Finance Ministry Announces Revolution in MDR – End of Excessive Reporting?

MDR in Poland – Bureaucratic Trap for Business

The MDR system has been in place in Poland since 2019, with some of the strictest provisions and sanctions in Europe. The Polish implementation of the DAC6 directive goes beyond EU requirements by also covering domestic schemes. The result is that even routine business transactions, such as dividend payments, are subject to mandatory reporting.

Although the goal of the regulations was to limit aggressive tax optimisation, in practice, they have led to an increase in bureaucracy and costs for businesses and tax authorities. Furthermore, the high regulatory risk discourages investors and weakens Poland's competitiveness on the international stage.

Enormous Scale of Reporting – Facts and Figures

From 2019 until the end of 2024, nearly 88,000 MDR schemes were reported in Poland, the majority of which did not pose a real threat to the tax system but merely met strict reporting criteria.

Had the MDR regulations in Poland initially limited themselves to cross-border schemes, as per the DAC6 directive, the number of filings would have been more than twenty times lower. Meanwhile, the actual scale of reporting significantly exceeds European standards.

Paradoxically, despite the massive amount of data transmitted, its real value for the tax authorities remains limited, as the vast majority of reported cases do not indicate potential violations of tax laws.

New Regulations Aligned with EU Standards

On 17 February 2025, Poland's Ministry of Finance included a proposal for amendments to the Tax Code in the Legislative and Programme Work List of Poland's Council of Ministers. The changes will align the MDR provisions with the CJEU ruling in case C-694/20 and Council Directive (EU) 2023/2226 (DAC8). Key changes include:

• Exemption for Professional Advisors from MDR Reporting – Lawyers, tax advisors, and patent attorneys will no longer be required to report tax schemes but will inform their clients about the obligation to report.
• Empowerment of the Minister of Finance to Issue Regulations – The minister will be able to exempt specific transactions from the MDR reporting obligation for domestic arrangements.
• Abolition of MDR-2 – The requirement to submit MDR-2 notifications to the Head of the KAS (National Tax Administration) will be abolished.
• Changes in MDR-3 – The obligation to report MDR-3 will be reduced to a single annual declaration, with the possibility of signing information via a proxy.
• Reduction of Sanctions – The maximum fine will be reduced from 720 to 240 daily rates, and sanctions for certain formal deficiencies will be lifted.
• Simplification of the NSP System – The obligation to assign a new Tax Scheme Number (NSP) will be removed if the scheme has already been registered by another entity.

Step Towards Sensible Regulation

The Ministry of Finance announces not only a reduction in the scope of MDR reporting but also the easing of sanctions and the elimination of interpretative uncertainties. The main principles of the reform have been positively received, although specific details have not yet been disclosed. The new regulations are expected to strike a balance between the effectiveness of the tax system and Poland’s competitiveness as a place for business, while also taking into account standards applied in other countries.

The final version of the reform is expected to be presented in the first quarter of 2025.