Archive for: e-loans

Tax law and Internet, case I SA/Gd 17/10

April 7th, 2010, Tomasz Rychlicki

On 3 March 2009, a Polish citizen (P.W.) requested the Minister of Finance to provide a written interpretation of tax law on individual case concerning personal income tax with regard to taxation of interest on loans granted over the Internet. P.W. wanted to use an online social lending website, which activity is based on associating individuals who want to take out a loan or to grant one. Loan agreements are concluded directly between the lender and the borrower by making a declaration of will in the electronic form.

P.W. had asked whether lending money to individuals through a social lending site will be an economic activity within the meaning of article 5a pt 6 of the Polish Act on Personal Income Tax – PITA – (in Polish: ustawa o podatku dochodowym od osób fizycznych) of 26 July 1991, Journal of Laws (Dziennik Ustaw) No. 80, item 350, with later amendments.

6) non-agricultural commercial activities – it shall mean profit oriented, organized and continuing activities, run in one’s own name and on own or another person’s account, the revenues from which are not included in other revenues from the sources listed in Article 10.1 subparagraphs 1, 2 and 4-9;

P.W. argued that his activities do not have all the above mentioned characteristics, and therefore such project will not constitute an economic activity within the meaning of the PITA. P.W. argued that the use of office equipment which is necessary for granting a loan by the use of the online social lending website does not imply the organized nature of such activity. He drew attention to the fact that having own devices is not necessary for carrying out such activities, since these activities may also be performed in Internet cafe or by the use of a third party equipment. The existence of the terms of service provided by the website does not prove the organized nature of lending activities either. P.W. also noted that his activities would not be a continuous process, because the loans will be sporadic, depending on the currently available resources.

On 21 May 2009, the Minister of Finance issued a personal interpretation, in which it ruled the taxpayer’s position as incorrect and held that activities related to lending money that are conducted through the Internet via a social lending website are deemed as non-agricultural commercial activities. According to the Minister of Finance these activities are taken to profit on its own behalf and on its own interest. Such loans are given in an organized manner, i.e., to be able to make loans the applicant must be subject to rules (TOS) set by the system, it must have computer equipment and Internet access. The fact that loans are to be given once a month, proves that these are not sporadic or one-time events and in consequence argues for recognition of the continuous nature of such actions.

P.W. did not agree with such interpretation and filed a complaint to the Voivodeship Administrative Court (VAC) in Gdańsk. The VAC in a judgment of 9 March 2010, case file I SA/Gd 17/10 rejected the complaint and upheld the interpretation of the Minister of Finance.

See also “Tax law and Internet, case III SA/Wa 1013/09“.

Categories: Art. 10(1) PITA | case law | e-law issues | e-loans | income tax | Polish Act on Personal Income Tax | tax law | Voivodeship Administrative Court.

Tax law and Internet, case III SA/Wa 1013/09

January 7th, 2010, Tomasz Rychlicki

On 24 November 2008, a Polish citizen (P.C.) requested the Minister of Finance to provide a written interpretation of tax law on individual case concerning personal income tax with regard to taxation of interest on loans granted over the Internet.

The system which is available at kokos.pl website allows for contacting people who need loans (the borrower – PB), with people who have the means to lend (the lender – PD). PB initiates a transaction by providing information on how much he or she wants to borrow, the period of repayment and interest. It is called an “auction” but there is no bidding at all. PD makes offer in the “auction” by making payments to kokos.pl website with an indication of the “auction”. The payment made by each user (PD) cannot exceed 500 PLN. If the “action” is finalized the system generates a series of electronic contracts (PB with each PD) and transfers all the payments made by the PDs to PB. Then PB pays a monthly installment loan to kokos.pl website, and the site distribute money between the accounts of all PD. The monthly payment is an adequate of a received share capital and it is increased by fixed interest. The sole income of PD is the interest rate determined by the PB while setting up the “auction”.

The Voivodeship Administrative Court (VAC) in Warsaw in a judgment of 29 October 2009, case file III SA/Wa 1013/09 ruled that P.C. receives income from interest on loans. This interpretation was based on articles 10(7) and 17(1) pt. 1 of the Polish Act on Personal Income Tax – PITA – (in Polish: ustawa o podatku dochodowym od osób fizycznych) of 26 July 1991, Journal of Laws (Dziennik Ustaw) No. 80, item 350, with later amendments.

Article 10. 1. The sources of revenues shall include:
7) financial investments and property rights, including selling property rights other than those referred to in subparagraph 8 letters (a)-(c),
(…)
Article 17. 1. Revenues from financial capital shall be:
1) interest on loans;

This means that the income should be classified as another source of income than non-agricultural economic activities. Consequently, even if it would be recognized that the P.C. grants loans using the site kokos.pl in an organized and continuing manner, this activity could not be deemed as non-agricultural commercial activities as defined in article 5a(6) of the PITA.

See also “Tax law and Internet, case I SA/Gd 17/10“.

Categories: Art. 10(1) PITA | Art. 17(1) PITA | e-law issues | e-loans | Polish Act on Personal Income Tax | tax law | VAT | Voivodeship Administrative Court.