Tax Treaty Case Law around the Globe 2017

S. 139Poland: Can a Leader in a Cash Pooling System be Recognized as the Beneficial Owner of the Interest in the Meaning of Tax Treaty Law?

Hanna Litwińczuk

1. S. 140Introduction

This Polish case confirms the previously existing Polish judicial tendency concerning the interpretation of the beneficial owner concept in relation to a cash pooling agreement under which a Polish entity pays interest to the pool leader, a resident of another state, whose position as a recipient of the interest is similar to an agent (intermediary). The problem that arose in this context was whether the interpretation of the concept of beneficial owner should take into consideration the substance of this arrangement: whether it reflected the economic reality, i.e. had a genuine economic character as a financial liquidity management agreement, or whether its main purpose was to gain access to the benefits of the treaty.

2. Facts of the Case

A Polish resident company (hereinafter Polish company) was a party to a cash pooling agreement. Under the terms of this agreement, the leader was an entity which had its registered office in Luxembourg, i.e. was resident in Luxembourg (hereinafter the leader). The leader had neither its...