The judgment relates to the case concerning a complaint against an individual interpretation.
The case concerned a Company specialising in tin recovery. It manufactures pure tin and offers tin alloys and soldering alloys. Due to the fact that industrial waste, which is a raw material in the Company’s production activity, is difficult to access, the key condition for success in the industry is access to raw material in sufficient quantity and at competitive prices. Another important factor for the market success is diversification of sales channels in order to provide markets for the finished products manufactured by the Company. Therefore, the Company pursues an active purchasing and sales policy, both independently and through its foreign branches and related parties.
The Company purchases from its related entities intermediary services in the purchase of industrial waste used by the Company as a raw material in the production process and in the sale of finished products. The service providers act as agents (brokers) responsible for bringing about the transaction of purchase of raw materials by the Company and sales of finished products with unrelated entities operating on a given market and maintaining cooperation with them. Service providers establish relations with a potential supplier of raw materials/receiver of finished products and mediate in concluding transactions by the Company.
The scope of services provided by intermediaries (agents) includes primarily establishing and maintaining current contacts with external entities (independent) offering industrial waste suitable for processing by the Company and entities interested in purchasing finished products offered by the Company. This is the basic and essential activity of each agent.
In connection with the above, the Company requested an individual interpretation as to whether the indicated intermediary services constitute services of a similar nature to those listed in Article 15e of CIT.
It should be noted that the issue of qualification of services of a similar nature to the services listed directly in Article 21 par. 1 point 1) and Article 15e par. 1 of CIT is unclear and problematic for taxpayers due to the lack of statutory prerequisites for qualification of services to those listed in the regulations. They must be similar, but there are no criteria indicating the extent of that similarity.
The basic criterion for classifying a service as similar to those listed directly in the regulations is whether, in the case of the service being compared, the elements characteristic for named services prevail over the other elements. Therefore, in order to consider that such a benefit being compared is subject to the restrictions resulting from the commented provision, and therefore similar to the benefits explicitly listed therein, it is necessary to state that the benefit being compared is a kind of modulation of one of the named benefits or a compilation of several such benefits.
In the case of intermediation services, it is difficult to define precisely the concept of such services. This is understandable if one considers that intermediation services are heterogeneous in nature and may be provided on different legal grounds, e.g. power of attorney, mandate, agency agreement and also on the basis of others, in accordance with the general principle of contractual freedom. The content of these agreements may also vary, and above all the extent to which the intermediary is authorised, i.e. what specific activities, tasks he is authorised to perform.
Therefore, in order to determine whether an intermediary provides services similar to those explicitly mentioned in provisions 15e and 21(1)(1) of the uCIT, it is necessary to refer to the extent of the authority of such an entity in concreto. Depending on what is the actual content of the contractual relationship on the basis of which the intermediary acts, i.e. what specific actions are undertaken, the process of comparing the services provided by the intermediary to those directly indicated in the above mentioned provisions may give a positive result, i.e. establishing their similarity or negative, i.e. they do not show such similarity.
In other words, the recognition of a given service as a service of a similar nature or not, is determined by the analysis of all circumstances of a given factual state. It is clear that contracts concluded by economic operators for the provision of intermediary services differ in the activities to be performed by intermediaries, and therefore an individual assessment of those activities should be made in each case.
Author: Izabela Lipka – Tax consultant