The European Commission has again asked Poland to amend it tax laws because they continue to discriminate against EU/EEA collective investment undertakings (“EU/EEA Funds”) by imposing restrictive conditions on the availability of an exemption from corporate income tax.
Under Polish tax law before 1 January 2011, EU/EEA Funds were subject to withholding tax at the 19% (for dividends) and 20% (for interests and royalties), whereas domestic investment funds were exempt.
Because this was discriminatory and breached the freedom to provide services and the free movement of capital, the law was changed from 1 January 2011 so that EU/EEA Funds became exempt from CIT if they met similar requirements to those applicable to Polish investment funds. These include being liable to unlimited (worldwide) taxation in their country of residence.
In addition, Polish taxpayers who pay dividends, interest or royalties to the EU/EEA Funds may apply the exemption to these payments as long as the EU/EEA Funds supply them with:
- a tax residency certificate;
- a written statement that the EU/EEA Funds are the beneficial owners of the payments;
- proof that there is a legal basis for the exchange of information and for the tax authorities to obtain information (double tax treaty, mutual assistance directive etc.);
- a written statement that the EU/EEA Funds have fulfilled all the conditions, which are provided for in applicable laws, required to apply exemption.
The need to meet these conditions means that the EU/EEA Funds are still treated more restrictively than Polish investment funds and therefore the conditions contravene EU law.