Double taxation of income (temporarily) permitted

A company which posted revenue in Germany and paid tax there must also pay tax in Poland if the German tax authorities do not issue a partial exemption decision on time, the Supreme Administrative Court has ruled (…)

Dr Janusz Fiszer comments: “In my view, the Supreme Administrative Court handed down the correct decision. The company, in its capacity as a Polish tax resident, was bound by law to settle its taxes in Poland by the deadline of 30 March, irrespectively of any tax proceedings which may have been pending in Germany. The legal instrument providing a basis for taking into account the effects of any such foreign proceedings is comprised in a subsequent correction to the original tax filing and, possibly, in an application for refund of excess tax. The representatives of the company in question apparently followed the reasoning that, at the moment when the Polish tax return was filed, the decision of the German tax authorities had not been issued yet, or was still open to appeal. This, however, would be tantamount to subordination of a statutory tax duty to an unknown – certainly as at the deadline for filing of the tax return – outcome of tax proceedings pending in the country in which the revenue accrued. Such an interpretation, while financially advantageous to the taxpayer, could not stand in light of statutory provisions of absolute application. The only surprising element is constituted in the Supreme Administrative Court’s remark to the effect that ‘the issue of avoiding double taxation in such a situation has not been addressed in the laws’. As a matter of fact, this issue does not merit separate regulation in that its resolution follows directly from the Polish law and from the relevant double tax treaty. Thus, this decision of the Supreme Administrative Court is controversial only on its face, in that it can be described as sanctioning temporary double taxation, but it is perfectly in order from the perspective of applicable laws”.