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Withholding tax on a research project


According to the individual tax ruling of the Head of the National Revenue Information Service of April 15, 2020 (case no. 0111-KDIB1-2.4010.43.2020.2.MS), if a foreign entity provides services consisting in the performance of a research project and its activities lead to the creation of copyright, which is transferred to a Polish company, the Polish entity will be obliged to collect the withholding tax when paying the remuneration.

The issue concerned a joint- stock company with its registered office in Poland which conducts business consisting, among other things, in engineering of boreholes. In order to improve its services, it signed a cooperation agreement with a German contractor for performance of a research project. Its aim is to determine whether the application of the technology possessed by the German entity will be possible for the type of work which the Company conducts. Upon completion of all stages of the project, the contractor will transfer to the Company the title to the installed devices and all copyrights in the final report which will arise as a result of its implementation. The Company has turned to the tax authority to confirm that the services performed by the contractor are not included in the list set out in Article 21 (1)of the CIT Act and, consequently, that it will not be obliged to collect the withholding tax.

In the opinion of the applicant, the remuneration for the transfer of copyrights does not constitute licence fees within the meaning of the Polish-German double taxation agreement. An analysis of the regulations shows that that they include receivables obtained for the use or right to use a copyright, but not its transfer. In the Company’s opinion, the revenue from transfer of copyrights should be classified as a profit from transfer of ownership of assets, taxable in the country in which the transferor has its registered office, i.e. Germany. Additionally, the services provided by the contractor are purely of technical nature, so they cannot be considered as counselling services or services of a similar nature.

However, the Head of the National Revenue Information Service (KIS) found the Company’s standpoint invalid. He agreed that the services consisting in the performance of a research project provided by the German entity do not constitute advisory services or services of a similar nature. In the opinion of the tax authority, however, Article 21 (1) (1) of the CIT Act, which expressly mentions revenues from copyrights – including also the sale of those rights, will be applied in the case in question as covered by the provision in question.

Polish entities that make payments to non-residents should each time verify whether or not the services in at issue are included in the list of activities subject to withholding tax. However, a proper qualification of payments entails numerous interpretation doubts, as evidenced by the number of individual tax rulings issued in this respect.


Anna Skórska, Tax Consultant, ATA Tax Sp. z o.o.

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