New Stamp Duty Act brings more clarity to tax
It's not often that stamp duty is sexy enough to be featured in Warsaw's premier tax column, but last month, Parliament passed the Stamp Duty Act and the Act on Tax on Civil Law Transactions. The Stamp Duty Act currently in place dates from 1989, and imposes charges on civil law acts as well as fees chargeable on operations of administrative bodies. As the two charges are distinct types of charges, the existing act has been divided into two new acts.
Beginning next year, stamp duty will be chargeable only on acts performed by public administrative bodies within administrative proceedings and on selected documents. The Tax on Civil Law Transactions applies to civil law operations involving trade in things and property rights outside the scope of business activity (called "non-professional trade" in the act).
The Stamp Duty Act states that the liability to pay stamp duty rests with individuals, corporate entities and unincorporated organizational units if they file applications and attachments thereto; if official acts are performed or if certificates or permits are issued at their request; and where they jointly issue documents or draft documents.
Acts and documents subject to stamp duty as well as applicable rates and exemptions are itemized in a table attached to the new Stamp Duty Act.
The new law allows for a considerable upward revision of stamp duty amounts. They will be changed automatically following a rise of the retail price index by more than 15%, and changed proportionately to the rise. In years to come, this means the possibility of some very irregular amounts being due on certain documents, but we'll live with that when it happens.
Selected stamp duty rates are as follows:
applications zl. 5 (from zl. 1.50),
attachments to applications zl. 0.50 (from zl. 0.15),
most certificates issued by the registry zl. 19 (from zl. 5),
certification of documents zl. 19 (from zl. 5),
certificates of tax arrears zl. 19 (from zl. 5),
permits for foreign nationals to purchase real property or perpetual usufruct zl. 1,400 (from zl. 1,000).
Charges payable on the permit to open a branch or a representative office of a foreign bank in Poland, to open a bank with Polish capital abroad and to carry on insurance operations will rise nearly fourfold. The amount of stamp duty payable in such cases will be zl. 11,400 (from zl. 3,000).
The new legislation requires the president's signature to become operative. Once published, the new law will take effect Jan. 1.
The new Act on the Tax on Civil Law Transactions contains a full catalog of taxable civil law transactions. This precludes taxation being sought on any types of contracts not specified in the law, and means that tax will not be chargeable on rental, lease and consignment contracts or selected contracts of exchange, which were not always clearly specified in the old law, meaning that it wasn't clear whether they were or were not subject to stamp duty. The new tax will be assessable on non-gratuitous usufruct (including irregular usufruct) and non-gratuitous servitude as well as contracts of irregular deposit and changes to all and any contracts arising therefrom if they increase the assessment basis, to ensure that the tax is paid on the full value of transactions.
Tax on acts in civil law will replace stamp duty on court rulings (including those issued by courts of arbitration) and will be chargeable on agreements concluded in courts that have the same legal effect as taxable civil law acts.
Articles of incorporation of companies and any amendments thereto are subject to tax provided that the registered office of a company is located in Poland. The rules of determining the tax assessment basis will vary from one transaction to another. In addition, the existing rule of appraising purchased items and rights on the basis of fair market value will remain in force.
The scope of application of tax on civil law transactions and VAT is now defined more clearly. According to the act, transactions in which at least one party is liable to pay VAT "on this particular transaction" or those transactions exempt from VAT pursuant to other regulations will be exempt from the new tax. This means that the existing general sort-of-rule that "things subject to VAT are not subject to stamp duty although nobody knows what that really means where something is VAT-exempt" will be replaced by something a bit clearer. Accordingly, the new tax will be chargeable only on civil law operations qualifying as the so-called "non-professional transactions" (i.e. not part of a business or trade), which do not carry the VAT liability.
An important change is a downward revision of tax on civil law operations involving real property or perpetual usufruct from 5% to 2%. The other percentages remain unchanged compared to the existing Stamp Duty Act. This is good news if you're buying or selling real estate.
The rule embodied in the new act is that taxpayers are to independently assess the tax and withholders to collect it. Tax on civil law transactions will be withheld and remitted by public notaries and purchasers of things designed for processing or re-sale.
The new legislation also requires the president's signature to become operative. Once published, the new law will take effect Jan. 1.
So while this may not be the most exciting change that's ever occurred in the history of Polish tax, it continues the trend of a bit more needed clarity in what is subject to tax, even if the minuscule increases in overall tax costs are costly. I don't think they'll break the bank, though.
Peter Ferrigno is a partner in the Warsaw office of Arthur Andersen.
