Supreme Administrative Court (SAC) in the judgement of 05 July confirmed what is to be understood under the term of services of a similar (to advisory, accounting services, etc.) nature for the purpose of determining the obligation of deducting a withholding tax from payments made to non-residents on this account.

A withholding tax occurs when the applicable convention on the avoidance of double taxation as well as the domestic laws provide for an obligation of deduction and payment in Poland of a tax from income obtained by a non-resident. Frequently, interpretation of the laws regulating such an obligation is the subject of a dispute with tax authorities.

One of many regulations giving rise to doubts as to interpretation is Art. 21(1)(2a) of the Act on CIT, pursuant to which a 20% withholding tax is imposed on income acquired by a non-resident on account the following services: advisory, accounting, market research, legal, advertising, management and control, data processing, personnel recruitment and acquisition, warranty and guarantee, and services of a similar nature. However, none of the aforementioned services has been defined by the legislator. All the more it is unclear for taxpayers services of what kind may be regarded as “services of a similar nature”. An open nature of the catalogue of events covered by the laws may lead to numerous disputes with tax authorities.

In the judgement of 05 July 2016 (file ref. no. II FSK 2369/15) the SAC confirmed the rightness of the stand adopted by a lower court according to which the discussed services of a similar nature are only services which in legal terms are equivalent with advisory, accounting, market research, legal, advertising, management and control, data processing, personnel recruitment and acquisition, warranty and guarantee services. In the opinion of the SAC, the interpretation leading to a conclusion that this term includes all intangible services is incorrect. The services listed in Art. 21(1)(2a) may, in the court’s view, be divided into two groups – the first one are services explicitly named, and the second are services of a nature similar to the named services, i.e. the ones that have both features characteristic of services explicitly mentioned in the law, and elements characteristic of services different that explicitly specified in the law. The SAC explained that for concluding that a service not explicitly listed (in the first group) falls within the law it is decisive that elements characteristic of services explicitly specified in the law predominated over features characteristic of not listed services.

The discussed judgement of the SAC should, in the light of the lack of statutory definitions in this field, make it easier for taxpayers to determine the need of deducting a withholding tax when intangible services are rendered. Only services meeting the conditions outlined by the SAC will fall within the scope of Art. 21(1)(2a) of the Act on CIT.

The judgement is final and binding.