Trade marks and taxes, case IPPB1/415-288/09-2/AG

March 12th, 2010, Tomasz Rychlicki

A Polish taxpayer being also an entrepreneur has requested the Director of the Tax Chamber in Warsaw to issue an interpretation to a question whether by contributing a trade mark to a general partnership (ordinary partnership), he would receive a revenue that is subject to personal tax income. The right of protection for a trademark was granted by the Polish Patent Office. The taxpayer received revenue from licensing the use of that trade mark. However, he decided to form a general partnership, to which he wanted to make a contribution in a trade mark, based on its market value. The partnership would treat such trade mark as a legal and intangible asset and would make it available to other entities under a license agreement. The entrepreneur was also considering the possibility to sale his right of protection for the trade mark to another entity if the general partnership would not count it as the intangible asset.

He argued that making a contribution to a partnership, such as general or ordinary one (these are not having a status of a legal person), is not a source of revenue in personal income tax. His opinion was based on provisions of article 17(1) pt. 9 of the Polish Act of 26 July 1991 on Personal Income Tax – PITA – (in Polish: ustawa o podatku dochodowym od osób fizycznych), published in Journal of Laws (Dziennik Ustaw) No. 80, item 350, with subsequent amendments

Revenues from financial capital shall be:
9) par value of shares (stocks) of an incorporated company or shares of a cooperative societ received in exchange for a non-financial contribution;

The Director of the Tax Chamber in Warsaw in the interpretation of 25 June 2009, no. IPPB1/415-288/09-2/AG, concluded that the contribution of a trade mark to a general partnership is considered as a sale. The value of a trade mark that was established in the partnership contract serves as a basis to set the revenue from financial capital. Therefore, according to article 14(2) pt. 1 of the PITA it is a revenue from commercial activity of a contributing person. The Director of the Tax Chamber referred to article. 4 § 1 of the Code of Commercial Companies, under which the general partnership is a partnership, which may on its own behalf acquire the rights, including real property and other property rights, to incur obligations, may sue and to be sued – it has legal capacity but not the legal personality (a private company not an incorporated one). A non-financial contribution causes a transfer the ownership of things or rights to a general partnership because the capital share of the partner shall equal the value of the contribution effectively made. From the viewpoint of the civil law regulations, it is a payable sale of things or rights. Because the general partnership has no legal personality separate from its partners, therefore is not subject to personal tax income. Only partners are subject to personal tax income in such case.

See also “Trade marks and taxes, case II FSK 1003/08” and “Trade mark law, I SA/Rz 249/09“.