Archive for: Art. 17(1) PITA

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“.

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 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 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 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 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“.