MDR as a subject of tax rulings
Supreme Administrative Court in the judgment of 28 January 2021, file ref. I FSK 1703/20 confirmed that the obligations related to reporting of tax schemes (MDR) may be subject to individual tax ruling. So far, tax authorities have refused to issue tax rulings in the MDR subject, claiming that these are procedural regulations and not substantive law. The opinion of tax authorities was partly shared by the administrative courts.
In its landmark judgment, Supreme Administrative Court did not accept the previous practice, revoking the judgment of Provincial Administrative Court and the tax ruling issued by the Director of National Fiscal Information (KIS). The judgment of Supreme Administrative Court is waiting for a justification, but it can be assumed that it will indicate a new interpretative direction to the tax authorities and Provincial Administrative Court, which would be beneficial for taxpayers struggling with MDR reporting.
How to settle the sale of own receivable
In the judgment of 9 September 2020, file ref. III SA / Wa 2488/19, Provincial Administrative Court in Warsaw shared the view of the tax authority that the sale of own receivables is a different event than the sale of goods (or the provision of services) constituting the source of this receivable, and thus it requires recognition of revenue. However, the court disagreed with the tax authority that the revenue from the sale of receivables should include the VAT due. According to the court, a taxpayer who sells his own debt under a factoring agreement should recognize the net amount of tax income and the cost of the debt in the net value of the debt previously included in tax income.
Independently, on 15 February 2021, the Minister of Finance issued a general tax ruling on the principles of determining the amount of tax deductible costs when selling own receivables under a factoring agreement. In the opinion of the Minister of Finance, the nominal value of the debt sold in gross terms (including VAT) is the cost incurred when selling own debt. However, the tax deductible cost will not be the loss that may arise in connection with the assignment of receivables, i.e. the difference between the „gross” value of the receivable and the amount of income from the assignment of this receivable.
Prepayment will not always be subject to VAT
The production company asked the Director of KIS whether the money it received for future deliveries are subject to VAT. The company concludes long-term contracts for the purchase of goods with contractors and collects prepayments for the completion of deliveries. The amount of goods sold is defined as a range, while the price for goods purchased depends on the number of goods finally delivered.
In the opinion of the company, the prepayments it receives are exempt from VAT, as not all the circumstances that will affect the taxation of a future tax event are known, such as: the final number of goods sold, price, delivery dates. The Director of KIS confirmed the company’s position in the individual tax ruling of 2 November 2020, file ref. 0111-KDIB3-3.4012.475.2020.1.PJ.
After the liquidation of the company, the unpaid loan does not constitute tax income
In the individual tax ruling of 7 January 2021, ref. 0111-KDIB1-2.4010.466.2020.2.BG, the Director of KIS agreed with the taxpayer that the value of unpaid loan liabilities remaining in the company as at the date of deletion from the National Court Register (KRS) will not constitute tax income within the meaning of the CIT Act. Upon deletion from the National Court Register, the company will cease to exist. Therefore it will be impossible to allocate to it, as an entity that no longer exists, any gain.
Foreign entity that has acquired real estate in Poland does not always create a foreign permanent establishment in Poland
German limited partnership has acquired a property for rent in Poland. The property is managed by the independent Polish property manager. Pursuant to the tax ruling of 26 January 2021, file ref. 0111-KDIB1-2.4010.477.2020.2.AK, the company’s activities do not create a foreign establishment in Poland for its general partner and limited partner, because the company does not have a permanent establishment: place of management, branch, office, factory, workshop, place of extraction, nor operates a construction site, and the independent property manager has limited rights and obligations, and is not the company’s representative. Consequently, the general partner is also not obliged to apply the provisions on transfer pricing, as these apply to: „natural persons, legal persons or organizational units without legal personality as well as foreign establishments”.
Foreign interest without tax in Poland
Interest on a loan for the purchase of real estate in Poland concluded between foreign residents (a German entity and a German bank) has its source where the debtor has tax residence – this is what Provincial Administrative Court in Gliwice ruled in its judgment of 20 January 2021, file ref. I SA / Gl 969/20. In the opinion of Provincial Administrative Court, it is irrelevant that the loan was taken for the purchase of real estate in Poland, because the source of income is the liability relationship between the lender and the debtor, and not the activity conducted in Poland related to this real estate.
Depreciation after the transformation of companies
If as a result of certain legal events, the depreciation write-offs made cannot, in whole or in part, constitute tax deductible costs in a limited company, they are also not such a cost for the entity being the tax successor of this company. According to the established line of jurisprudence, the concept of succession should be used in a broad sense. Thus, the provision that limited the transformed company will equally limit the entity created after the transformation. This was ruled by Supreme Administrative Court in its judgment of 15 December 2020, file ref. II FSK 2040/18.
Dividend and verification of the beneficial owner of receivables
Provincial Administrative Court in Łódź stated in the judgment of 9 November 2020, file ref. I SA / Łd 322/20 that in the case of a dividend payment to a foreign entity, the dividend payer does not have to check the status of the beneficial owner of the recipient. In the opinion of the court, no additional obligations should be imposed on the dividend payer, if this is not indicated by the CIT provisions regulating the payment of dividends to a non-resident.
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