Lending Entities vs. Bank Tax | Tax Alert 2/2016
Is a business entity granting a one-off loan to an individual liable to pay the bank tax?
25 March 2016 marks the date of submission of the first declaration under the tax on certain financial institutions (the so-called "bank tax") in accordance with the Act on Taxation of Certain Financial Institutions (the "Act").
Definition of the taxpayer under the Bank Tax Act
Contrary to its name, and perhaps the intention of the legislator, the bank tax within the current wording of the Act does not apply solely to banks, insurance companies and professional entities providing loans or credit facilities. According to the Act, taxpayers may also include lending institutions defined by reference to the Act on Consumer Credit, as lenders other than banks and co-operative savings and credit unions, who provide consumer credits within the scope of their business or profession.
This blurry definition of the taxpayer inevitably raises the question whether the term loan institutions should not be taken to include any business entity (regardless of the scope of its activity), which, within the course of their business, is also engaged in financial activity outside the banking system and has provided at least one loan to an individual.
The above concerns are further amplified by the imprecise principles for determining the amount of assets constituting the bank tax base, the vague nature and scope of examining the relationships between subsidiaries or jointly controlled entities for the purpose of calculating the amount of these assets, as well as the rules for determining who is liable to pay the bank tax within a group of affiliated entities.
A fundamental question arises as a result: is a business entity whose assets (including the assets of its subsidiaries and jointly controlled entities) exceed PLN 200m and which has granted a loan to an individual, liable to pay the bank tax as of 1 February 2016.
Interpretation of the Bank Tax Act by the Minister of Finance
The accumulation of interpretative doubts meant that no later than a month after the Act becoming effective, its provisions saw a response to a parliamentary question raised and the issue of a general interpretation of tax law (ref. PK1.8201.12016). Published on 3 March 2016 by the Minister of Finance, the general interpretation refers specifically to the situation of entities granting loans to their employees from current assets or the company’s welfare fund.
However, the interpretation provided by the Minister of Finance, although beneficial for entities providing financing to their employees, fails to directly address other situations and actions taken by those business entities which due to the nature of such actions might be liable to pay the bank tax as lending institutions.
Taking into account that the view adopted by the Minister in his interpretation, is not based directly on the regulations of the legislature under consideration, in practice, it is impossible to rule out that the tax authorities applying the provisions of the Act, may adopt a restrictive interpretation. The tax authorities may assume, therefore, that the explanations provided by the Minister of Finance relate solely to employer-employee relations and are not applicable to other cases of financing provided to individual consumers.
Verification of loan agreements may provide protection against the bank tax
A number of these questions will remain unresolved until the Act is amended. As a result, each business entity should conduct a thorough review of its existing loan agreements granted to individuals, in particular with regard to the purpose of the loan, to accurately assess the risk of any tax bank liabilities for their company (group of companies) due to the nature of their activity.
Patrycja Goździowska, Partner, Tax Advisor
Agnieszka Pajurek, Senior Associate, Tax Advisor