On 25 February 2020. The Regional Administrative Court in Łódź, in its judgment under no. I SA/Łd 685/19, dismissed the complaint against the contested interpretation, considering the position presented therein as correct.

The dispute in this case concerned two issues:

  1. in connection with the taking out of loans in a bank consortium with its registered office in the Slovak Republic, can such fees as a bank commission, fees for the organiser of the loan, an agent and a financing security agent (the so-called ‘credit circling fees’) be regarded as interest within the meaning of the double taxation convention between the Republic of Poland and the Slovak Republic;
  2. whether the payer is obliged to obtain a written statement from the taxpayer that it is the beneficial owner of the receivables (interest) paid.)

The Administrative Court shared the position of the Director of the National Revenue Information, considering that the above mentioned credit-related fees are related to the actual receivable/debt, which means that the remuneration paid on the above titles is closely linked to the granting of financing and constitutes an element of the “cost” of raising capital (external financing). Consequently, the above remuneration meets the definition of interest and is subject to withholding tax.

On the second issue, the remitter, complaining about the interpretation of the Director of National Revenue Information, alleged an erroneous interpretation of Article 26(7a) of UCIT by assuming that in order to apply it, it is necessary for the remitter of the withholding tax to obtain a statement of the taxpayer of that tax referred to in Article 26(1f) of UCIT, whereas the provision does not constitute such a requirement and thus it is not necessary to obtain such a statement.

The Court did not share the charges of complaint regarding the infringement of Art. 26 par. 7a of uCIT in connection with Art. 26 par. 1f and Art. 26 par. 1 of uCIT, considering that in Art. 26 of uCIT the legislator defined two regimes for collection of tax on interest income earned by non-residents in the territory of the Republic of Poland. The first one concerns payments of receivables up to the amount not exceeding PLN 2,000,000 in the tax year in force at the entity paying these receivables to the same taxpayer, where the application of the tax rate resulting from the relevant double taxation avoidance agreement or not collecting the tax in accordance with such agreement is possible provided that the company or its foreign establishment obtains a written statement from that company or its foreign establishment that in relation to the paid receivables the conditions referred to respectively in Art. 26 of UCIT are met. In the case of interest payments, the written statement should indicate that the company or foreign plant is the real owner of the receivables paid (art. 26 par. 1f uCIT.). The second one concerns interest payments exceeding the total amount of PLN 2,000,000 in the tax year in force at the entity paying these receivables to the same taxpayer and then the taxpayer is obliged to collect on the day of payment a lump-sum income tax on these payments at the rate of 20% from the surplus over the amount of PLN 2,000,000, taking into account the deductions provided for in Art. 22 par. 1a-1e of UCIT. or without the possibility of not collecting the tax on the basis of a proper double taxation convention, as well as without taking into account exemptions or rates resulting from special provisions or double taxation conventions (Article 26 par. 2e of UCIT). The latter provision does not apply if the taxpayer has made a declaration that:

1) has documents required by tax law for applying the tax rate or exemption or non-collection of tax resulting from special provisions or double taxation treaties;

2) after carrying out the verification referred to in par. 1, does not have knowledge justifying the presumption that there are circumstances which exclude the possibility to apply the tax rate or to exempt or not to collect the tax resulting from special provisions or double taxation treaties, and in particular does not have knowledge about the existence of circumstances which make it impossible to meet the conditions referred to in Article 28b par. 4 points 4-6 (Article 26 par. 7a of UCIT.).

Therefore, since in order to be able to apply the tax rate resulting from the proper double taxation convention, the remitter must behave in accordance with art. 26 par. 1f and art. 26 par. 7a of UCIT. – in order to collect the tax on the amount of interest up to PLN 2,000,000, the remitter must have a written statement of the taxpayer that he is the real owner of the receivables being paid, and when taxing the surplus of this receivables (over PLN 2,000,000) he must submit an appropriate statement on the application of an exemption or a reduced tax rate – it is difficult to consider that the paid out amount itself.

Autor: Izabela Lipka ? Tax Consultant