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Fund Taxation Alert 2017-15

Fund Taxation Alert 2017-15



Olivier Schneider

Partner, Financial Services Tax

KPMG in Luxembourg


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Poland - Possibility to claim late interest on withholding tax refunds received by foreign funds

Recent decisions issued by Polish Administrative Courts have confirmed that withholding tax (WHT) refunds due to discriminatory treatment towards foreign investment funds should also contain a late interest component, to be computed from the day the withholding took place. Despite that, the end date of such a late interest period remains under dispute between taxpayers and tax authorities. The purpose of this newsletter is to describe the Polish tax authorities’ current approach towards late interest claims and recent developments in this area.


It is generally understood that, upon the refund of unduly collected taxes, late interest is equally due. In this sense, pursuant to Polish domestic law, when the refund is a consequence of a decision issued by the Court of Justice of the European Union (CJEU) stating that the domestic treatment is in breach of EU law, tax authorities are obliged to pay interest for the period starting from the date the tax was withheld until either (1) the date of actual repayment (provided that the claim letter was filed within 30 days from the publication of said CJEU decision) or (2) until the 30th day from the publication of said decision (if the claim letter was filed after the 30th day from the publication of the CJEU decision).

Nevertheless, Polish law is silent when it comes to the payment of late interest in cases where the refund is not a consequence of a specific CJEU decision, but rather of the tacit recognition of an EU law breach by means of a legislative amendment (in absence of CJEU judgment), such as the amendment of art. 6(1)(10) of the Corporate Income Tax Law of 15 February 1992 (ustawy o podatku dochodowym od osób prawnych), which became effective as of 1 January 2011. Said law introduced a tax exemption for certain foreign investment funds (i.e. meeting listed conditions) on income (e.g. dividends or interest) paid by Polish companies. Therefore, Polish tax authorities have repeatedly denied the addition of late interest to the WHT reimbursements granted to foreign investment funds, on the argument that there were no specific provisions obliging them to do so.

Developments and news

In 2015, one of the Polish Administrative Courts (District Administrative Court in Wrocław) issued the first judgments in which it confirmed that non-resident pension funds which suffered WHT (prior to 1 January 2011, i.e. before the new Polish tax legislation granting the possibility for foreign investment funds to benefit from the withholding tax exemption came into force) in Poland based on domestic provisions being in breach of EU law should be entitled to receive reimbursement of the tax paid together with late interest payment. The latter were calculated from the date the tax was initially withheld until the date of actual repayment, regardless of whether such an infringement of EU law was confirmed by a CJEU decision. According to those judgments, it was sufficient that the refund was made based on the breach of EU law as confirmed by the respective positive domestic decision granting the refund.

Furthermore, earlier this year, decisions were issued by the Supreme Administrative Court with respect to the abovementioned judgments (as a result of the tax authorities’ appeals) in which the Supreme Administrative Court confirmed that the WHT refund should be due together with the late interest for the period starting from the day the WHT was paid. However, these decisions were not entirely favourable for the taxpayers as they suggested that no interest should be due on withholding tax suffered after 1 January 2011, given the fact that, as of that date, there should not be any further discrimination (a view with which we disagree, pursuant to our comments below).

Finally, the Supreme Administrative Court applied by analogy the Polish law provisions relating to late interest payments applicable to refunds that are due to a CJEU decision, leading to the following conclusions:

I. for claims filed until 30 January 2011 – i.e. within 30 days from the date when the discrimination was abolished by means of the introduction of art. 6(1)(10a) of the Corporate Income Tax Act – taxpayers should be entitled to receive interest for the whole period, meaning, from the day the tax was withheld until the day the tax was repaid; and

II. for claims concerning periods prior to 2011 which were filed after 30 January 2011, taxpayers should be entitled to receive interest for the period starting from the day the tax was withheld until 30 January 2011.

Following the abovementioned judgments of the Supreme Administrative Court (which concerned a Dutch pension fund) the District Administrative Court in Wrocław issued further judgments:

  1. in a case concerning a Luxembourgish investment fund (FCP) which suffered WHT prior to 2011

    As the original claim letters (for the principal amount of overpayment) were filed prior to 2011 the interest was granted for the whole period, i.e. from the date the tax was withheld until the day of the actual refund. The judgment has not been appealed by the Polish tax authorities and became final.

  2. in a case concerning a Luxembourgish investment fund (SICAV) which suffered WHT prior and after 2011

The negative decision of the tax authorities was cancelled by the Court; however, the written justification of the judgment is not available as of now, so it is not possible to determine to what extent the Court agreed with the taxpayer, in particular regarding the approach towards WHT suffered after 2010. In its oral justification, the Court suggested that, if the discrimination was not entirely eliminated by the introduction of the tax exemption for foreign funds, the interest should be due also for later periods. Unfortunately the issue was left for the consideration of the tax authorities, who will have to re-examine the case.

Many other cases are pending before the administrative courts and judgments are expected soon.

Lastly, it seems that the Polish Ministry of Finance accepted the Supreme Administrative Court judgments, as the recently published draft bill of the Polish Tax Ordinance Act introduces new provisions according to which interest is due also if the discriminatory taxation – in the absence of a CJEU decision declaring such discrimination – was eliminated by an amendment of law. Significantly, in the justification of the abovementioned bill it was explicitly stated that the necessity of introduction of such a provision stems from the abovementioned judgments of the Supreme Administrative Court.

KPMG comments

As mentioned, the Polish tax authorities presently refund unduly withheld taxes to foreign funds either without interest or only including interest counted from date of filing of the claim. In such cases, a separate interest claim is needed in order to claim the interest – or its remaining part – for the benefit of foreign funds. The filing of such interest claims should be done within a five year period from the end of the year in which a refund should have been granted on the basis of the tax authorities’ decision.

In this sense, we believe that there are strong arguments capable of supporting our view that the late interest should be due from the period starting from the moment the unduly paid tax was withheld until the date of the repayment, regardless of the date the reclaim was filed. KPMG can assist you in the filing of such late interest reclaims.

Any tax advice in this communication is not intended or written by KPMG to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing, or recommending to another party any matters addressed herein.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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