International exchange of tax information: Does it have a real impact on inspectors’ findings?
In cross-border tax cases—particularly involving withholding tax—the evidence often includes information obtained from foreign tax authorities. Such information is intended to help paint an objective picture of the facts. But is it really used that way?
What is documented by tax information obtained through international cooperation?
Foreign tax information should provide knowledge about the circumstances affecting a foreign taxpayer, including the reasons for establishment of the taxpayer in its home country, how it operates there, the local accounting rules, and the sources of the taxpayer’s income. By submitting inquiries to foreign tax authorities, the Polish tax authorities in a sense share some of their own competencies for establishing the facts in the case. The foreign tax authority gathers information and then transmits it to Poland using the relevant form.
The information obtained through administrative cooperation should identify the facts. However, evaluation of the facts in light of the law is the task of the authority conducting the inspection or proceeding.
A problem that can arise in practice is how the questions are framed by the Polish authority. Sometimes the questions are formulated so that the foreign authority, in its response, must make a legal determination about the established circumstances, for example by stating that the taxpayer is the beneficial owner of receivables. In such cases the Polish authority sometimes finds that the information does not merely document the facts, but constitutes an opinion, and consequently will reject the foreign information in an exercise of broad discretion.
Information from a foreign tax authority is included in the evidence in the case and should be treated as part of the factual findings by the authority conducting the inspection or proceeding. This information constitutes findings “outsourced” to the foreign authority by the Polish authority, within the limits set by the questions. The Polish authority should not arbitrarily critique these findings.
However, the practice shows that material obtained from the exchange of tax information between countries is assessed during Polish inspections or proceedings like any other form of evidence, which can easily be questioned. By its nature, this concerns situations where the findings by the foreign authority are favourable to the taxpayer or remitter and conflict with the conclusions of the authority conducting the audit.
Tax information as an official document
It must be borne in mind that evidence obtained through international exchange of tax information constitutes an official document. This view has been recognised by the Polish administrative courts (e.g. in the judgments of the province administrative courts in Łódź of 3 April 2025 (case no. I SA/Łd 79/25) and Gdańsk of 9 January 2024 (case no. I SA/Gd 812/23)).
When evidence is classified as an “official document,” it has serious procedural consequences. Such evidence enjoys a statutory presumption of accuracy and reliability. This means that the Polish authority cannot reject the findings of the foreign tax authority based merely on its own interpretation of the evidence. Rather, if it wishes to show that the facts are otherwise, it must find and document evidence to the contrary. This is the authority’s legal responsibility.
However, experience shows that the Polish authorities do not comply with these requirements, but treat data derived from the international exchange of tax information as merely a reflection of the taxpayer’s position. Undermining such evidence in the course of the inspection or proceeding may result in erroneous findings, resulting in an assessment of tax arrears.
Impact on limitation periods
There is another side to this coin. Initiation of the procedure for exchange of tax information suspends the running of the limitation period on the underlying tax obligation, and this is not affected by later rejection of the findings made by the foreign authorities. This can lead to a situation where the Polish authority decides in its own discretion to eliminate from its findings any inconvenient evidence from abroad, while extending its own time to issue a tax decision. Under the realities of Polish tax litigation, such instrumental moves are a common occurrence, as shown by the practice encountered for years of initiating fiscal penal proceedings solely for the purpose of suspending the running of the statute of limitations. The revival of debate around this phenomenon, and stepping up of the review exercised in this area by the administrative courts, is a good sign that this tendency may change in the future.
Why is this topic so important for taxpayers and remitters?
Experience shows that data obtained through international exchange of tax information can greatly enrich the factual picture, but nonetheless that data often has no impact on the findings by the Polish authority. This information might be ignored during the course of the inspection or proceeding, particularly when it presents a legal characterisation of facts advantageous to the taxpayer or remitter. An example would be a finding by the foreign authority that the taxpayer conducts genuine economic activity in the country where the taxpayer has its registered office.
The level of complexity of disputes involving withholding tax—in interpreting the law as well as the facts—makes judicial review of the actions of the tax authorities particularly critical. This applies among other things to the manner of evaluating the evidence, including evidence obtained from international exchange of tax information. To date, this specific issue has not been examined very thoroughly in the case law. There are rulings by the courts treating foreign tax information as an official document, but there is an absence of judgments where the court assesses the relevance of such evidence not just formally, but also on the merits.
The issue raised here now has a chance to draw greater attention from the courts, due to the huge scale of tax disputes in which tax information is exchanged between countries. However, the initiative of taxpayers’ professional representatives has a key impact on shaping the decision-making standards in this area. Infringements by the Polish tax authority involving arbitrary treatment of evidence obtained from foreign tax authorities should be challenged during the administrative proceedings, and then at the judicial phase. If counsel do not take the initiative in this area, the tax authorities may become more entrenched in their belief that they have boundless discretion in evaluating such evidence, with detrimental impact on taxpayers and remitters.
Katarzyna Ziomek, Tax practice, Wardyński & Partners
