneration was independent of dividends, and it also procured identical services from unrelated parties.
The Refusal: A Dual-Level Tax Advantage Argument
Rather than addressing the substantive question, the DKIS obtained an opinion from the Head of NTA confirming its suspicions and issued a refusal ruling. The authority identified potential tax advantages at two levels. At the company level: service remuneration reduces net profit, diminishing the lump-sum tax base under Article 28m(1)(1). At the shareholder level: income is re-characterised from dividend participation (subject to 19% withholding plus prior corporate-level taxation) into service remuneration under a potentially more favourable regime.
Notably, the DKIS stated in its ruling that it was “bound by the opinion of the Head of NTA” — a characterisation that the Court subsequently rejected.
The Court’s Analysis: No Tax Advantage Demonstrated
The Court annulled both the challenged ruling and the underlying first-instance ruling on the basis of Article 145(1)(1)(c) of the Law on Proceedings Before Administrative Courts — that is, for a violation of procedural rules capable of materially affecting the outcome, rather than for a violation of substantive law. This distinction carries practical significance: the authority may, in renewed proceedings, theoretically reach the same conclusion, provided it furnishes adequate justification.
The Court’s central finding is devastating in its logical simplicity. The applicant’s factual description — which the authority was bound to accept as presented — established that the company necessarily required external services; that it procured identical services from unrelated parties; and that arm’s-length pricing was applied. In every conceivable scenario, the cost of the services would reduce net profit by an identical or even greater quantum. As the Court stated: the authority “in substance identified no tax advantage whatsoever that would arise on the part of the applicant.”
The Court focused its analysis on the absence of any demonstrated advantage at the company level and did not need to resolve the question of shareholder-level advantages. The authority’s reasoning collapsed at the threshold condition — rendering further analysis of artificiality or contrariety to statutory purpose unnecessary.
The Artificiality Deficit
Even assuming a tax advantage had been established, the Court found the authority’s analysis of “artificiality” under Article 119c(1) fatally deficient. The DKIS had not invoked any of the indicia specified in Article 119c(2). Moreover, the Court identified an internal contradiction: in the very opinion where the Head of NTA asserted artificiality, he simultaneously acknowledged that “the outsourcing of services to external entities is a common economic phenomenon that does not result from a desire to achieve a tax advantage”.
Procedural Circumvention: Refusal as Surrogate Assessment
The Court found that the DKIS had de facto rendered a negative substantive assessment — asserting that service remuneration constituted profit distribution — but within the procedural framework of a GAAR refusal rather than through a substantive interpretation. This manoeuvre deprives the taxpayer of the right to raise challenges of misinterpretation under Article 57a of the procedural law.
Constitutional Dimension: Freedom of Economic Activity
The Court invoked the constitutional guarantee of freedom of economic activity under Articles 20 and 22 of the Polish Constitution. The authority’s position, the Court held, amounted to an arbitrary prohibition on contracting with related parties for essential services — compelling the applicant to engage unrelated parties on less favourable terms solely for fiscal reasons.
The Non-Binding Character of the Head of NTA’s Opinion
Consistent with the Supreme Administrative Court’s holding in its judgment of 6 December 2024 (III FSK 708/23), the Court affirmed that the Head of NTA’s opinion is not binding upon the interpretive authority. This stands in direct contrast with the DKIS’s own assertion that it was “bound” by the opinion.
An Emerging Line of Jurisprudence
The Court expressly noted that it had drawn upon the reasoning of the Provincial Administrative Court in Wrocław in its judgment of 3 December 2025 (I SA/Wr 631/25), rendered in a closely analogous factual and legal context. This circumstance evidences the formation of a consistent jurisprudential line at the Wrocław court in GAAR-refusal cases involving the Estonian CIT regime — enhancing the practical significance of both judgments as reference points for analogous disputes.
Practical Recommendations
For taxpayers operating under the Estonian CIT regime and procuring services from related parties, the judgment yields three actionable principles. First, documentation of business rationale is paramount — the evidentiary foundation should establish operational necessity and arm’s-length pricing. Second, interpretation requests should proactively address the tax-advantage criterion by demonstrating that the cost would be incurred regardless of the counterparty’s identity. Third, where a GAAR refusal is issued, the taxpayer should examine whether the authority has genuinely substantiated its suspicion or has instead employed the mechanism as a surrogate negative assessment.
Legal basis: Judgment of the Provincial Administrative Court in Wrocław of 26 February 2026, case no. I SA/Wr 638/25; Article 28m(1)(1) of the Act of 15 February 1992 on Corporate Income Tax; Articles 14b(5b)(1), 119a(1), 119c(1)–(2) of the Tax Ordinance; Article 145(1)(1)(c) of the Law on Proceedings Before Administrative Courts; Articles 20 and 22 of the Constitution of the Republic of Poland.
Robert Nogacki – licensed legal counsel (radca prawny, WA-9026), Founder of Kancelaria Prawna Skarbiec.
There are lawyers who practice law. And there are those who deal with problems for which the law has no ready answer. For over twenty years, Kancelaria Skarbiec has worked at the intersection of tax law, corporate structures, and the deeply human reluctance to give the state more than the state is owed. We advise entrepreneurs from over a dozen countries – from those on the Forbes list to those whose bank account was just seized by the tax authority and who do not know what to do tomorrow morning.
One of the most frequently cited experts on tax law in Polish media – he writes for Rzeczpospolita, Dziennik Gazeta Prawna, and Parkiet not because it looks good on a résumé, but because certain things cannot be explained in a court filing and someone needs to say them out loud. Author of AI Decoding Satoshi Nakamoto: Artificial Intelligence on the Trail of Bitcoin’s Creator. Co-author of the award-winning book Bezpieczeństwo współczesnej firmy (Security of a Modern Company).
Kancelaria Skarbiec holds top positions in the tax law firm rankings of Dziennik Gazeta Prawna. Four-time winner of the European Medal, recipient of the title International Tax Planning Law Firm of the Year in Poland.
He specializes in tax disputes with fiscal authorities, international tax planning, crypto-asset regulation, and asset protection. Since 2006, he has led the WGI case – one of the longest-running criminal proceedings in the history of the Polish financial market – because there are things you do not leave half-done, even if they take two decades. He believes the law is too serious to be treated only seriously – and that the best legal advice is the kind that ensures the client never has to stand before a court.
