Telematics services are becoming more and more popular, especially for companies with a large fleet of vehicles. The vehicles are fitted with devices that enable their tracking (using GPS), downloading data from on-board computers, etc. Such effects are achieved thanks to special software.
In practice, as in the case of many other services, suppliers of this type of solutions may be foreign entities. This means that it is necessary to assess whether their remuneration is subject to withholding tax in Poland (WHT).
Pursuant to Art. 21 sec. 1 point 2a of the CIT Act, a 20% flat-rate tax is charged for the following benefits: advisory, accounting, market research, legal services, advertising services, management and control, data processing, employee recruitment and recruitment services, guarantees and sureties and similar benefits .
The question then arises as to whether we are dealing with “data processing” or similar services.
Tax authorities accept the approach according to which “data processing” means IT activity related to the transformation of data. Therefore, data processing services are reproductive in nature, and their sense is to perform operations on existing databases (systems), such as supplying databases, creating reports, tables, forms, etc.
In this context, telematics services are a kind of “conglomerate” of telecommunications services, the delivery of software to end-users where some aspect of data processing may occur. Nevertheless, this is not the primary purpose of such a service, but is an element of it.
Naturally, the provisions of a given contract are of key importance. If the contract concerns, above all, the provision of software that will present the user with all data about his fleet, then such a service should not be considered as taxation “withholding” according to the CIT Act. We believe that it is an “end user” license agreement, which is not subject to taxation according to Polish regulations.
However, if the scope of the contract is the rental or lease of telematics equipment (even with software), then the tax authorities may decide that the benefit should be taxed as royalties – i.e. the rental of an industrial device (e.g. the Director of the National Tax Information in the individual interpretation of July 8, 2015, sign. IBPB-1-3/4510-14/15/PC).
Importantly, the Polish CIT Act is applied taking into account double tax treaties.
Polish double tax treaties are based on the OECD Model Convention, which provides for the possibility of taxing WHT in the source country (here: Poland) of royalties.
Royalties are typically defined as any kind of royalties payable for the use or right to use any copyright in a literary, artistic or scientific work, including cinema films, any patent, trademark, pattern or model, plan, technology secret, or production process. or for the use or right to use an industrial, commercial or scientific device or for information relating to experience in an industrial, commercial or scientific field.
Telematics services themselves should not fall under the so-defined concept of ‘royalties’. They do not fall within the scope of any of the elements indicated above.
Such a position was confirmed, among others, by in the individual interpretation of the Director of the Tax Chamber in Katowice of December 7, 2015 (sign. IBPB-2-2/4510-91/15/ZuK):
“The nature of the service provided by the Swedish company is that it (and not the Applicant) retrieves relevant data from devices installed in customers’ vehicles and enables access to this data and relevant reports via a web portal. In addition, this service, within the framework of communication modules, enables the transmission of relevant data and messages (messages) between the customer’s premises and his vehicle. At no time does the Applicant gain access to the devices used for communication between the vehicle and the Service 1 servers and the internet portal enabling access to the obtained data. In this respect, the end customer purchases a kind of telecommunications service. However, it does not manage or receive access to the Swedish company’s equipment used in the process of data transmission between the vehicle and the respective servers. At the same time, neither the Applicant nor its customers have access to any patent, trademark, pattern or model, plan, technology secret or production process. The technical, hardware and software solutions used by the Swedish company for the provision of the Service 1 in question constitute its internal property. “
A similar position was expressed in the individual interpretation of the Director of the Tax Chamber in Warsaw of May 16, 2016 (sign. IPPB5/4510-114/16-3/MK).
Again, a different qualification may apply to contracts for the rental or lease of telematics equipment, in which case it should be reassessed whether they constitute “industrial equipment”.