Electronic certificates of residence accepted by Polish tax authorities
In the individual binding ruling issued on 13 November 2017 (ref. no. 0111-KDIB1-3.4010.371.2017.1.JKT), Director of the National Fiscal Information confirmed the position favourable for taxpayers regarding certificates of residence issued in electronic form.
The applying company had doubts whether it could refrain from collecting the withholding tax pursuant to the provisions of relevant double tax treaties in a situation where it had electronic versions of certificates of residence, received by electronic mail from its business partner, who downloaded a certificate of residence from the server of tax authority competent for that business partner. The company presented its position that since in a given country of tax residence it is admissible to issue two forms of certificates of residence and they are both equivalent, there are no grounds for Polish tax authorities to honour and give preference to only one of them. Furthermore, the company noted that both a document in hard copy as well as its electronic equivalent are issued by tax authorities of the country of residence, in accordance with the law of that country, and confirm taxation of the entire income of the business partner within the territory of the country. Consequently, it is wrong to assume that only a certificate in hard copy entitles the taxpayer to apply the regulations under double tax treaties.
A certificate of residence certifies the place where the taxpayer is resident for tax purposes, issued by a competent tax administration authority in the country of the taxpayer’s residence. A certificate of residence is a necessary condition for applying a preferential, meaning lower than normally envisaged in the statutory instrument, rate of tax arising from a proper double tax treaty, or even refraining from tax collection by the withholding agent. It applies, among others, to income from royalties, interest or dividends received by entities not resident in Poland. If no certificate of residence is held on the date on which income is received, a lump-sum tax amounting to, depending on income, even 20% must be paid in Poland.
Until recently, the Polish tax authorities did not want to honour electronic certificates if competent authorities of a given country issue also a certificate in classic hard copy. The countries which make both versions of the certificate available to taxpayers include e.g. Ireland, Germany or Austria. Nevertheless, as rightly noted by the Director of the National Fiscal Information, pursuant to the Tax Code, official documents drawn up in the form specified by legal regulations by public administration authorities empowered to do so constitute evidence of what has been officially stated therein. So an official document will be a certificate of residence satisfying the above criteria, i.e. drawn up in the form envisaged by legal regulations of a given country by the authority empowered to do so. Hence, if given legislation envisages the possibility to obtain a certificate of residence both in hard copy and in electronic form, both forms are issued by a competent tax authority of a given country and have equivalent status pursuant to the law of that country, the withholding agent will authorised to accept such certificate of residence in either of the two forms. Such certificate of residence in electronic version will be thus the basis for the withholding agent for applying the provisions of the double tax treaty. The fact that it is possible to obtain in a given country also a certificate in hard copy, does not render invalid a certificate issued by the competent authority in electronic version. At the same time, the Polish tax authorities reminded that a copy of the certificate downloaded e.g. from the business partner’s website cannot be accepted as a certificate of residence.
Similar position, favourable for taxpayers, was taken by the Director of the National Tax Information in the individual binding ruling of 26 June 2017 (ref. no. DPP7.8221.33.2017.GFQV). A change in the attitude of the Polish tax authorities should be assessed in a positive way – the possibility to use an electronic version of certificate of residence will facilitate significantly the settlement of withholding taxes.
Barbara Otrzonsek, Tax Consultant, ATA Tax Sp. z o.o.