According to the Polish Corporate Income Tax (CIT) Act, an entrepreneur acquiring copyrights from abroad or using such rights for a fee, e.g., rights to computer software, is obliged to withhold 20% tax (WHT) on payments made for this purpose to a foreign entity. The taxation applies to copyrights or related rights, including the sale of these rights.
In turn, Article 74(4) of the Act on Copyright and Related Rights states that economic rights to a computer program include, among others:
- permanent or temporary reproduction of the computer program in whole or in part by any means and in any form;
- adaptation, arrangement alterations, or any other changes to the computer program;
- distribution, including lending or rental, of the computer program or its copies.
It is generally accepted that the so-called withholding tax (WHT) does not apply to licenses for the use of computer software acquired from abroad for one’s own use, which do not involve reproduction, distribution, or modification of the program (end-user license).
This interpretation is supported by the Commentary to the OECD Model Tax Convention, according to which rights allowing only the actual use of the program for the licensee’s own needs, even if involving copying the program solely for the needs of their own business activities, do not constitute grounds for charging royalties. Until recently, this position was also uniformly presented by the tax authorities.
All the more noticeable was the emergence of tax rulings in which the tax authority attempts to enforce the view that fees paid by entrepreneurs for the use of foreign computer software for their own purposes may be subject to withholding tax.
For example, in an individual tax ruling dated February 28, 2024, ref. 0111-KDIB1-2.4010.606.2023.2.END, the Director of the National Revenue Information stated that the provision of accounting services for a fee by a company to related entities using software acquired abroad constitutes its use for commercial purposes and thus should be subject to WHT.
The Director of the National Revenue Information reached a similar conclusion (ruling dated October 13, 2023, ref. 0111-KDIB1-3.4010.423.2023.2.JKU) in the case of an entrepreneur who acquired an SAP software license from a related company in Germany and subsequently used it to provide accounting and controlling support services to related entities.
It should be emphasized that court judgments were issued in 2024 and 2025 regarding both rulings. Interestingly, both – divergent – judgments were issued by the same court, the Provincial Administrative Court in Gliwice, and concern the taxation of income from fees for the use of end-user licenses. In the case of the October 2023 ruling, the court, in its judgment of July 15, 2024, case I SA/Gl 1582/23, agreed with the tax authority, ruling that using a software license in business constitutes its processing for commercial projects and is therefore subject to withholding tax (WHT). However, in the judgment of January 14, 2025, case I SA/Gl 464/24, referring to the February 2024 ruling, the Provincial Administrative Court used the reasoning of the Supreme Administrative Court contained in the judgment of October 25, 2024 (case II FSK 421/22), according to which, since computer programs were not classified by the legislator as literary or scientific works, fees for the use or the right to use these programs do not constitute royalties subject to WHT as defined in double taxation treaties. The Provincial Administrative Court acknowledged that income from copyrights can be subject to taxation under Article 21(1)(1) of the CIT Act; however, since the software license does not include the possibility of copying, lending, or renting it, it does not meet the criteria for exercising economic copyright to a computer program listed in Article 74(4) of the Act on Copyright and Related Rights, and therefore cannot form the basis for levying tax on fees for its use under Article 21(1) of the CIT Act.
The court’s revision of its stance on the taxation of income from the use of end-user licenses offers hope for maintaining a taxpayer-favorable line of interpretation in this regard in the future.
