Tax law, case III SA/Wa 1823/09

May 17th, 2010, Tomasz Rychlicki

The Director of Tax Control Office in Warsaw ruled that the amounts of cash referred to as a “license to exercise the media rights” that were received by Legia football club from the Polish Football Association (PZPN), should be subject to tax on goods and services. Legia argued that such an agreement is not a contract of sale of rights, but the license agreement. However, the Director has found that the PZPN was the sole owner of intangible (economic and non econimic) property rights to the Polish national championships. To be the sole owner of the rights to football matches, PZPN had to acquire these rights. Therefore, Legia had to transfer these rights in some way, and that included proper fee.

The Director referred to a series of court decisions and pointed out that the sports’ event, namely football games, do not constitute a copyrightable work under the Polish Act on Authors Rights and Neighbouring Rights – ARNR – (in Polish: ustawa o prawie autorskim i prawach pokrewnych) of 4 February 1994, published in Journal of Laws (Dziennik Ustaw) No. 24, item 83, consolidated text of 16 May 2006, Journal of Laws (Dziennik Ustaw) No. 90, item 631. Legia as a football club does not take action on the creative nature. In the opinion of the Director, it is not precluded that on the legal market may exist licensing agreements relating to intangible property, other than works that are defined in the ARNR.

Only article 43(1) pt 13 of the Act on Goods and Services Tax – GSTA – (in Polish: ustawa o podatku od towarów i usług) of 11 March 2004, Journal od Laws (Dziennik Ustaw) No. 54, item 535, includes a reference to the ARNR.

Art. 43. 1. The following shall be exempted from the tax:
13) licensing or authorization to use a license, as well as assignment of the proprietary right within the meaning of the copyright law – in relation to computer programmes – free of charge, for educational facilities, referred to in paragraph 9.

That provision indicates the grant of the license or authorization to use copyright licenses and the transfer of property rights under copyright law (the ARNR). The absence of such references in other regulations means that the transfer of copyright may affect the rights of the author, or a sole owner of any intangible property, which does not have the characteristics of the copyrightable work. A similar situation will occur in the case of a license. Wherever there is no reference to copyright law (ARNR) it will also mean the license agreement for the use of intangible property other than the copyrightable work.

The Tax Office ruled that Legia transfered “media rights” to the PZPN, so the Association could fully manage of them, and so enter into an agreement concerning the disposition of such rights. The rate of the tax shall be 22% for such service. The tax shall become chargeable upon the receipt of all or part of payment, though not later than upon the expiry of the due date specified in the contract or invoice – for the performance in the territory of the country of services referred to in article 27(4) pt 1 of the GSTA.

4. The provision of paragraph 3 shall apply to the following services:
1) sale of rights or granting of licenses or sublicenses, transfers and assignments of copyrights, patents, trademarks, letting joint trademarks or joint guarantee marks for use, or other related rights.

Legia did not agree with the decision of the Director of Tax Control Office and filed a complaint against. The Voivodeship Administrative Court in Warsaw in its judgment of 26 March 2010 case file III SA/Wa 1823/09 dismissed it.