The Supreme Administrative Court noted that the body providing an individual interpretation was obliged to give an interpretation in the course of the interpretation, so that the relevant standard of national law would not lead to an individual tax interpretation incompatible with the content of Union law standards.
A company based in the territory of the Republic of Poland has applied for a written interpretation of tax law in an individual case concerning CIT. The taxpayer asked the body questions about the obligation to pay tax on foreign company income and on keeping records of events occurring in a foreign company, citing the provisions of the Treaty on the Functioning of the European Union (TFEU).
The company's explanations showed that it is subject to an unlimited tax obligation in the territory of Poland. The company is considering the inclusion of shares in capital companies which may be established outside the EU, with the participation of each company being higher than 25%. The company noted that in the future it may also have more than 25% voting rights in control bodies or foreign companies.
Where a national standard is contrary to a Community provision, the authorities of a Member State must apply a Community provision. National law in this case is not abolished or repealed, only its binding power is suspended
At the time of the request for an individual interpretation of tax law, it was not possible to clearly identify and define the scope of the activities of foreign companies, it was known that these companies would primarily carry out operational activities which would constitute more than 50% activities and above 50% The revenues of foreign companies will come from the aforementioned operating activity.
On the other hand, the liabilities of foreign companies will be less than 50% their activities, as well as possible passive revenues in the tax year, will represent less than 50% all revenue generated by the abovementioned foreign companies.
However, it was known that foreign companies would be subject to taxation on all their income in their country of residence, in accordance with local tax law.
In the request for individual interpretation, the company submitted two questions. first the questions concerned the obligation to pay tax on foreign company income (CFC).
This question was met with a positive assessment by the interpretation authority confirming the absence of a payment obligation 19% CFC income tax.However, the next question referred to the obligation to keep a register for CFC purposes in case the company will have at least 25% shares in capital or 25% voting rights in control bodies, or 25% shares related to the right to participate in the profits of foreign companies.
According to the company, it will not even be required to keep a register of foreign companies and to record events in the register, according to Article 24a(13) Act dated 15 February 1992 on corporate income tax (Journal of Laws of 1992, item 86), Because this article goes against Article 26 and Article 63 TFEU and thus priority will be given to provisions Article 26 and Article 63 TFEU.
Consequently, the company will not have to keep records and records for the purposes of CFCs, since the adoption of a different position would constitute a breach of the provisions Articles 87(1) and 91(1) and 3 Constitution of the Republic of Poland dated 2 April 1997 (Journal of Laws of 1997, item 78.483).
The interpretative body acknowledged the position of the company on the issue In the second question, for incorrect and stated that this obligation clearly follows Article 24a(13) Act dated 15 February 1992 on corporate income tax (Journal of Laws of 1992, item 86), The same company will not be exempted from the obligation to keep a register of foreign companies in this registration of events in a foreign company in the records.
The Authority stated that it did not refer to the company's consideration of the non-compliance with the acts of law of the common higher order, indicating that it was not competent to examine the compatibility of the provisions of tax law with the Constitution, but merely to interpret the provisions of law which were not repealed.
In a complaint lodged with the Provincial Administrative Court in Warsaw, the company objected to the above interpretation of a violation of the law by waiving the interpretation of the provisions of the Act in the light of the provisions of European Union law and by issuing an individual interpretation without the full legal justification of the interpretation. The interpretation authority reiterated its position and lodged a cassation complaint with the NSA.
The Supreme Administrative Court considered that, in the light of the existing provisions of EU law on tax issues, they could be the normative subject of individual interpretations of tax law as they were subject to international agreements ratified by the Republic of Poland.
The NSA also highlighted the need to harmonise the law resulting from the provisions of the Treaties with the tax law of each Member State. It is therefore also up to the national court to interpret national law in the light of the objectives and wording of Union law.
Where a national standard is contrary to a Community provision, the authorities of a Member State must apply a Community provision. National law in this case is not abolished or repealed, only its binding power is suspended.
Although the individual interpretation of tax law is not an act of application of the law, it cannot be overlooked that the interpretative body is acting in a manner comparable to that of the application of the law, since it subsumes a particular factual situation to a specific substantive standard of tax law.
The NSA therefore concluded that, by issuing a written interpretation of the provisions of tax law, the interpretative body violated the provisions of the procedure by not assessing the compatibility of the provisions of national law with Union law, thus dismissing the cassation action.
Individual interpretation is part of the protection of the rights of the taxpayer, and the purpose of introducing individual interpretations is to protect taxpayers from the consequences of improper actions resulting from the understanding of tax law standards. The NSA stressed that it was the duty of the tax authority to assess the compatibility of national law with Union law. The ruling is final and final.
Judgment dated 20 December 2018, reference no. II FSK 3523/16
Author: Paweł Boś, Law student at Leon Kozminski Academy in Warsaw, employee Russell Bedford