Poland: Amendment to EU/EEA investment funds exemption rules approved

09.12.2016

Further to our Tax Flash T16039 dated 4 November 2016, Clearstream Banking1 would like to inform customers that expected changes to the Polish Corporate Income Tax Act were approved by the Polish Parliament and the President of the Republic of Poland. Changes will be effective

1 January 2017

Background

The amended Tax Act changes the scope of the EU and EEA based investment fund tax exemptions.

CIT exemption for open-ended funds

EU/EEA based open-ended investment funds and certain specialised open-ended investment funds will still benefit from the tax exemption provided that the fund fulfills certain requirements including:

  • Raising funds through public offering of participation titles;
  • Investing only in securities and money market instruments; and
  • Carrying out its activities based on permit of the relevant financial market supervision authority.

However, the following funds will be taxed under the amended Act:

  • Open-ended collective investment vehicles that apply investment principles and limitations such as those imposed on closed-ended funds; and
  • Collective investment vehicles whose participation titles, in accordance with their constitutive documents, are not subject to public offering nor to admission to trading on organised markets and can be acquired by individual investors only in a way of a one-off transaction amounting to a minimum of EUR 40,000.

CIT exemption for closed-ended funds and specialised open-ended investment funds

According to the amended Act, closed-ended and specialised open-ended investment funds applying investment principles and limitations such as those imposed on closed-ended funds will be able to benefit from the tax exemption only to the extent that the interest payments are not deriving from a holding in a tax transparent entity.

Therefore, the exemption will no longer apply to:
a) Income from holdings in partnerships or organisational units that do not have legal personality, whose headquarters or the management boards are located in Poland or in other countries where they are not treated as legal persons nor are subject to taxation of their entire income, no matter where the income is realised;
b) Interest payments on loans and on other receivables payable to the fund by entities described in a);
c) Interest payments on share in capital of entities described in a);
d) Donations or any other benefit payments made towards the fund by entities described in a);
e) Interest payments on securities or discounted instruments issued by entities described in a); and
f) Income derived from sale of securities issued by entities described in a) or sale of shares in such companies.

Furthermore, the above eligibility for exemption will only be applicable in cases where Poland has signed a relevant Double Taxation Treaty agreement or another agreement with the respective country allowing Poland to receive tax information from the tax authorities of the investment fund.

Impact on customers

As a result of the amended Tax Act, the existing Investment Fund Statements submitted will become invalid as from 31 December 2016.

Consequently, to benefit from the tax exemption on dividend and interest payments distributed by Polish securities on behalf of eligible EU/EEA investment funds, all impacted customers should provide to Clearstream Banking with:

  • A new notarised and apostilled completed “Investment Fund Statement” (attached below); and
  • A valid certificate of tax residence. Certificates already in place will remain valid until the foreseen validity end date.

Note: The attached “Investment Fund Statement” is provided to Clearstream Banking customers in the format given and requested by the Clearstream Banking local depository, Citi Handlowy. Clearstream Banking can therefore not be held liable for the content of the statement.

The above mentioned documents should be provided in original from 1 January 2017 and at the latest:

  • For relief at source: Four business days before the first income payment;
  • For quick refund: Four business days prior to the last business day of the month;
  • For standard refund: Two months before the statutory deadline.

Further information

For further information about tax procedures for Polish securities, please refer to the Clearstream Banking Poland Tax area.

Customers may contact the Clearstream Banking Tax Help Desk or Clearstream Banking Client Services or their Relationship Officer.
------------------------------------------
1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking Frankfurt (CBF) customers using CreationOnline), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.