Tax Treaty Case Law around the Globe 2015

S. 203Poland: The Legitimacy of Double Tax Relief for Dividends Prior to Directive 2014/86/EU: Poland’s 2014 Supreme Administrative Court Judgment (II FSK 187/12)

Hanna Litwińczuk

I. S. 204Introduction

The problem considered in the judgment is the tax classification of a German company's cross-border profit distributions to a Polish shareholder in consideration for “jouissance” shares in light of the applicable tax treaty and the domestic laws of both countries. Under German law, i.e. the domestic law of the distributing company, payments made to the holders of “jouissance” shares are deductible expenses, while pursuant to Polish law, the domestic law of the receiving company, they should be treated as dividends and exempt from tax by virtue of the regulations implementing the EU Parent-Subsidiary Directive. The essence of the dispute is whether the state of the receiving company is entitled to change the qualification of the payments from dividends to interest, which would amount to a refusal of the tax exemption. The most problematic issue from the point of view of the state of the receiving company is therefore the tax effect of dividend-like treatment of profits, which would amount to a deduc...