An overview by CRIDO
In a recent verdict, the Polish Supreme Administrative Court (“SAC”) ruled, inter alia, on the requirement for the Polish tax remitter to have a statement from the receiving taxpayer confirming its beneficial ownership with respect to the interest paid in case the annual amount exceeds a threshold of PLN 2 million. The case involved a Polish company that received a loan from Slovak banks and made interest payments above the threshold. The company argued against the requirement, but both the Voivodship Administrative Court and the SAC disagreed, upholding the position of the Head of the National Tax Information expressed in an individual tax ruling.
Our Polish Firm CRIDO analyses this verdict and its potential impact.
WHT: Why does the Polish Supreme Administrative Court require a beneficial owner statement for payments exceeding PLN 2 million?
In a recent verdict1, the Polish Supreme Administrative Court (“SAC”) ruled, inter alia, on the requirement for the Polish tax remitter to have a statement from the receiving taxpayer confirming its beneficial ownership with respect to the interest paid in case the annual amount exceeds a threshold of PLN 2 million2.
What was the case about?
The case concerned a Polish company (“Company” / “Applicant”) that obtained loan financing from a consortium of Slovak banks. In connection with the loan, the Company made interest payments to the Slovak banks that exceeded PLN 2 million in the tax year. When making the payment, the Company collected withholding tax (“WHT“) at a preferential rate under the Polish-Slovak double tax treaty (“DTT“).
According to the Applicant, it was not required to obtain a formal written statement from the taxpayer confirming that the recipient of the payment was the beneficial owner of the receivables paid. The Company argued that, for the due care required under the law to be able to apply a WHT preferential treatment, the necessity to have such a statement was not implied in the provisions. A contrario, the legislator included the necessity to obtain such a statement in order to apply WHT preferences only when the payments do not exceed PLN 2 million in the legislation.
The position of the Voivodship Administrative Court and the SAC
Neither the Voivodship Administrative Court in Łódź nor the SAC agreed with the Company, but the courts upheld the unfavourable position of the Head of the National Tax Information (“NTI”) expressed in an individual tax ruling. In this ruling, the NTI indicated, despite the lack of an applicable provision, the requirement to have a beneficial owner statement when the amount of receivables in a tax year exceeds PLN 2 million in order to benefit from a preferential WHT rate.
The SAC stated that the taxpayer’s statement should be treated as an element of the due care requirement, which the taxpayer is obliged to exercise when verifying the conditions for applying a WHT exemption or preferential rate. In the SAC’s view, a remitter acting with due care should not have any doubts as to whether the receiving taxpayer is the beneficial owner of the receivables received, and for this it is necessary to have an appropriate statement.
Additionally, the SAC argued that if the statement is necessary to apply the exemption in the case of receivables not exceeding PLN 2 million, the more the remitter should also possess such a document when the sum of receivables exceeds this amount. On the other hand, the lack of indication in the regulations of the obligation to have such a statement was explained by the imperfection of the CIT Act.
A surprisingly pro-fiscal interpretation of the legislation
The Polish CIT Act does not specify what constitutes due care to be exercised by the remitter, but only indicates that the nature and scale of the remitter’s activities and its relationship with the taxpayer are taken into account in its assessment. In addition, the draft tax explanations on the new WHT regime being in force since 2019, which was issued a couple of years ago by the Polish Minister of Finance, indicate examples of the tax remitter’s activities constituting due care, and the holding of a beneficial owner’s statement is not mentioned there.
The judgment in question is undoubtedly unfavourable for Polish taxpayers who are WHT remitters and presents an expansive interpretation of the existing regulations. The rulings are all the more surprising, bearing in mind that in the justifications the authority and the courts repeatedly emphasise that two different regimes apply to payments up to PLN 2 million and above this amount, and that the provisions of the CIT Act literally require a beneficial owner statement only in case of payments below PLN 2 million. Yet, since the provisions explicitly specify the circumstances in which such a declaration is (not) needed, interpreting the provisions seems unnecessary (in particular, if such an interpretation increases the Polish remitter’s obligations).
At the time of this publication, the SAC ruling is the first judgment relating to the issue of the obligation to have a beneficial owner statement when paying receivables in excess of PLN 2 million. It remains to be seen whether the courts will maintain the pro-fiscal line in this respect or whether they will take a different stance in subsequent judgments in similar cases. A change in the approach of the Polish administrative courts has occurred more than once in the past, also in matters related to withholding tax.
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