Articles & Publications
HomePage 4

VAT in relation to selling real estate plus the management of personal assets. Warsaw, September 2nd, 2021

Using a proxy to prepare a property for sale is equivalent to a business activity by the owner in the eyes of the tax authorities and is subject to VAT regulations. The position does not change, even if the buyer is the proxy. The authorities consider the seller of the property to be a VAT taxpayer even in the case of a one-off (occasional) transaction.

This position is enforced by the authorities (despite different assessments expressed by voivodeship administrative courts) even in the case of granting a power of attorney to the future buyer, who makes the purchase of a given property conditional on a change in its legal status and wants to take care of the relevant formalities himself.

During a recent case, the taxpayer defended himself by pointing out that the activities related to maintaining the status of the building plot and the request for exclusion from forest production were made at the express request of the buyer, who expected the property to comply with his requirements at the time of sale.

The property owner gave the buyer permission to perform the necessary activities on his behalf (conduct all formal and legal matters related to the entire process preceding the issuance of location decisions and building permits, apply to suppliers of all utilities to connect the planned investment to necessary networks, obtaining all decisions, resolutions, agreements and opinions in order to correctly connect the investment to the necessary utilities, etc.).

Despite this, the tax authorities found that in connection with the sale of the real estate, the owner of the real estate had become a VAT taxpayer for this one activity, which was the sale of the real estate. Thus, in the opinion of the tax authorities, the sale of real estate should have been subject to VAT.  The tax authorities also found that the owner’s activities went beyond the scope of private property management and should be considered as an economic activity in the field of real estate trading.

In the judgment of June 2021, the voivodeship administrative court did not agree with the authority’s assessment and recalled that economic activity within the meaning of the Value Added Tax Act is any activity of producers, traders or other service providers, also when the activity was performed on a one-off basis, but in circumstances indicating the intention to perform activities repeatedly.

In the opinion of the court, activities related to the ordinary exercise of the right of ownership cannot, by themselves, be regarded as conducting economic activity. The sheer number and scope of sales transactions made is not decisive, since the scope of the sales transactions cannot be used as a criterion for distinguishing between activities carried out privately which are outside the scope of the VAT directive and activities constituting an economic activity.

The situation is different when an owner takes active measures in the field of real estate trading and engages funds similar to those used by producers, traders and service providers. Such active activities may consist, for example, in preparation of the site for the installation of utilities or in marketing activities. Such activities do not fall within the scope of the day-to-day management of private property, therefore, in such a situation, the delivery of building land cannot be regarded as an activity related to the ordinary exercise of the ownership right.

According to the court, to recognise that a given person acts as a VAT taxpayer, it is necessary to establish that he or she carries out professionally, business activities in the field of real estate trading. Each time it requires checking whether a given transaction was carried out in connection with conducting business activity in this specific scope. It is not enough to state that a given person conducts economic activity at all. It must be an activity with a specific profile, because the performance of a given activity does not prejudge its taxation even on several occasions. The assumption that a given person, selling land, acts as a VAT taxpayer conducting commercial business activity, requires establishing that his activity in this field takes a professional (business) form, which is manifested in the activity of that person in the field of real estate transactions, which may indicate that his / her activities take an organized form.

When assessing the activities of the person selling the real estate, one should also take into account the activities at individual stages of the seller’s activity as a whole, and not only separately.

For these obvious reasons, in the opinion of the court, there were no grounds to recognize the seller’s activities as an economic activity within the meaning of the VAT Law.

Despite the clear and – it seems – convincing position expressed by the voivodeship administrative court, the tax authorities decided to bring a cassation appeal. This means that taxpayers selling real estate will soon be exposed to disputes with the tax authorities. At the same time, it will cause uncertainty on the real estate market and increase transaction risk.

Bernard Łukomski
Attorney-at-law
Tax advisor
Tel: 608 093 541

Fiscal offense and exclusion of punishment – art. 16a of the Tax penal code. Warsaw, September 10, 2021

On July 26, 2021, the Polish government presented a draft law introducing extensive changes to the tax and social security laws, which were the subject of public consultations conducted by the Ministry of Finance up until August 30, 2021. These changes were partially announced earlier this year and are referred to as the “Polish Deal”.

The latest draft of the Polish Deal provides for an amendment to Art. 16a of the Tax Penal Code, which enables the avoidance of criminal liability in relation to the defective filing of a tax return. The draft regulation will also release the persons responsible for submitting the books from liability.

According to the current wording of this provision, it only applies to the person who:

(1) has submitted a legally effective (within the meaning of the provisions of the Tax Ordinance or within the meaning of the provisions of the Act on the National Revenue Administration) correction of the tax declaration, and
(2) paid in full, immediately or within the time limit set by the authorized body, the tax depleted or subject to depletion.

However, in the case of tax returns relating to legal persons, it is difficult for the perpetrator (i.e. a natural person) to meet the requirement to “pay” a public debt (e.g. VAT payable by the company). After all, a board member, CFO, accountant, etc. cannot pay taxes from their own resources on behalf of the companies they manage. The proposed wording of Art. 16a of the Tax Penal Code provides only for the necessity to pay the amount due without demanding that the amount payable be paid by the perpetrator himself.

The draft provision stipulates that if, in connection with a prohibited act, there has been a reduction in taxes paid, avoidance of liability is possible only when the liability has been paid immediately, but not later than within the time limit set by the financial authority of the preparatory proceedings. In other words, it is necessary to pay the tax without awaiting any indications in this regard from the tax authorities. However, it is important that the amount paid is in the correct amount. Otherwise, it will not be possible to avoid criminal liability.

Moreover, the proposed provision of Art. 16a of the Tax Penal Code specifies who may take advantage of its benefits, indicating that it is the perpetrator of a prohibited act concerning:
(1) submitting a return or
(2) submitting the books.

The provision in the current wording defined the beneficiary of this regulation, indicating this person in a general way, by referring to actions (activities) that exculpate him, taken post factum.

What is very important, the proposed provision clarifies that the exemption from liability shall not apply if, prior to the submission of a correction to the declaration or book, preparatory proceedings for a fiscal offense were initiated, or a fiscal offense was revealed in the course of the pending preparatory proceedings.

Bernard Łukomski
attorney at law
tax advisor
tel. +48 608 093 541

UK Divorce laws overhaul will ‘end blame game’ for couples

Existing UK divorce laws mean spouses have to provide evidence for a divorce if one partner does not agree to it.

For the first time in 50 years, UK divorce laws are being overhauled in an attempt to end the “blame game” for couples trying to end their marriage.

Current laws in England and Wales dictate that unless someone can prove there was adultery, unreasonable behaviour or desertion, the only way to get divorced without a spouse’s agreement is to live apart (be separated) for five years.

The new laws state that one side will now only have to submit a “statement of irretrievable breakdown” to say the marriage has broken down; instead of having to provide evidence about length of separation or their spouse’s behaviour. In addition to this,the ability of one partner to contest a divorce will also be scrapped.

The existing two-stage process of a decree nisi, a document which says the court cannot see any reason why you cannot divorce, followed by a decree absolute, the legal document which ends a marriage, will remain the same; however, a six month minimum period will be introduced between the lodging of a petition to the divorce being made absolute.

Couples will also be able to make joint divorce applications, alongside the current option for one partner to start the process.

Similar changes will also be made to the law governing the dissolution of civil partnerships.

The overhaul follows a government consultation last year, when details of the proposals were first unveiled.

The Ministry of Justice said the new legislation is expected to be introduced as soon as parliamentary time allows.

The cost of divorce

The cost of divorce in the UK has soared by 17 per cent in the past three years, with divorcing and separating couples now typically spending £14,561 on legal and lifestyle costs, a new report by Aviva reveals.

On top of this, couples who move house as a result of the separation spend tens of thousands of pounds on moving house. Those who rent – which applies to more than half of divorcees – spend around £35,000, while those who go onto buy a new property (16%) spend £144,600 on average.

The report reveals soaring legal fees and the cost of redecorating homes, as well as moving house, are central to this rise.

Legal fees have more than doubled since 2014, up by 109% from £1,280 to £2,679, with any additional costs in child custody battles having also increased by 62%, from £3,500 to £5,671.

The cost of redecorating a previously shared home has also risen by around 73%.

Concern about the cost of divorce

Due to these soaring costs, for a significant proportion of separated couples – 16% – affordability remains such a concern that they remain living together in the same house because they can’t afford to move.

Aviva’s findings indicate the majority (68 per cent) of couples who divorce or separate have financial issues to resolve, with the process taking on average 14 and a half months – three months longer than in 2014.

The report comes as new data revealed the number of divorces in England and Wales increased by 6% between 2015 and 2016 to 106,959 – in what marked the first rise since 2009.

In light of the findings, Paul Brencher, Aviva’s health and protection director, said: “The breakdown of a marriage or long-term relationship is likely to be one of the most emotionally demanding life events for people who experience it. While it may seem completely unnecessary to plan for such an unfortunate life event, it is important that both partners in a relationship take an active interest in their financial affairs, even if one tends to take the lead.”

Help

If you need expert advice on any aspect of family law, Kancelaria Prawna Bernard Łukomski is the place to turn to. Our lawyers are highly trained, experienced and knowledgeable in everything from marriage and divorce to issues involving children. If you are going through a difficult time and need expert advice you can trust, we can help.

VAT Taxation on rental of residential property. Warsaw, April 16, 2020

Rental of residential properties may be subject to three different VAT taxation regimes:

(a) exemption;
(b) the 23% VAT rate and
(c) the 8% VAT rate (so-called accommodation related services).

I. General comments

The purpose of the services provided is decisive for determining the applicable VAT rate.

The tenant’s actual use of the property should also be consistent with the intended purpose of the services.

For example, a short stay of a tourist or a businessman should be treated as non-residential stay.

Non-residential stay is typically offered by hotels, guesthouses, rooms offered for short-term rent.

The residential purpose excludes temporary stay and vice versa.

The residential purpose is related to satisfying the tenant’s vital needs.

In other words, the rental services can be exempted from VAT (e.g. renting an apartment) depending on whether the rented property satisfies the vital needs, regardless of the duration of the rental period.

II. Rental services exempted from VAT

Only a rental of real property for residential purposes is VAT-exempt.

In addition, rental services must be provided by the landlord acting on his own account.

The possibility of taking advantage of the VAT-exemption is therefore conditional upon the fulfilment of both objective and subjective criteria.

The property must be of a residential character (objective criterion) and the purpose of the rental agreement must be to satisfy the customer’s residential needs (subjective criterion).

The possibility of benefiting from a VAT exemption is therefore conditional and depends on meeting the specific requirements:

– the residential nature of the rented property and

– the purpose for which the property is used must also be residential.

As a consequence, the VAT-exemption does not apply to a rental of residential property for non-residential purposes.

The availability of the VAT exemption does not depend on the type and/or legal form of the service provider or the entity purchasing such services.

If the tenant is not a tourist, spa visitor, business traveler etc., but his/her intention is to permanently reside in a given place, then the provider of the rental services will qualify for the VAT-exemption.

Real property rental services are VAT-exempted provided that all the conditions regarding (a) the parties, (b) the object and (c) the purpose of the specific contract, are met.

Therefore, the VAT taxpayer will be able to take advantage of the VAT exemption if the lease agreement contains, inter alia, provisions clearly stipulating that it concerns residential premises and the premises may be used by the tenant only for his personal residential purposes.

III. Rental services taxed at the 23% VAT rate

A rental of residential premises by a person who does not personally provide accommodation services but provides such services, for example, to a company conducting business activities involving the provision of short-term accommodation services, is taxed at the rate of 23%.

In addition, any rental of residential property for business purposes is taxed at the rate of 23% VAT (e.g. office, company headquarters).

IV. Services taxed at the 8% VAT rate

In accordance with art. 41 section 2 of the VAT Act, the so-called accommodation-related services are subject to the 8% VAT rate.

The accommodation-related services include, among other things:

(a) accommodation and associated services provided by hotels, motels, boarding houses, wellness centers and other hotel facilities

and

(b) temporary or long-term accommodation in student hostels, boarding schools and dormitories, workers hotels, apartment houses.

The differences between a typical rental and the accommodation-related services include:

(1) the availability of auxiliary services (laundry and basic equipment for the rented premises are usually provided in addition to the accommodation services);

(2) the period of stay in the premises (usually shorter for accommodation-related services).

Where the taxpayer:

– runs a business of short-term rental of apartments for tourists and people traveling for business purposes,

– the apartments are not his /her property, but he/she manages them on the basis of separate contracts concluded with their owners,

– prepares offers and accepts reservations via online booking portals,

– responds to customers’ inquiries,

– makes sure the apartments are available to guests on time,

– provides fresh towels, linen and refreshments,

– is responsible for keeping apartments clean,

– is responsible for minor repairs, etc.

thus enabling the visitors to conveniently use the premises, then the VAT exemption will not apply.

However, such services as described above are subject to the 8% VAT rate.

V. Summary

The taxation regime for rental of real property depends on the objective purpose and manner of using the property by the tenant, as well as the subjective intentions of the parties to the lease agreement.

Bernard Łukomski
Legal counsel
Warsaw, April 16, 2020

A prerequisite for adjudicating divorce. Warsaw, May 19, 2020

A prerequisite for adjudicating divorce (a so-called positive premise) is the “irretrievable and complete breakdown of marital life”. It is a mandatory condition.

A “breakdown of the marriage” means a cessation of common marital life in its emotional, physical and economic aspect (Polish “wspólne pożycie”) that the spouses are obliged to conduct. Hence, there is a strict conceptual and substantive connection between the obligation of the spouses concerning the “common marital life” and the prerequisite for divorce formulated as “irretrievable and complete breakdown of marital life”.

According to the Supreme Court “Marital life is characterized by a unique kind of spiritual, physical and economic bond”.

According to the Supreme Court for a marital breakdown to be declared irretrievable it is not necessary to establish that it is absolutely impossible for the spouses to restore their marital life. It is sufficient to conclude, based on practical life experience, that in the circumstances of the case the spouses will not restore their marital life.

Hence, a marital breakdown manifests itself in the cessation of a marital emotional, physical and economic bond.

In the light of decisions of the Supreme Court, the fundamental bond of marital life is the spiritual bond. The absence of the spiritual bond is always a manifestation of a marital breakdown.

For the purposes of adjudicating divorce, unlike in the case of a separation, the marital breakdown must be not only complete but also irretrievable. The breakdown may be declared irretrievable only if it is already complete. The marital breakdown is irretrievable if there are no prospects (anticipation) for restoring marital life by the spouses.

According to the Supreme Court the spiritual (emotional, physical bond) “community consists in mutual positive emotional attitudes of the spouses, respect, confidence, sincerity, loyalty, understanding, acceptance of personal qualities of the spouses, taking into account their personal needs and readiness to make concessions”.

The Supreme Court also explains that “in order to assert the absence of spiritual community between the spouses it is not necessary to conclude that they have hostile or at least reluctant attitudes to each other. Maintaining civil relations, contacts in the interest of their children, etc. does not necessarily mean that a spiritual bond between the spouses exists and therefore no marital breakdown occurred. The spiritual bond being sought here is not that between any two humans, but that characteristic of a spiritual marital community”. The Supreme Court points out that such “spiritual community” can be manifested even in correspondence alone”.

In the light of Supreme Court’s judicial practice, “common marital life” generally includes sexual intercourse between the spouses referred to as the “physical” (intimate, sexual or bodily) bond. A disappearance of this bond may be a manifestation of complete breakdown of the marital life.

In judicial practice, the economic bond is considered tantamount to running a common household. The legal commentaries take this view further and indicate that the economic life is usually manifested by living together, having common property, running one household, preparing and having meals together.

A complete and irretrievable breakdown of the marital life is also attested to by the spouses’ mutual consent to divorce. The spouses’ consent in this respect does not release the court from the obligation to examine all material circumstances of the case. If one of the parties consents to divorce, the court should examine if she/he is not being pressed by the other spouse to agree to the divorce, and whether such consent is indeed a result of her/his reflection upon the future of the communion, rather than an effect of some other circumstances” (sentence of the Appellate Court in Rzeszów).

For further information about adjudicating divorce, please contact us.

Bernard Łukomski
Legal counsel
Warsaw, May 19, 2020

Colloquial expressions (blank invoices, unreal transactions, artificial transaction chain) and the tax law. Warsaw, 17.01.2020.

Tax law imposes an obligation on tax authorities and administrative courts to express their opinions accurately and clearly.

Negative consequences for taxpayers cannot be drawn without precisely defining (in a legal sense) their actions and behaviour.

Naming the same events with different legal terms (e.g. transaction that did not take place at all, fraud, abuse) and terms typical for colloquial speech (e.g. blank invoices, unreal transactions, artificial chain of transactions), but devoid of legal significance seriously hinders taxpayers’ effective defence. This practice of tax authorities is also contrary to the recommendations formulated in the jurisprudence of the Supreme Administrative Court.

Such practice has been questioned by the Supreme Administrative Court in a judgment of October 2019.

In its judgment, the Supreme Administrative Court also questioned the improper practice of tax authorities by “taking shortcuts” instead of gathering reliable and impartial evidence.

The Supreme Administrative Court also confirmed that it is inappropriate to question the taxpayer’s good faith solely by claiming that if it is proved that the transaction between the entities indicated on the invoice did not actually take place, it is obvious that the taxpayer was not acting in good faith and was aware of the violation rules for deducting input tax.

The above means that the use of only such arguments by courts and authorities is insufficient and defective.

Unfortunately, a fairly common practice of tax authorities is a very cursory examination of taxpayers’ good faith, without going much into the details of their activities.

Thanks to the NSA judgment of October 2019, taxpayers will be able to defend themselves against such actions more effectively.

Consequently, the taxpayer’s good faith cannot be examined (in principle) without hearing the parties to the transaction and (possibly) other persons involved in it. Good faith, understood as a “state of consciousness,” cannot be determined effectively without examining that consciousness by questioning the person.

It happens that the tax authorities only vaguely state that taxpayers should exercise due diligence, not only in terms of documenting expenses, but also in the collection of all documents illustrating business operations. Such opinions should be considered cursory and not sufficient.

This approach is not enough to properly assess taxpayers’ good faith.

Tax authorities should clearly indicate (in their decisions) what objective actions taxpayers should have taken to be considered reliable taxpayers.

Authorities should provide such objective circumstances for individual taxpayer transactions, taking into account his/her state of consciousness at the time of the transaction.

Tax authorities and courts cannot assess the taxpayer’s behaviour and conduct on the basis of circumstances established or disclosed later (e.g. at the stage of tax proceedings).

Bernard Łukomski
Legal Counsel
Warsaw, 17.01.2020

Tax – Overview, Purposes, Types of taxation and History

What is tax?

A tax is a compulsory financial charge or some other type of levy imposed upon a taxpayer (an individual or legal entity) by a governmental organisation in order to fund various public expenditures. A failure to pay, along with evasion of or resistance to taxation, is punishable by law. Taxes consist of direct or indirect taxes and may be paid in money or as its labour equivalent. The first known taxation took place in Ancient Egypt around 3000–2800 BC.

Most countries have a tax system in place to pay for public, common or agreed national needs and government functions. Some levy a flat percentage rate of taxation on personal annual income, but most scale taxes based on annual income amounts. Most countries charge a tax on an individual’s income as well as on corporate income. Countries or subunits often also impose wealth taxes, inheritance taxes, estate taxes, gift taxes, property taxes, sales taxes, payroll taxes or tariffs.

In economic terms, taxation transfers wealth from households or businesses to the government. This has effects which can both increase and reduce economic growth and economic welfare. Consequently, taxation is a highly debated topic.

Overview

The legal definition, and the economic definition of taxes differ in some ways such as economists do not regard many transfers to governments as taxes. For example, some transfers to the public sector are comparable to prices. Examples include, tuition at public universities, and fees for utilities provided by local governments. Governments also obtain resources by “creating” money and coins (for example, by printing bills and by minting coins), through voluntary gifts (for example, contributions to public universities and museums), by imposing penalties (such as traffic fines), by borrowing, and also by confiscating wealth. From the view of economists, a tax is a non-penal, yet compulsory transfer of resources from the private to the public sector, levied on a basis of predetermined criteria and without reference to specific benefit received.

In modern taxation systems, governments levy taxes in money; but in-kind and corvée taxation are characteristic of traditional or pre-capitalist states and their functional equivalents. The method of taxation and the government expenditure of taxes raised is often highly debated in politics and economics. Tax collection is performed by a government agency such as the National Revenue Administration in Poland, the Internal Revenue Service (IRS) in the United States, Her Majesty’s Revenue and Customs (HMRC) in the United Kingdom or Federal Tax Service in Russia. When taxes are not fully paid, the state may impose civil penalties (such as fines or forfeiture) or criminal penalties (such as incarceration) on the non-paying entity or individual.

Purposes of taxation

The levying of taxes aims to raise revenue to fund governing or to alter prices in order to affect demand. States and their functional equivalents throughout history have used money provided by taxation to carry out many functions. Some of these include expenditures on economic infrastructure (roads, public transportation, sanitation, legal systems, public safety, education, health-care systems), military, scientific research, culture and the arts, public works, distribution, data collection and dissemination, public insurance, and the operation of government itself. A government’s ability to raise taxes is called its fiscal capacity.

When expenditures exceed tax revenue, a government accumulates debt. A portion of taxes may be used to service past debts. Governments also use taxes to fund welfare and public services. These services can include education systems, pensions for the elderly, unemployment benefits, and public transportation. Energy, water and waste management systems are also common public utilities.

When expenditures exceed tax revenue, a government accumulates debt. A portion of taxes may be used to service past debts. Governments also use taxes to fund welfare and public services. These services can include education systems, pensions for the elderly, unemployment benefits, and public transportation. Energy, water and waste management systems are also common public utilities.

Governments use different kinds of taxes and vary the tax rates. They do this in order to distribute the tax burden among individuals or classes of the population involved in taxable activities, such as the business sector, or to redistribute resources between individuals or classes in the population. Historically, taxes on the poor supported the nobility; modern social-security systems aim to support the poor, the disabled, or the retired by taxes on those who are still working. In addition, taxes are applied to fund foreign aid and military ventures, to influence the macroeconomic performance of the economy (a government’s strategy for doing this is called its fiscal policy), or to modify patterns of consumption or employment within an economy, by making some classes of transaction more or less attractive.

A state’s tax system often reflects its communal values and the values of those in current political power. To create a system of taxation, a state must make choices regarding the distribution of the tax burden—who will pay taxes and how much they will pay—and how the taxes collected will be spent. In democratic nations where the public elects those in charge of establishing or administering the tax system, these choices reflect the type of community that the public wishes to create. In countries where the public does not have a significant amount of influence over the system of taxation, that system may reflect more closely the values of those in power.

Types of taxation

The Organisation for Economic Co-operation and Development (OECD) publishes an analysis of the tax systems of member countries. As part of such analysis, OECD has developed a definition and system of classification of internal taxes, generally followed below. In addition, many countries impose taxes (tariffs) on the import of goods.

The Polish tax system

The Polish tax system distinguishes 12 types of taxes, including:

Nine direct taxes:

  • corporate income tax (CIT),
  • personal income tax (PIT),
  • tax on civil law transactions,
  • real estate tax,
  • tax on means of transport,
  • inheritance and donations tax,
  • agricultural tax,
  • forestry tax,
  • tax on dogs

Three indirect taxes:

  • tax on goods and services (VAT),
  • excise duty,
  • game tax.

Income tax

Many jurisdictions tax the income of individuals and business entities, including corporations. Generally, the authorities impose tax on net profits from a business, on net gains, and on other income. Computation of income subject to tax may be determined under accounting principles used in the jurisdiction, which may be modified or replaced by tax-law principles in the jurisdiction. The incidence of taxation varies by system, and some systems may be viewed as progressive or regressive. Rates of tax may vary or be constant (flat) by income level. Many systems allow individuals certain personal allowances and other non-business reductions to taxable income, although business deductions tend to be favored over personal deductions.

Personal income tax is often collected on a pay-as-you-earn basis, with small corrections made soon after the end of the tax year. These corrections take one of two forms: payments to the government, for taxpayers who have not paid enough during the tax year; and tax refunds from the government to those who have overpaid. Income-tax systems will often have deductions available that reduces the total tax liability by reducing total taxable income. They may allow losses from one type of income to count against another. For example, a loss on the stock market may be deducted against taxes paid on wages. Other tax systems may isolate the loss, such that business losses can only be deducted against business tax by carrying forward the loss to later tax years.

Capital gains tax

Most jurisdictions imposing an income tax treat capital gains as part of income subject to tax. Capital gain is generally a gain on sale of capital assets—that is, those assets not held for sale in the ordinary course of business. Capital assets include personal assets in many jurisdictions. Some jurisdictions provide preferential rates of tax or only partial taxation for capital gains. Some jurisdictions impose different rates or levels of capital-gains taxation based on the length of time the asset was held. Because tax rates are often much lower for capital gains than for ordinary income, there is widespread controversy and dispute about the proper definition of capital.

Corporate tax

Corporate tax refers to income tax, capital tax, net-worth tax or other taxes imposed on corporations. Rates of tax and the taxable base for corporations may differ from those for individuals or for other taxable persons.

Social-security contributions

Many countries provide publicly funded retirement or health-care systems. In connection with these systems, the country typically requires employers and/or employees to make compulsory payments. These payments are often computed by reference to wages or earnings from self-employment. Tax rates are generally fixed, but a different rate may be imposed on employers than on employees. Some systems provide an upper limit on earnings subject to the tax. A few systems provide that the tax is payable only on wages above a particular amount. Such upper or lower limits may apply for retirement but not for health-care components of the tax.

Payroll tax

Unemployment and similar taxes are often imposed on employers based on total payroll. These taxes may be imposed in both the country and sub-country levels.

Wealth tax

A wealth tax is a levy on the total value of personal assets, including: bank deposits, real estate, assets in insurance and pension plans, ownership of unincorporated businesses, financial securities, and personal trusts. Typically liabilities (primarily mortgages and other loans) are deducted, hence it is sometimes called a net wealth tax.

Property

Recurrent property taxes may be imposed on immovable property (real property) and on some classes of movable property. In addition, recurrent taxes may be imposed on the net wealth of individuals or corporations. Many jurisdictions impose estate tax, gift tax or other inheritance taxes on property at death or at the time of gift transfer. Some jurisdictions impose taxes on financial or capital transactions.

Property taxes

A property tax is an ad valorem tax levy on the value of property that the owner of the property is required to pay to a government in which the property is situated. Multiple jurisdictions may tax the same property. There are three general varieties of property: land, improvements to land (immovable man-made things, e.g. buildings) and personal property (movable things). Real estate or realty is the combination of land and improvements to land.

Property taxes are usually charged on a recurrent basis (e.g., yearly). A common type of property tax is an annual charge on the ownership of real estate, where the tax base is the estimated value of the property. For a period of over 150 years from 1695 the government of England levied a window tax, with the result that one can still see listed buildings with windows bricked up in order to save their owners money. A similar tax on hearths existed in France and elsewhere, with similar results. The two most common types of event-driven property taxes are stamp duty, charged upon change of ownership, and inheritance tax, which many countries impose on the estates of the deceased.

Inheritance tax

Inheritance tax, estate tax, and death tax or duty are the names given to various taxes which arise on the death of an individual. In United States tax law, there is a distinction between an estate tax and an inheritance tax: the former taxes the personal representatives of the deceased, while the latter taxes the beneficiaries of the estate. However, this distinction does not apply in other jurisdictions; for example, if using this terminology UK inheritance tax would be an estate tax.

Expatriation tax

An expatriation tax is a tax on individuals who renounce their citizenship or residence. The tax is often imposed based on a deemed disposition of all the individual’s property. One example is the United States under the American Jobs Creation Act, where any individual who has a net worth of $2 million or an average income-tax liability of $127,000 who renounces his or her citizenship and leaves the country is automatically assumed to have done so for tax avoidance reasons and is subject to a higher tax rate.

Transfer tax

Historically, in many countries, a contract needs to have a stamp affixed to make it valid. The charge for the stamp is either a fixed amount or a percentage of the value of the transaction. In most countries, the stamp has been abolished but stamp duty remains. Stamp duty is levied in the UK on the purchase of shares and securities, the issue of bearer instruments, and certain partnership transactions. Its modern derivatives, stamp duty reserve tax and stamp duty land tax, are respectively charged on transactions involving securities and land. Stamp duty has the effect of discouraging speculative purchases of assets by decreasing liquidity. In the United States, transfer tax is often charged by the state or local government and (in the case of real property transfers) can be tied to the recording of the deed or other transfer documents.

Wealth tax

Some countries’ governments will require declaration of the tax payers’ balance sheet (assets and liabilities), and from that exact a tax on net worth (assets minus liabilities), as a percentage of the net worth, or a percentage of the net worth exceeding a certain level. The tax may be levied on “natural” or “legal persons.”

Value added tax

A value added tax (VAT), also known as Goods and Services Tax (G.S.T), Single Business Tax, or Turnover Tax in some countries, applies the equivalent of a sales tax to every operation that creates value. To give an example, sheet steel is imported by a machine manufacturer. That manufacturer will pay the VAT on the purchase price, remitting that amount to the government. The manufacturer will then transform the steel into a machine, selling the machine for a higher price to a wholesale distributor. The manufacturer will collect the VAT on the higher price, but will remit to the government only the excess related to the “value added” (the price over the cost of the sheet steel). The wholesale distributor will then continue the process, charging the retail distributor the VAT on the entire price to the retailer, but remitting only the amount related to the distribution mark-up to the government. The last VAT amount is paid by the eventual retail customer who cannot recover any of the previously paid VAT. For a VAT and sales tax of identical rates, the total tax paid is the same, but it is paid at differing points in the process.

VAT is usually administrated by requiring the company to complete a VAT return, giving details of VAT it has been charged (referred to as input tax) and VAT it has charged to others (referred to as output tax). The difference between output tax and input tax is payable to the Local Tax Authority.

Other forms of tax

Other forms of tax exist such as Sales tax, Excise, Customs, Consumption tax etc. These are not discussed within this article.

History

The first known system of taxation was in Ancient Egypt around 3000–2800 BC in the First Dynasty of Egypt of the Old Kingdom of Egypt. The earliest and most widespread form of taxation was the corvée and tithe. The corvée was forced labour provided to the state by peasants too poor to pay other forms of taxation (labour in ancient Egyptian is a synonym for taxes). Records from the time document that the Pharaoh would conduct a biennial tour of the kingdom, collecting tithes from the people. Other records are granary receipts on limestone flakes and papyrus. Early taxation is also described in the Bible. In Genesis (chapter 47, verse 24 – the New International Version), it states “But when the crop comes in, give a fifth of it to Pharaoh. The other four-fifths you may keep as seed for the fields and as food for yourselves and your households and your children”. Joseph was telling the people of Egypt how to divide their crop, providing a portion to the Pharaoh. A share (20%) of the crop was the tax (in this case, a special rather than an ordinary tax, as it was gathered against an expected famine) The stock made by was returned and equally shared with the people of Egypt and traded with the surrounding nations thus saving and elevating Egypt.

Divorce – Dissolution of marriage

Dissolution of marriage (Divorce) is the process of terminating a marriage.

Divorce usually entails the cancelling or reorganising of the legal duties and responsibilities of marriage, thus dissolving the bonds of matrimony between a married couple under the rule of law of the particular country or state. Divorce laws vary considerably around the world, but in most countries divorce requires the sanction of a court or other authority in a legal process, which may involve issues of distribution of property, child custody, alimony (spousal support), child visitation / access, parenting time, child support, and division of debt. In most countries, monogamy is required by law, so divorce allows each former partner to marry another person.

Divorce is different from annulment, which declares the marriage null and void, with legal separation or de jure separation (a legal process by which a married couple may formalize a de facto separation while remaining legally married) or with de facto separation (a process where the spouses informally stop cohabiting). Reasons for divorce vary, from sexual incompatibility or lack of independence for one or both spouses to a personality clash.

The only countries that do not allow divorce are the Philippines, the Vatican City and the British Crown Dependency of Sark. In the Philippines, divorce for non-Muslim Filipinos is not legal unless the husband or wife is an alien and satisfies certain conditions. The Vatican City is an ecclesiastical state, which has no procedure for divorce.

Overview

Grounds for the dissolution of marriage vary widely from country to country. Marriage may be seen as a contract, a status, or a combination of these. Where it is seen as a contract, the refusal or inability of one spouse to perform the obligations stipulated in the contract may constitute a ground for divorce for the other spouse. In contrast, in some countries divorce is purely no fault. Many jurisdictions offer both the option of a no fault divorce as well as an at fault divorce. This is the case, for example, in many US states.

Though divorce laws vary between jurisdictions, there are two basic approaches to divorce: fault based and no-fault based. However, even in some jurisdictions that do not require a party to claim fault of their partner, a court may still take into account the behavior of the parties when dividing property, debts, evaluating custody, shared care arrangements and support. In some jurisdictions one spouse may be forced to pay the attorney’s fees of another spouse.

Laws vary as to the waiting period before a dissolution of marriage is effective. Also, residency requirements vary. However, issues of division of property are typically determined by the law of the jurisdiction in which the property is located.

In Europe, divorce laws differ from country to country, reflecting differing legal and cultural traditions. In some countries, particularly (but not only) in some former communist countries, divorce can be obtained only on one single general ground of “irretrievable breakdown of the marriage” (or a similar formulation). Yet, what constitutes such a “breakdown” of the marriage is interpreted very differently from jurisdiction to jurisdiction, ranging from very liberal interpretations (e.g. Netherlands) to quite restrictive ones (e.g., in Poland, there must be an “irretrievable and complete disintegration of matrimonial life,” but there are many restrictions to granting a divorce). Separation constitutes a ground of divorce in some European countries (in Germany, e.g., a divorce is granted on the basis of a 1-year separation if both spouses consent, or 3-year separation if only one spouse consents). Note that “separation” does not necessarily mean separate residences – in some jurisdictions, living in the same household but leading a separate life (e.g., eating, sleeping, socialising, etc. separately) is sufficient to constitute de facto separation; this is explicitly stated, e.g., in the family laws of Latvia.

Divorce laws are not static; they often change reflecting evolving social norms of societies. In the 21st century, many European countries have made changes to their divorce laws, in particular by reducing the length of the necessary periods of separation.

Divorce in Poland

1. Where do we get a divorce in Poland and how?

Individuals can divorce in Poland by lodging a petition for divorce (dissolution of the marriage) by one of the spouses. Divorce proceedings cannot be initiated either by the public prosecutor or any other person. Spouses can only divorce in the court. Actions shall be brought in a Regional Court. Actions pertaining to marital relations shall be brought exclusively in a court in whose district the spouses had their last place of residence, insofar as one of them still resides or stays there. Otherwise, exclusive jurisdiction shall be vested in the court for the respondent’s place of residence or where there is no such place, with the court for the petitioner’s place of residence.

2. What are the most common reasons that spouses may invoke?

If there has been an irretrievalbe and complete breakdown of matrimonial life between the spouses, divorce may be requested by either of the spouses to the court to order the marriage dissolved by divorce. Both conditions must be met. This complete disintegration will consist of a lack of any spiritual, physical and economic bonds between the spouses. The main reasons causing breakdown of marriage are alcoholism, aggression, violence & marital infidelity.

3. How long does it take to divorce in Poland?

The greater the discrepancies between the parties the longer the process. In the first place the contentious issue may be the fault as to the breakdown of the marriage. If the spouses do not agree to a divorce without adjudging on the guilt, it already heralds a rather lengthy trial, because the court will have to carry out all the evidentiary proceedings in the matter of guilt. Most often this involves the interrogation of a few or a dozen or so witnesses, as well as bringing a number of documents. The second factor that affects the length of the process is the issue of the spouses children. Divorce can end very quickly – even after the first hearing and in the event of an advanced conflict of the spouses – may take up to several years. Thus, you can wait for a long time for a final court decision, but it all depends on the individual circumstances of the particular case.

4. What types of evidence can be used when divorcing?

Evidence proceedings in a divorce case are primarily aimed at determining the circumstances surrounding the breakdown of marriage. The court can allow evidence from witnesses, official documents, private documents, experts opinions, environmental interviews, e-mails, bills and SMS printouts. These are not all acceptable evidence – their catalog is not closed. The possibility of using other proofs is regulated by the Polish Code of Civil Procedure.

5. What other family life aspects are settled once with the divorce?

In the ruling on the divorce, the court rules on joint parental authority over a minor child of both spouses and on parental contact with the child, and decides how much each spouse is obliged to bear on the costs of living and educating a child. The court may also delegate the exercise of parental authority to one of the parents, limiting the parental authority of the second parent to specific rights and duties in relation to the child. The court takes into account the agreement of the spouses on how to exercise parental authority, and maintaining contact with the child after the divorce, if it is compatible with the welfare of the child. Siblings should be brought up together, unless the welfare of the child requires a different outcome. Upon a mutual request of the parties, the court does not adjudicate on keeping contacts with the child.

If the spouses occupy shared accommodation, in the ruling on divorce the court will also rule on the use of the residence for as long as the divorced spouses are sharing accommodation. There is also the possibility that at the motion of one of the spouses, the court may, in the ruling on divorce, divide the joint property, as long as carrying out the division does not cause undue delay to the proceedings.

When the divorce verdict becomes final, a divorced spouse who changed a previous surname as a result of the marriage may submit a statement before the head of the registry office on reverting back to the surname from before the marriage.

6. Is my presence necessary when divorcing?

During the trial, either party could be represented by an attorney at law, however each time in divorce cases the court orders obligatory hearing of the parties, then the presence in court is obligatory.

7. What kind of temporary measures concerning children can be ordered during divorce proceedings?

During a divorce case, the court may grant for injunction by regulating custody of minors and contacts with a child and the secure maintenance claims.

8. How can a parent living abroad keep in touch with his child?

A parent living in another state can keep in touch with his child by visiting him at his place of residence, by having the children over and using electronic means of communication. The issue is not regulated by the law and is left to be regulated by parents.

9. In case a parent lives in another EU State, is that an obstacle for joint custody?

The place of residence of parent is not an obstacle when applying for joint custody.

10. How can a divorce resolution issued in Poland be acknowledged in another EU State?

When divorce is finalised, parties may request the issuance of a European form that can be used in any EU State and is recognized in the other Member States without any special procedure being required.

International divorce and family law issues are very different from purely English family law cases, so it is essential that you seek specialist legal advice.