Taxpayers often sell shares with a deferred payment date or payment in instalments. They are then faced with a dilemma – how to classify income (revenue) from the price itself and the interest associated with it?
An important issue with regard to the proper classification of such receivables is to determine whether the interest in question will be treated as an ancillary benefit that is directly and closely related to the income from the sale of shares for consideration. Is it an element of their price resulting structurally from the contract, dependent on the mechanism of sale of these shares, or will they constitute interest for late payment in the strict sense, which will entail their separate treatment?
Pursuant to Article 10 sec. 1 point 7 of the Polish PIT Act, the sources of revenue are cash capital and property rights, including the sale of property rights other than those listed in section 8(a)-(c). At the same time, pursuant to Article 17 sec. 1 point 6(a) of the Polish PIT Act, income from capital gains is considered to be income from the sale of shares, shares in a cooperative and securities.
According to Article 30b(1) of the Polish PIT Act, income from the sale of securities or derivative financial instruments for consideration, including the exercise of rights arising from these instruments, from the sale of shares for consideration, from the sale of shares in a cooperative for consideration and from the acquisition of shares or contributions in a cooperative in exchange for an in-kind contribution, income tax is 19%.
Contractual issues seem to be of key importance for the possible distinction between the endowment obtained by the seller of the shares. In a situation where the agreement specifies, for example, a schedule for the payment of individual tranches for the shares sold, where each tranche is correspondingly higher by the interest specified in the agreement (it is known in advance what the amount will be), and in addition, it is not interest treated as interest for delay in the strict sense (they are regulated separately or it is assumed that they result directly from the Civil Code), In such a situation, it is correct not to distinguish between two sources of income.
In such cases, it should be assumed that the price set for such shares contains two elements: the market value of the shares plus the interest resulting from the payment in instalments. As indicated, bearing in mind that this interest is due for the period before the expiry of the due date of a given installment (however, it is also possible to pay the installment earlier or partially), it does not serve the nature of interest for late payment referred to in the Civil Code
Accordingly, the fixed price for the shares, which includes interest, is the result of the provision of capital by the taxpayer concerned, i.e. the deferral of the payment date which is part of the agreement. Such an interpretation also means that the purchaser of the shares in question does not act as a payer. Such conclusions are also reflected in the advance tax ruling of the Director of the National Tax Information of 11 October 2023 (file reference number 0112-KDIL2-2.4011.589.2023.1.MC).
To sum up, the sale of shares together with interest constituting their ancillary element will lead to the seller’s income only from capital gains, referred to in Article 10 sec. 1 point 7 in conjunction with Article 17 sec. 1 point 6(a) of the Polish PIT Act, subject to taxation pursuant to Article 30b sec. 2 point 4 of the said Act.