Conventions for the avoidance of double taxation as acts of international and domestic law: consequences of applying tax agreements with differences between official language versions. Commentary to the verdict of the Polish Supreme Administrative Court of 18 April 2023, II FSK 400/21
Abstract
The author discusses the verdict of 18 April 2023 issued by the Polish Supreme Administrative Court in case II FSK 400/21 concerning the obligations of a Polish entity (tax remitter) in the area of uncollected flatrate corporate income tax – also referred to as withholding tax or WHT – on payments made from Poland to a Swedish entity. The author aims to express approval for the standpoint taken by the Court by underlining the dogmatic correctness and axiological value of the commented verdict, as well as recognising it as a notable example of the voice of reason amongst rather inconsistent rulings in similar cases. The main issue the Court considered was the interpretation of Article 11 section 1 of the Convention of 19 November 2004 between the Government of the Republic of Poland and the Government of the Kingdom of Sweden for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. At the time when the events of the case took place, three language versions of Article 11 section 1 of the Convention existed, and the Polish version – contrary to Swedish and English – did not contain the “beneficial owner” clause. The consequence of the Polish tax remitter assuming that there were no grounds to examine the fulfilment of this condition was, in principle, that no tax was collected on payments made to Sweden, irrespective of whether or not the recipients were the beneficial owners of the receivables. This approach was challenged by Polish tax authorities, according to whom the comparison of different language versions of the disputed provision should effectively lead the tax remitters to notice and apply the beneficial owner condition. In the verdict, the Supreme Administrative Court mostly focuses on the results of discrepancies between the linguistic versions of the Convention, nevertheless, the judgment itself is also a valuable voice in the discussion on withholding tax, in particular the position and function of the tax remitter in the tax system, as well as the scope of the obligations that can reasonably be imposed on it within a democratic state under the rule of law.
Keywords:
international tax law, beneficial owner clause, agreements on the avoidance of double taxationReferences
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