Half 2019 between the interpretative bodies is dominated by the belief that brokering services in relation to their similar nature to intangible services, consisting in advertising, market research and advice are subject to WHT taxation.
It should be noted that this is a negative change in the interpretation practice for taxpayers, as for years the tax authorities have confirmed that commercial brokering services are not subject to withholding tax. Therefore, it is all the more noteworthy one from the latest convictions, beneficial to taxpayers.
Day 9 July 2020 WSA in Warsaw repealed an interpretation of the individual Director of KIS from 30 August 2019 No 0114-KDIP2-1.4010.245.2019.3.MR, concerning the collection of flat-rate tax 20% the revenue generated from the conclusion of the Agency Agreement.
In the present case, the company asked the interpretative authority whether the revenues obtained by the agent for the provision of sales brokering services in the scope of, inter alia: representation of the company in each forum and business platform, active search for business opportunities on behalf of the company, participation in meetings on behalf of the company, submission of tenders on behalf of the company, answering any questions of customers on behalf of the company are included in the catalogue Article 21(1) Corporate Income Tax Laws (hereinafter: ‘updop’), and therefore whether these revenues are subject to flat-rate taxation of 20% the revenue obtained and, consequently, whether the company is obliged as a payer, to collect flat-rate income tax.
According to the applicant, the remuneration received by the agent for services provided to the company will not be included in the revenue catalogue mentioned in Article 21(1) updop, and thus the revenue generated will not be subject to flat-rate corporate income tax in the territory of the Republic of Poland, resulting in the company not acting as a payer of this tax.
The company argued its position, stressing that in the catalogue contained in Article 21 Updop lacks services provided under agency contracts. Although this is an open catalogue, as clearly indicated by the statement "and similar benefits", the Applicant's assessment of brokering services cannot be classified as such or similar benefits.
Advisory services, accounting services, market research services are intended to obtain certain information which is useful for the management of the company. Other objectives are directly met by brokering services.
In addition, the company indicates that in the Polish Classification of Products and Services, which is an annex to the Regulation of the Council of Ministers dated 4 September 2015 on the Polish Classification of Products and Services (PKWiU), issued on the basis of Article 40(2) Act of 29 June 1995 on public statistics (Journal of Laws of 2015, item 1676), brokering services are classified separately from the services referred to in the provision Article 21(1)(2a) Updop.
Furthermore, the company argued in its argument that the agent would receive a commission remuneration that is characteristic of brokering contracts, as opposed to advisory services or market research, which are paid on a flat-rate (quota) basis.
In view of the above, according to the company, the services which will be provided under the Agency’s agreement, intended to lead to the conclusion of a trade agreement, do not fall within the catalogue specified by the legislator in Article 21(1)(2a) they are also not of a similar nature to the benefits listed in that provision and are therefore not taxable on the basis of that provision.
In order to confirm its position, the company recalled the individual interpretations previously issued, including the interpretation of the Director of the Tax Chamber in Katowice of 23 December 2016, No 2461-IBPB-I-2.4510.937.2016.1.MM and the Interpretation of the Director of the Tax Chamber in Katowice on 25 September 2016, No IBPB-1-2/4510-500/15/MM.
The Director of the Tax Chamber found the position presented by the company incorrect, indicating that it was true Article 21(1)(2a) Updop does not exchange brokering services for sale.
However, it should be stressed that the name of the service contract itself cannot be the only determining factor that will qualify or not the service as belonging to the directory of services listed therein.
The decisive importance of determining that the service is included in the activity directory referred to in Article 21(1)(2a) the update has the content of the contract concluded with the counterparty and, above all, the nature of the benefits actually performed.
The Service Provider performs under the agreement described in the proposal, i.e.
services consisting in searching for potential customers for the Company's products, and thus in mediating the conclusion of contracts for the sale of products to customers are similar to advertising services, market research services and advisory services (they have characteristics corresponding to services of a similar nature to those set up).
Surely these characteristic elements prevail in the “mediation contracts” concluded by the company.
Although the above-mentioned brokering agreement has elements characteristic of non-promotional, market or advisory benefits, the characteristics characteristic of advertising, market and advisory services outweigh those characteristic of other benefits.
Day 9 July 2020 Provincial Administrative Court in Warsaw (III SA/Wa 2603/19) set aside the adverse interpretation for the company (no written justification for the judgment – for the moment of drafting the article). This judgment is invalid.
The sentence of the WSA is another attempt to break the negative interpretation line presented by the tax authority. The position presented by WSA from Warsaw should be assessed positively. It can be hoped that further judgments, as well as the decisions of the Director of KIS, will uphold the argument set out above and open the way to a less restrictive interpretation of the rules.