The Provincial Administrative Court in Łódź in its judgment of July 16, 2015 (case no. I SA/Łd 517/15) resolved that due to the fact that the Act on the Civil Law Transactions Tax does not contain any definition of a “place of exercise of property rights” it should be assumed in the case of cash receivables that this term is equivalent to the “place of performance” in the meaning of Art. 454 of the Civil Code (hereinafter: “k.c.”). In the discussed case the cash receivables acquired by a Polish tax resident as a should be repaid to the hands of a assignor (company seated abroad) i.e. abroad. The fact that after the assignment the Polish debtor becomes obligated to pay the receivables to the hands of the taxpayer residing in Poland does not affect the assessment of the tax effects of the assignment of receivables in light of the civil law transactions tax (hereinafter “PCC”). In this case, at the time of concluding the agreement for the sale of the receivables, the object of the sale shall be the property rights, with the place of performance being abroad. Therefore, the said transaction is not subject to PCC if the sale agreement is concluded abroad.
The commented judgment is particularly important for entrepreneurs acquiring receivables due from Polish entities. Generally, the sale of receivables due from Polish entities may be subject to 1% PCC if these receivables constitute (i) property rights exercised in Poland or (ii) property rights exercised abroad if the acquirer resides or is seated in Poland and the civil law transaction took place in Poland.
Neither the Act on civil law transactions tax nor other tax laws define the place of exercise of property rights. In practice it is assumed that in the case of cash receivables one should rely on the civil law notion of the place of performance, referred to in Art. 454 k.c. Pursuant to the above regulation, the place of performance should be specified in the content of a legal relationship creating the obligation of a given performance or it should arise from the nature of the obligation. If the place of performance was not specified or it does not arise from the nature of an obligation, the cash obligation should be performed at the place of residence or seat of the creditor at the time of performance.
In the said judgment the court rightly pointed out that the receivables acquired by a Polish taxpayer should be originally repaid to the assignor (the company seated abroad). In light of Art. 454 k.c. the place of performance (place of exercise of the property right for PCC purposes) as of the date of acquisition on the receivables was situated abroad. Additionally, the sale agreement was concluded abroad. Therefore, the abovementioned prerequisites of PCC taxation of the sale of receivables (the sale of property rights) were not fulfilled and the transaction should not be taxed with PCC in Poland.
The said judgment should contribute to the change and unification of tax rulings issued by tax authorities in this respect. In practice, the tax authorities often take a stance that the assessment of the place of performance of property rights should take into consideration whether the receivables, when acquired, will be repaid to the bank account of the acquirer of the receivables in Poland or abroad. A proper structure of the acquisition of receivables from a foreign entity allows to avoid PCC on this transaction even in light of such interpretation.