The portion of the purchase price of the goods identified as payable under the license is subject to WHT.
The applicant (company) is a distributor of cosmetics. It purchases goods from a related entity (a foreign establishment of a foreign company). The contract concluded between the applicant and the plant contains a provision according to which 3% of the price of the goods purchased by the applicant is a remuneration for the right to use the trademarks by the buyer (i.e. the company) for the purposes of promotion, advertising and sale of these goods.
The company asked the Director of the National Fiscal Information whether the remuneration for the use of trademarks included in the price of the goods purchased by the applicant will be subject to WHT taxation in Poland?
According to the company, the answer should be negative, because it is a mixed benefit. The “license” element is an ancillary performance to the main (“commodity”) performance.
However, the authority disagreed with her position, arguing that the fee for the right to use trademarks is not a side element of the main service and its importance is not insignificant – it is a separate element of the contract. Therefore, in the light of the CIT Act and the relevant double taxation agreement (DTT), it should be subject to WHT.
The District Administrative Court in Warsaw dismissed the company’s complaint. The Provincial Administrative Court indicated that we are dealing with two different types of activities – the acquisition by the Company of goods from one parties, and the acquisition of the right to the trademark. Hence, the approach of the authority was correct.
This decision was upheld by the Supreme Administrative Court.
The Supreme Administrative Court stated that the court must act within the framework of the facts described in the application. It was apparent from that report that the fee comprised two elements, including a royalty fee. Therefore, the company’s allegation that the authority is trying to separate this payment from the entire benefit is not justified. Nor can it be said that this payment “shares” the fate of the main (commodity) benefit. In the light of this fact, there are no doubts as to the obligation in WHT, both under the CIT Act and the UPO.
Judgment of the Supreme Administrative Court of 7th March 2023, file reference number II FSK 2034/20.