Legal consequences of the application of protection rights to the trademark brought to the Polish company

The subject of the analysis in this article is the issue of the legal consequences of the application of protection rights to the trademark to the Polish company. The introduction of a number of anti-tax avoidance regulations in recent years has resulted in the secondary allocation of trademark rights to Poland.

Consequently, the Polish entity acquires the right to amortisation obtained through the delivery of these rights. The study presents the legal consequences of the above-mentioned restructuring of income taxes and tax on civil law activities, with particular emphasis on depreciation.

On the basis of the analysis carried out, critical conclusions were made against Polish legislation, which does not take sufficient account of the legislation of other countries applying tax preferences, including trademarks.

This legislation successfully attracts foreign capital as an example of effective tax competition from the perspective of these other countries, also operating in the EU internal market.

1. Introduction

Trade marks as a rule one of the most important intangible assets (hereinafter WNiP) in business activities were and are still used to reduce income taxation.

To the end 2014 The main mechanism for avoiding taxation using trade marks was to bring a trade mark to a dedicated foreign company, which subsequently charged the licence fees to the Polish entity using the mark in its business.

From 2015 the above mechanism began to become less popular due to the introduction into the law of 15 February 1992 on corporate income tax 1 (Next: the Corporate Income Tax Act) and laws of 26 July 1991 on personal income tax[2] (Further: u.p.d.o.f.) so-called controlled foreign company regulation.

They provide for taxation of profits of a foreign company having at least 33% the passive nature (e.g. obtained from royalties) at the level controlling it in more than 50% Polish taxpayer.

Consequently, the entry into force of the regulations Article 24a the Corporate Income Tax Act and Article 30f uc 1 January 2015 The secondary allocation of parts of trademarks to Poland began.

This allocation has also been increased by other regulations of Polish substantive tax law, in particular the limitation of the tax deductibility of royalties paid for the use or the right to use trademarks acquired or created by a taxable person or a company which is not a legal person to which he is a shareholder and subsequently disposed of – in part exceeding the revenue obtained by the taxpayer from their disposal (this restriction provides for Article 16(1)(73) the Corporate Income Tax Act and Article 23(1)(45c) u.p.d.o.f.).

The transfer of a trademark by a foreign entity to a Polish company will in principle result in the depreciation of that mark at the level of the Polish unit. In the case of a capital company, the initial value from which depreciation will be made will be the market value of the trade mark received by the Polish entity.

Consequently, the above restructuring will ultimately be more advantageous for the taxpayer to make depreciation write-offs than to pay royalties to a foreign company.

The value of the monthly depreciation write-offs, which are derived from the market value (initial) of the trade mark received by way of aport, will be clearly higher than the market value of the royalties that could be paid to a foreign company.

The Polish capital company, which makes depreciation write-offs from the above values, will increase its capital base, as it will have non-taxable measures, the value of which will increase as depreciations are made.

In the case of tax-transparent partnerships, the rules on depreciation against the value of trademark protection rights received in the import are less favourable, since depreciation is only by way of exception (not a general rule as with capital companies) can be made from their market value[3].

The common reason for the restructuring of trademark protection rights is that Polish tax law does not allow the possibility of depreciation of trademark protection rights which have not been acquired by the taxpayer from another entity.

At the same time, it should be noted that a number of activities of taxpayers, which are of a restructuring nature, may be assessed from the perspective of the general anti-tax avoidance clause (i.e. Article 119a-119zf Act on 29 August 1997 - Tax Ordinance 4 , (c) which is the source of a significant legal tax risk.

This statement should also refer to the aport of protection rights to the trademark to the Polish entity.

Due to the often significant value of trademark protection rights and the fact that in many cases they have been allocated to foreign companies at some stage, and the transfer of these rights, as a mechanism for their secondary allocation to Poland, is a fundamental legal mechanism aimed at obtaining their right to depreciation and reducing the tax risk of paying royalties to a related foreign company.

2. Scope of the concept of trade mark

The concept of a trademark has been defined in both Polish and European legislation. According to Article 120(1) Act on 30 June 2000 Industrial property law 5 ((b) the trade mark may be any indication which makes it possible to distinguish the goods one undertakings from goods of another undertaking and which may be presented in the register of trade marks in such a way as to determine the unambiguous and precise object of the protection granted. Provision Article 120(2) p.w.p. in a non-subscription manner indicates that the trade mark may be, in particular, a word, including a name, a drawing, a letter, a digit, a colour, a spatial form, including the shape of a commodity or packaging, and a sound. In turn according to regulation Article 3 Directive 2015/2436 to 16 December 2015, to approximate the laws of the Member States relating to trade marks 6 (Next: Directive 2015/2436) the trade mark may consist of any indication, in particular any words, including names, or drawings, letters, numbers, colours, shape of goods or their packaging or sounds, provided that such markings enable:

• 1) distinguishing goods or services one undertakings from goods or services of other undertakings, and
• 2) to present them in the register in such a way as to enable the competent authorities and the recipients to determine the unambiguous and precise object of the protection granted to the proprietor of that trade mark.

In the light of the above definitions, it can be concluded that trademarks are an intangible medium in human consciousness for certain ideas about the products or services of the undertaking. Many definitions of the concept of trademark have also been formulated by doctrine. According to the most common definition of R.

Skubisz: “The sign of a commodity is a reflected union of sign and commodity in a person’s consciousness, covering all the information and ideas of a commodity separated by that sign among goods of the same kind. Such a trademark is an intangible good because it exists only in human consciousness” 7 .

Trade marks are mainly related to products and services, not to the company brand itself and the company name. The concept of a brand of an enterprise is primarily economic – it can be referred to far more widely than only in the context of trademarks – and the concept of a trademark is strictly legal.

Under the brand name of the undertaking, many trade marks assigned to the individual services or goods of the undertaking may be used.

Notwithstanding the fact that the trade mark is distinct from the name and brand of the undertaking concerned, the vast majority of the trade marks include the company's name or key element, in order to distinguish the products or services of the undertaking from similar or even the same goods or services of competitors.

However, the definitions of the legal terms of the trade mark do not specify where the ‘trade mark’ can be referred to. The determination of such temporal casuria is important not only in the context of legal protection, but also in the context of the amortisation of depreciation, in particular since amortisation is subject to a trademark protection law and not the mark itself, which is the subject of industrial property rights (and often also intellectual property).

Special attention should be paid to the fact that both European law and regulations refer to trade marks in the context of their legal protection, acquired by registration of the mark in the Polish or European Patent Office. An entity to which a trademark right has been granted shall have the exclusive right to use that mark for commercial purposes in the territory covered by the registration of that mark.

Although the registration application for a trade mark does not constitute that mark in formal terms nor does it result in the conversion of the mark used by the entity concerned into a trade mark, it undoubtedly allows the proprietor of the mark to make reasonable profit from royalties or to make depreciation write-offs (in the case of acquisition of protective rights to the mark from another entity).

The right to use in the course of the business of non-registered trade marks arises as a result of the use by the undertaking in trade 8 , provided that the mark has not been previously used by another entity, in particular if it is subject to legal protection.

Unregistered trademarks benefit from legal protection under the law of 16 April 1999 combating unfair competition 9 (Further: u.z.n.k.).

However, legal protection resulting from its provisions may be incomplete and, in a certain sense, conditional, particularly in the case of registration of the same or deceptively similar mark by another entity in an earlier or similar period[10].

In case of use of unregistered trademarks, including their depreciation at the level of Polish entities, there is a significant legal risk associated with the potential challenge of the ownership of the mark by other market participants, and, moreover, it is not possible to make depreciation write-offs (the depreciation is subject to trademark protection rights rather than the marks themselves, subject to the acquisition of them from another entity).

3. Taxation of import to a Polish capital or passenger company

According to the disposition Article 12(1)(7) the Corporate Income Tax Act the revenue is, in particular, the value of the contribution as defined in the statutes or in the articles of association and, in the absence of such contributions, the value of the contribution as determined in another document of a similar nature, but if that value is lower than the market value of that contribution or if the value of the contribution is not specified in the statutes, contracts or other similar documents, the revenue is the market value of such contribution as determined on the date of transfer of ownership of the non-monetary contribution; Article 14(2) the Corporate Income Tax Act shall apply mutatis mutandis.[11]. The said regulation in principle means the formation of tax revenue on the part of the importer of the trademark to the Polish entity. According to Article 12(1b)(1-3) the Corporate Income Tax Act This income shall be generated on:

• 1) registration of the company, cooperatives or
• 2) the entry in the register of the increase in the share capital of the company, or

1. transfer to the company the object of the contribution, where the company or the increase in the capital of the company is not subject to registration in the relevant register in accordance with the rules of the State in which the company is established or managed, or
2. the issue of share documents where the inclusion of shares is linked to a conditional increase in share capital.

Thus, the transfer by the Polish unit results in the immediate rise of tax revenue, but the transfer to the Polish company by a foreign company will remain tax-neutral for the company that brings this aport from the perspective of Polish law. Provision Article 12(1)(7) the Corporate Income Tax Act it will not apply to a company which is resident in another country, linked to the Polish double taxation agreement.

The international agreements ratified with the prior agreement of the Sejm, as expressed in the Act, are in the hierarchy of sources of law commonly applicable to national laws, excluding their provisions in the event of a conflict with them (according to Article 91(2) Constitution of the Republic of Poland). Provisions Article 7 individual double taxation agreements, following the OECD Model Convention 12 , provide for taxation of profits of the company one Contracting States only in that country, unless the undertaking has an establishment In the second A contracting country.

Therefore, if specific provisions concerning e.g. passive gains or real estate do not apply, any other profit should be eligible for disposal Article 7 the double taxation agreement concerned.

Provision Article 7 the double taxation agreement concluded by Poland with the State of the tax residence of the company carrying on the export of trademark rights to the Polish company will always exclude provisions Article 12(1)(7) the Corporate Income Tax Act, which ensures tax neutrality of this transaction for a foreign company under income tax[13].

The transfer of the trademark to the Polish company results in a tax on civil law activities of 0.5% – whether it is transferred to a capital company or to a personal company.

Provision Article 1(1)(1) point (k) and point 2 Act on 9 September 2000 on tax on civil law acts 14 (Further: u.p.c.c.) provides that PCC is subject to, inter alia, the articles of association and its amendment if it increases the tax base of PCC, subject to Article 1(3)(4) u.p.c. Article 1(3) u.p.c.

in the case of a partnership agreement, the following shall be considered as a change of contract:

1. in the case of a passenger company, to make or increase a contribution, the value of which results in an increase in the company's assets or an increase in the share capital, a loan granted to the company by a shareholder, a subsidy and the surrender by the shareholder of the company's goods or property rights for free use,
2. in the case of a capital company, an increase in the share capital from contributions or from the funds of the company and a subsidy.

According to Article 3(1)(1)(2) u.p.c.c. tax liability, subject to Article 3(2) u.p.c.c. arises when a civil act is carried out or when a resolution on the increase of the capital of a company having legal personality is adopted. Subject to the provisions Article 6(1)(8) u.p.c.c. the tax base shall be:

• 1) at the conclusion of the contract, the value of contributions to the company or the value of share capital,
• 2) where contributions to a personal company or an increase in share capital are made or increased, the value of contributions increasing the assets of a passenger company or the value by which the share capital has been increased,
• 3) on the aid, the amount of the aid.

According to Article 7(1)(9) u.p.c.c. the rate of tax on civil law acts on the company's contract is 0.5%. However, it should be borne in mind that when the value of the assets transferred to the capital company is transferred to the reserve capital (agio) of PCC, only an increase in the core share capital is subject to taxation and that part of the value of the agio is free of that tax. This view is confirmed, among others, in the interpretation of the individual Director of IS in Bydgoszcz from 15 July 2015 15 .

Individual interpretation of the IS Director in Bydgoszcz with 15 July 2015 Taxes on civil law activities are subject only to an increase in share capital, while contributions resulting in an increase in reserve capital are not taxed. Therefore, in the event of an increase in the share capital of the Applicant and the shareholder taking up new shares in the increased share capital Applicants at a price higher than the nominal value of these shares, the excess value of the contribution above the nominal value of the newly created shares (the so-called agio) transferred to the reserve capital will not be subject to tax on civil acts.

In the case of a transfer to a passenger company, the tax on PCC shall be subject to the entire value of the transfer to that company, which is a consequence of clearly wider editorial of the provision Article 6(1)(8) point (b) u.p.c. in the section concerning the increase of contributions to a personal company and the fact that there is no share capital in partnerships. As a result, any contribution to a personal company constitutes an increase in its assets within the meaning of the above-mentioned provision.

1. Rules for making write-offs on trade marks received in the import under the provisions of the Income Tax Act
2. 1. Objective of restructuring

Any restructuring by traders who are subject to trademark protection rights results from the fact that Polish tax law does not allow the depreciation of intangible assets (including trademarks) that have not been acquired by the entity from another entity[16].

The objective fact that the taxable person has made significant investments in order to produce the value of the mark, in particular marketing and advertising, is irrelevant.

This value, as well as the excess value added of the trade mark above the cost of its production, remains directly related to the revenue generated by the undertaking and is objective. The purpose of many restructurings involving trade marks and protective rights to these marks was therefore to obtain the right to tax depreciation.

At the same time, the Polish tax legislation of recent years tries to counter this type of behaviour of taxpayers, aiming primarily at limiting or even eliminating the licensing of Polish units by dedicated foreign companies to which trademarks have previously been allocated.

In parallel, many other countries, including those belonging to the EU, encourage their tax legislation to allocate industrial and intellectual property rights to their territories. This is what Belgian legislation does, for example, 17 , Cyprus 18 and Malta[19].

As a result, legal tax regulations on trademark protection rights, including depreciation rules, are in the field of tax competition in the EU internal market.

1. 2. Impact of the acquisition of a trademark right on the right to depreciation

For many years, under the interpretation positions of tax authorities, it was doubtful that the right to amortise a given right to a trademark depended on whether that right was originally acquired (i.e. as a result of registration by the entity concerned, or secondary (i.e.

as a result of the re-registration of a protection right from a legal predecessor to whom that protective right was applicable). In the tax law, depreciation is subject to a protective right on a trade mark rather than a mark itself.

In the event of the acquisition by way of aport of a protective right to a trade mark which has been acquired from an entity to which that right has been conferred, its depreciation is undisputed. Acquisition by way of an aport of a trade mark which is not protected by law, i.e.

a work within the meaning of Article 1(1) Act on 4 February 1994 about copyright and related rights 20 (Further: p.a.) and performance first the registration of that trade mark at the competent patent office by the entity that received the mark (the track) in the passport has caused controversy on the fiscal side for many years.

The dominant and established view both in the case-law and in the doctrine pointed to the appropriateness of making depreciation in the above case.

For example, in the judgment of 8 October 2013 21 The NSA confirmed the possibility of amortisation of the trademark right which was obtained after the acquisition of the trademark itself by the company. Notice the following judgments.

Judgment

„Obtaining by the company a constitutional decision of the Patent Office to grant a protective right to a utility model and a trade mark and rights from registration of an industrial design does not mean that those rights are to be produced by the company. The fact of registration cannot be considered to constitute the creation of a mark on its own account by the company, as it is based on the decision of the body operating within the limits of the relevant legal regulations (judgment of the WSA in Poznań with 13 December 2017 22 ).

„In order to speak of the acquisition of a trade mark, that mark should be characterised by a protective right. It is not sufficient to simply declare this mark [...]. The trade mark acquired is a registered mark suitable for economic use. The right to a trade mark may be entered in the records of intangible assets and subsequently depreciated [...], when it is not only actually used by the mark of goods and services but, above all, legally accepted for use as a law. [...] The subject of tax depreciation must not be a trade mark and the use of a trade mark for which no safeguard right has been granted. [...] The right to a Community trade mark is to be established on the basis of the registration of a Community trade mark by the Office for Harmonisation of the Internal Market in Alicante. As soon as the decision is taken, the company will acquire the right from registration and after further conditions have been fulfilled, it will be able to proceed to depreciation of that right as intangible assets” (SA judgment of 5 June 2019 23 ).

The above-mentioned view was based on the fact that in such a case, a trade mark obtained by way of aport is acquired. Tax legislation to the end 2017 allowed depreciation of trademark protection rights which were acquired and not acquired trademark protection rights[24].

From 1 January 2018 changes entered into force under Article 16b(1) the Corporate Income Tax Act and Article 22b(1) u.p.d.o.f.

Article 1(9) and Article 2(20) Act on 27 October 2017 amending the Personal Income Tax Act, the Corporate Income Tax Act and the Flat-rate Income Tax Act on certain revenues generated by individuals 25 , hereinafter: Amending Act with 2017), according to which the condition of sine qua non (necessary) depreciation of the rights set out in the Industrial Property Law is that they are ‘acquired from another entity’.

Consequently, this right to a trade mark should be acquired on a secondary basis, i.e. as a result of re-registration from a legal predecessor, i.e. the importer of such rights to the Polish company.

In the light of the current wording of the above provisions, it is also worth noting that registration of a trade mark by the competent patent authority is of a constitutional nature, and that the Polish entity, by way of aport, acquires an unregistered trade mark (a work) to which a registration application has been lodged, cannot depreciate the right of protection for that mark, since its registration (a grant) will in this case have an original character.

1. 3. Rules for making write-offs on trade marks received in the import under the provisions of the Income Tax Act

The tax consequences of importing a trade mark to a Polish entity depend on the legal form of the company receiving the aport and on whether the trade mark which was the subject of the aport was amortised in the company providing the aport or not.

In the case of the aport of a trade mark to a Polish capital company – regardless of whether the trade mark which was the subject of the aport was amortised with the importer or not – general regulations will apply the Corporate Income Tax Act on depreciation.

In accordance with the provisions Article 16b(1)(6) the Corporate Income Tax Act amortisation shall be subject, subject to Article 16c the Corporate Income Tax Act, acquired from another entity, suitable for economic use on the date of acceptance of the right referred to above — with an estimated period of use longer than one year, used by the taxpayer for purposes related to his business activity or put into use by him under a licensing agreement (sublicence), rental, lease or contract defined under Article 17a(1) the Corporate Income Tax Act (i.e.

lease agreements).

At this point the correlation of regulations deserves attention Article 16b(1)(6) the Corporate Income Tax Act with provisions Article 16(1)(4) the Corporate Income Tax Act (This provision lists ‘authorised or related property rights’).

According to the prevailing view in the case law of administrative courts, the right to apply for a trade mark cannot be depreciated on the basis of Article 16(1)(4) the Corporate Income Tax Act, because it is not a work of understanding Article 1(1) p.a.

This view was expressed by the NSA, among others, in the judgment of 17 February 2015 26 and in the judgment of 24 November 2017 27 .

Judgment

The right to apply for a trade mark cannot be depreciated on the basis of Article 16b(1)(4) the Corporate Income Tax Act as a work within the meaning of p.a., since the applicant itself has just regarded it as a trade mark, i.e. a mark which is suitable for distinguishing goods one undertakings from goods of another undertaking and which can be presented graphically (Article 120(1) p.w.p.) and not for the work, that is for showing creative activity of individual character (Article 1(1) p.a.); the economic usefulness for the applicant therefore had a trade mark rather than a work (SA judgment of 24 November 2017).

This view should be applied equally to twin regulation Article 22b(1)(4)(6) u.p.d.o.f.

However, it should not be identified with the impossibility of amortising unregistered trademarks as works within the meaning of Article 1(1) p.a., especially since tax authorities sometimes confirm the possibility of recognising unregistered trademarks as copyrighted works (e.g.

individual interpretations: Director of IS in Warsaw with 22 October 2012, reference no. IPPB3/423-518/12-2/PK1, Legalis; Director of IS in Katowice from 22 November 2012, reference no. IBPBI/1/415-1022/12/ AB, Legalis, and z 10 February 2015, reference no.

IBPBI/2/423-1377/14/MS, Legalis; Director of IS in Bydgoszcz from 27 December 2016, reference no. 0461-ITPB1.4511.803.2016.1/PSZ, Legalis).

Individual interpretation of the IS Director in Bydgoszcz with 27 December 2016

Works purchased by way of donations (track) in the form not yet registered in the EUIPO/Polish Patent Office on trade marks of the European Union/trade marks (European Union trade mark/trade mark) as presented in a graphic form, consisting in particular of words, drawings, letters which make it possible to distinguish the goods or services of an undertaking from the goods or services of other enterprises, will constitute intangible assets within the meaning of Article 22b(1)(4) u.p.d.o.f.

It is pointed out in the doctrine that "trade marks, particularly graphic or verbal-graphic, regardless of their being the subject of exclusive rights as a result of registration in the Patent Office, often show the characteristics of works and enjoy copyright-based protection" [...].

Therefore, the development of the European Union trade marks/trade marks (European Union trade mark/trade mark) not yet registered may constitute a copyright and be eligible under u.p.d.o.f. as intangible and legal assets subject to depreciation.

Moreover, the rulings of the administrative courts directly indicating the admissibility of depreciation of an unregistered trade mark as a work remain in circulation.

Judgment

An unregistered trade mark, the graphic layer of which constitutes a work within the meaning of p.a., will constitute an intangible and legal value included in a specified directory under Article 16b(1) the Corporate Income Tax Act – i.e. copyright in question under Article 16b(1)(4) the Corporate Income Tax Act (judgment of the WSA in Warsaw with 10 February 2017 28 ).

It should be stressed that it is the taxpayer who, when introducing the WNiP in the records of fixed assets and the WNiP, qualifies it as a copyright or as an industrial property right.

The basis for many decisions of the administrative courts is that the taxable person has wrongly qualified the right to apply for a trade mark as an object of copyright, even though before making such a application, the taxable person may have qualified an unregistered trade mark as a work within the meaning of Article 1(1) p.a.

and begin its depreciation. According to the author, the possibility of starting depreciation of an unregistered trademark as a work within the meaning of Article 1(1) p.a., should be considered correct. At the time, it is not possible to talk about the trademark of the stricto sense, but about the track.

This statement should be made in particular with regard to graphic and verbal-graphic characters, but verbal characters can also meet, according to the author, the definition of the work indicated under Article 1(1) p.a. 29 . Moreover, the recipe Article 1(2)(1) p.a. expressis verbis indicates that the track can be expressed in a word.

No recipe the Corporate Income Tax Act neither u.p.d.o.f. stands in the way of recognising that a given WNiP can be depreciated on the basis of two different points Article 16b(1) the Corporate Income Tax Act (Article 22b(1) u.p.d.o.f.

The taxpayer can therefore begin to depreciate an unregistered trademark as copyrighted – the work (Article 16b(1)(4) the Corporate Income Tax Act either Article 22b(1)(4) u.p.d.o.f.) or only after having obtained a protective right for that sign, i.e.

as an object of industrial property law within the meaning of Article 120(1)(2) (Article 16b(1)(6) the Corporate Income Tax Act either Article 22b(1)(6) u.p.d.o.f.).

At the same time, it must be stressed that the rate of depreciation of copyright and of protection rights per trademark is identical, so the taxpayer would not have to adjust the applicable depreciation rate, according to which he had previously depreciated the unregistered mark (the track). Such a correction is also of considerable doubt as no provision the Corporate Income Tax Act nor the u.p.d.o.f. provides for this possibility.

It should also be noted that the subject of a trademark right may benefit from protection under the provisions p.a. In practice, often future trademarks are first logos to which taxpayers (entrepreneurs) have copyright. It is only at a later stage in their activity that they register, resulting in the acquisition of trademark rights.

Obtaining a trademark protection right does not result in a loss of protection resulting from the regulation p.a., although, of course, for functional reasons, legal protection resulting from the trademark seems stronger in practice.

A non-monetary contribution to a company is a form of acquisition of an asset from another entity from the perspective of that company.

Moreover, it is a paid purchase as the recipient company spends its own shares (shares) in the value corresponding to the value of the aport, with some of the value transferred to the aport being allocated to the recipient company for reserve capital (agio).

The right to amortisation will apply to both part of the value of the aport transferred to the core share capital and to that allocated to agio. By Sound Article 16d(1) the Corporate Income Tax Act a depreciation obligation arises when the initial value of the trade mark contributed by the aport exceeds 10,000 PLN.

In accordance with the provisions Article 16g(1)(4) the Corporate Income Tax Act for initial value of fixed assets and WNiP, including Article 16g(2-14) the Corporate Income Tax Act, where a non-monetary contribution to a company or cooperative is acquired, the taxable person shall be deemed to have established, subject to the Article 16g(1)(4c) the Corporate Income Tax Act, at the date of contribution, the value of the individual fixed assets and of the CFI, but not higher than their market value.

In view of the lack of normative rules on the rules for determining the values received by the supply of fixed assets or by the WNiP, that value shall be determined by the taxable person at the date of the contribution in kind.

At the same time, it has far-reaching freedom to determine this value, as its top-down limitation will be the market value of these fixed assets or WNiP[30].

Consequently, the recipient company will be required to determine the market value of the trade mark received for the purposes of its depreciation, which will be done in the form of a valuation of that trade mark by an independent expert.

Due to the lack of provisions in Polish law requiring such valuation and rules governing the drawing up of valuations by experts, in practice it is extremely difficult to challenge the value resulting from such valuation, if it is done in a reliable manner.

The expert assessor's valuation allowing for a fair determination of the market value of the trade mark brought by the aport is in this case a fundamental part of the restructuring aimed at obtaining its right to depreciation on the part of the Polish entity.

In the case of an aport of a trade mark brought by a foreign capital company to a Polish company whose shareholders are capital companies, depreciation rules are more favourable than in the case of such a transfer to a personal company whose shareholders are natural persons. This is a consequence of the fact that regulations will then be applied the Corporate Income Tax Act (the passenger company is accounted for at the level of its shareholders, who in this situation are corporate tax taxable persons). In accordance with the provisions Article 16g(1)(4a) the Corporate Income Tax Act in this case for the initial value of fixed assets and CHP, including Article 16g(2-14) the Corporate Income Tax Act, shall be deemed to be acquired in the form of a non-legal contribution:

• 1) initial value from which depreciation was made — if the object of the contribution was depreciated (the principle of continuation of depreciation) 31 ,
• 2) expenditure incurred in the acquisition or production of the object of the contribution, not included in the cost of obtaining revenue in any form, if the object of the contribution has not been depreciated,

1. value determined according to Article 14 the Corporate Income Tax Act – where it is impossible to determine the expenditure for the acquisition or production of the subject matter of the contribution by the contributing partner, which is a natural person, and the object of the contribution has not been used by the contributing participant in the course of his business, excluding the WNiP produced by the contributing partner on his own account.

In the case of the transfer of a trademark to a Polish personal partnership, whose partners are natural persons, the regulations of u.p.d.o.f. will apply (a personal company as a transparent tax company is settled at the level of shareholders), i.e. First of all, provisions Article 22b(1)(4)(6) u.p.d.o.f.

Article 16b(1)(4)(6) the Corporate Income Tax Act) and Article 22g(1)(4) u.p.d.o.f. (Article 16g(1)(4) the Corporate Income Tax Act).

In their light, in the case of an aport of a trade mark which was not depreciated with the aporter, to a Polish company whose shareholders are natural persons, the initial value of that mark should in principle be fixed at the level of the expenditure incurred for the acquisition or production of the mark, provided that these expenses have not been included in the cost of obtaining revenue in any form.

In most cases, foreign companies which have a right to protection of certain trademarks have received them by aport or by way of a donation, and cannot therefore recognise any or almost any expenditure incurred in the acquisition or manufacture of those marks.

In the present case, the initial value of the trade mark for depreciation purposes should be determined at market value only if it is impossible to determine the expenditure for the acquisition or production of that mark by an individual partner and the object of the contribution has not been used by the contributor to the business activity, excluding the WNiP produced by the partner on his own account.

In the light of the above analysis, the most tax-effective method of ‘return’ of the trade mark to Poland is its aport to the capital company, which will recognise this mark for the purposes of its depreciation at market value.

1. 4. Legal tax restrictions on the possibility of debiting trademarks acquired by way of aport

According to Article 16(1)(64) the Corporate Income Tax Act shall not be considered as the cost of obtaining depreciation revenue from the initial value of the WNiP transferred to a company or a company which is not a legal person, in the form of a non-monetary contribution, equivalent to the information obtained in the field of industrial, commercial, scientific or organisational knowledge (know-how).

Consequently, if the transfer of a protective right to a trade mark to a Polish capital or personal company, the partners of which are legal persons, would result in the company receiving that aport obtaining information related to knowledge in the field of industrial, commercial, scientific or organisational (know-how), then depreciation write-offs on that protection right would not be the cost of obtaining revenue for that capital company or for legal persons who are members of a partnership.

A contrario, if the transfer of protection rights to a trade mark to a Polish capital or personal partnership, whose shareholders are legal persons, would not entail obtaining information related to industrial, commercial, scientific or organisational knowledge by the company receiving that aport, then depreciation deductions from that protection right could be considered as revenue-related costs.

Another legal restriction on the possibility of depreciation of trademarks acquired in the form of aport is provisions Article 16(1)(64a) the Corporate Income Tax Act and Article 23(1)(45c) u.p.d.o.f. According to them, the cost of obtaining revenue is not considered to be depreciation deductions from the initial value of WNiP referred to under Article 16b(1)(4-7) the Corporate Income Tax Act (or Article 22b(1)(4-7) u.p.d.o.f.), if previously those rights or values were by a taxable person or a company which is not a legal person to which he is a shareholder, acquired or produced, and subsequently disposed of in part exceeding the income obtained by the taxable person from their previous disposal. The above regulation therefore provides for a top-down limitation of the possibility to charge to the costs of obtaining depreciation revenue from the initial value of the WNiP which the taxpayer acquired or produced on its own and then disposed of to another economic unit. In such a case, it does not matter whether the entity to which the abovementioned rights or values have been disposed made a direct transfer of these rights or values to the Polish company, or whether another entity has made this delivery. Lack of identity in this respect is not relevant for the application of regulations Article 16(1)(64a) the Corporate Income Tax Act and Article 23(1)(45c) u.p.d.o.f. The condition for the application of these provisions is to comply simultaneously third criteria i.e.:

• 1) the taxable person has acquired or produced, in his own capacity, certain rights or of the CIS concerned under Article 16b(1)(4-7) the Corporate Income Tax Act or Article 22b(1)(4-7) u.p.d.o.f.,
• 2) the taxpayer has disposed of those rights or of the CSI to another economic entity,
• 3) the taxpayer has again acquired the abovementioned law or WNiP, starting their tax depreciation.

In the event of cumulative fulfilment of all the above conditions, the taxable person will be able to charge depreciation deductions made from the initial value of the indicated CIS only to the amount of revenue obtained from their disposal. If, therefore, the disposal of these rights or values was free of charge, the taxpayer would be unable to deduct the depreciation allowances of the initial value of the indicated WNiP into the cost of obtaining revenue.

The analysis of the practice of corporate restructuring, where trademark protection rights are the subject of these activities, makes it clear that cumulative fulfilment of these conditions is quite rare.

Most often, there will be no personal identity between the entity which has produced or acquired specific rights or the WNiP and which has made Next, their disposal (payable or unpaid) to another economic entity and an entity which has received these rights or values by means of aport from a foreign entity and which has begun to depreciate them.

In such a case, the limitation of the tax deductibility of depreciation deductions made from the initial value of the abovementioned rights or of the CAP resulting from Article 16(1)(64a) the Corporate Income Tax Act and Article 23(1)(45c) u.p.d.o.f., will not be used.

4. Summary

Trade marks are often the most important asset of intangible and legal assets of companies, often prejudging their competitive position in a given segment of the market. The value of the protective rights to these marks is objective, measurable and directly linked to the revenue generated.

Notwithstanding the above, trade marks have repeatedly been used in international tax avoidance structures, in which sometimes their objective value has been distorted. After introduction 1 January 2015 regulations on the taxation of controlled foreign companies, i.e.

Article 24a the Corporate Income Tax Act and twin regulation Article 30f u.p.d.o.f., although there has been a reduction in the international avoidance of income taxation under the licensing mechanism 32 , However, paradoxically, the fiscal effects of this change are different from those envisaged, i.e.

the corporate taxation of capital companies receiving trademark protection rights by way of aport is further reduced. The effect of such an aport will be to acquire the right to amortise the trademark rights of that company from their market value. This mechanism is the most tax-friendly method of returning the trademark to Poland.

In such a case, the annual value of depreciation will almost always exceed the annual value of the royalties that were previously paid to a foreign company by the use of the trade mark.

Moreover, the self-port of trademark rights from a foreign company to a Polish entity will be tax neutral, as the provision Article 7 the relevant double taxation agreement prohibits the national legislature from taxing the foreign company submitting the aport.

The only tax burden in the case of such delivery will be PCC of 0.5% from the value of the rights transferred to the part in which they will be transferred to the principal share capital of the recipient company.

Trade mark issues can also be seen from a broader legal international perspective, i.e. Tax legislation in Poland and other countries, especially EU Member States.

Many of them successfully attract foreign capital to their territories through the application of tax preferences, inter alia, in relation to taxation of income from intellectual and industrial property rights. Passive income is the most common subject of preferential corporate taxation in many EU countries (e.g.

Belgium, Ireland, Malta, Cyprus). The significant successes of these countries, measured by the amount of foreign capital allocated to their territories, brought about by such tax preferences, prompt questions about the validity of the current direction of the tax legislation of the Polish State.

It is questionable whether this direction is as effective as in other countries that encourage tax legislation by taxpayers from other countries to allocate intellectual and industrial property rights management centres to their territories.

Although in recent years some changes in Polish tax legislation can be observed, aimed at increasing Poland's attractiveness from the perspective of the most innovative companies 33 , However, these solutions are addressed to a narrow range of taxpayers.

The extension of preferential taxation in respect of revenues obtained from royalties on all taxpayers, regardless of their business activity, could lead to an increase in foreign capital inflow to Poland through the allocation of intellectual property management centres for cross-border enterprises and affect investment decisions of companies, especially those operating in the high technology industry, concerning the selection of the most optimal (not only tax) jurisdiction.

Of course, the sine qua non of the effectiveness of such solutions would have to be adequate legislative guarantees relating to the stability of these solutions. Given the effective level of taxation of royalties profits in other EU countries, a income tax of 5% seems attractive enough to perform its function[34].

Tax preferences for depreciation of at least some WNiPs, in particular trademark rights and patents, would also be worth considering. The most common solution used in this respect by other countries is one-off depreciation, which is a one-off credit to the cost of obtaining specific revenues from the WNiP.

An optional solution could be the accelerated depreciation of preferentially treated intellectual and legal property rights. The rate of this depreciation could depend on the degree of innovation of goods or services sold under a given trade mark or containing patent-protected solutions.

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Legal basis

• Article 3(5-9) Directive 2015/2436,

• Article 119a-119zf o.p.,

• Article 17(1)(9), Article 22b(1), Article 22g(1)(4), Article 23(1)(45c), Article 30f u.p.d.o.f.,
• Article 12(1)(7) and section 1b point 1-3, Article 14, Article 16(1)(64)(64a), Article 16b(1), Article 16c, Article 16d(1), Article 16g, Article 17a(1), Article 24a the Corporate Income Tax Act,
• Article 1(3), Article 3(1)(1)(2) and section 2, Article 6(1)(8), Article 7(1)(9) u.p.c.,
• Article 1(1) p.a.,
• Article 120(1)(2) P.C.,
• Article 1(9) and Article 2(20) Act amending from 2017

The article comes from the book Tax and Balance sheet Closing of the Year 2019” under ed. prof. nadzw. dr. hab. Artur Hołda, published by C.H. Beck Publishing House In 2019; https://www.ksiegarnia.beck.pl/18745-podatkowe-i-bilansowe-zamkniecie-roku-2019-artur-holda