Tax

Are there stamp, registration, transfer or other similar taxes payable on the advance, transfer or assignment of a loan?

Grant (advance) of a loan

Yes, loan agreements (and amendments to such agreements, if they result in an increase of the principal) may be subject to the tax on civil law transactions (TCLT) at 0.5%. As a rule, loans granted by financial institutions and entities whose business activities are to provide finance are not subject to TCLT (as they are exempt from value added tax in relation to such transactions).

A loan agreement is subject to TCLT, if:

• the rights arising out of the loan agreement are exercised in the territory of Poland (where the loan is granted by a company not resident in Poland this condition is not fulfilled); or
• the rights arising out of the loan agreement are exercised outside of the territory of Poland but the borrower has its place of residence or registered office in Poland, and the loan agreement was executed in Poland.

Loans granted by a shareholder to a company (limited liability company or joint-stock company) are exempt from TCLT.

The TCLT obligation arises when the loan agreement is executed. Generally, the tax base is the amount or value of the loan (principal). If the principal is to be paid in tranches and the total amount of tranches is not known (eg because the agreement does not specify the total principal amount), the tax is due in relation to a given tranche once it is paid out. The borrower is obliged to calculate and pay TCLT within 14 days from executing the loan or receiving the tranche of the loan.

Transfer (assignment) of a loan

A transfer (assignment) of a loan may be subject to TCLT; where this is the case, the tax rate is 1%. The acquirer of the debt is liable to pay the TCLT.

There is no TCLT in the case of the subrogation of loans.

TCLT does not apply to the assignment of a loan agreement if at least one of the parties is subject to or exempt from value added tax in relation to the assignment.

Are there stamp, registration, transfer or other similar taxes payable on the taking, transfer or assignment of a mortgage, debenture or other security?

There are court fees involved in the registration of registered pledges and mortgages in the relevant registers. Stamp duty is payable if the application to register a security is filed by an attorney-in-fact. Additional court fees are payable if any amendments to the registered pledges or mortgages are registered. In each case, the fees are not significant.

Notarial fees are involved when any security interest is executed is in a form of notarial deed (eg mortgage) or with signatures certified by the notary (eg civil pledge over shares in a limited liability company) or with date certified by the notary (eg security assignment or security transfer of assets). In any case, the notarial fees are capped at PLN 10,000 (approx. €2,350).

The establishment of a mortgage is subject to TCLT. The tax rate is 0.1% of the amount of the secured debt if it is possible to determine the amount of such debt or PLN 19 (approximately €5), if the debt is of an amount which is not capable of being determined.

The TCLT obligation arises upon submission of a declaration on the establishment of a mortgage or conclusion of an agreement for the establishment of a mortgage. The tax base is the value of debt secured. The person submitting a declaration of intent concerning the establishment of a mortgage is liable to pay the TCLT.

Are there stamp, registration, transfer or other similar taxes payable on the issue, transfer or assignment of a debt security (eg a bond)?

Generally, this depends on the type of debt securities and entities involved.

As a rule, a sale agreement relating to shares and stocks in a Polish company is subject to TCLT, as these stocks and shares are considered as rights exercised in the territory of Poland.

Sales of bonds will be subject to TCLT if they constitute rights exercised in Poland or if the acquirer is resident in Poland and the transaction is concluded in Poland. Usually, it is accepted that bonds are exercised where the creditor (ie the seller) is resident, but bond documentation should be analyzed in this respect on a case-by-case basis.

The TCLT is calculated as 1% of the market value of the shares/stocks/bonds. The tax is to be paid by the acquirer.

The following sales are exempt from TCLT:

• sales to investment companies and foreign investment companies;
• sales via investment companies or foreign investment companies (eg brokerage houses);
• sales as part of an organized trading; and
• sales outside organized trading by investment companies and foreign investment companies, if those rights were acquired by those companies under organized trading.

No stamp, registration, transfer or other similar taxes payable are payable on the issue of bonds.

On the enforcement of security, do tax authorities take priority over secured lenders or secured debt security holders (eg secured bond holders)?

There is no general rule of priority entitling the tax authorities to take priority over secured lenders or secured debt security holders during enforcement proceedings. Any priority is determined on the basis of general rules provided by law. For example, in the case of a compulsory mortgage established in favor of the State Treasury and a mortgage securing the rights of secured bond holders, it is the relative position of the mortgages which determines which mortgage is executed in the first place and therefore takes priority. If the mortgage securing the bonds was determined as the mortgage with first position, then this mortgage will be treated as executed before the compulsory mortgage of the State Treasury and will take priority.

Notwithstanding the above, in the case of bankruptcy of a debtor, the law distinguishes certain categories of liabilities that should be paid by the bankrupt entity in a given order. In this respect, liabilities owed to tax authorities may be privileged – that is they are paid just after liabilities owed to employees and before liabilities owed to other unsecured creditors.

Is there withholding tax on interest payments under a loan?

In principle interest paid under a loan to an entity which is not resident in Poland is subject to withholding tax.

Payments of interest to entities resident in Poland (but not individuals) are not subject to withholding tax.

If so:
What is the rate of withholding?

The general withholding tax rate on interest paid to entities which are not resident in Poland is 20%.

What are the key exemptions?

Interest payments to entities not resident in Poland may be exempt from withholding tax under the EU Interest and Royalties Directive as implemented under Polish law, provided that certain conditions are met. The withholding tax rate may be also reduced or eliminated based on relevant double tax treaty (DTT) concluded between Poland and the recipient’s country of residence under certain conditions. Under most DTTs the withholding tax rate is limited to 10% or 5%. Some DTTs provide for a 0% withholding tax rate. Moreover, a number of DTTs provide for exemption applicable to interest payable to banks.

However, the Polish withholding tax (WHT) regime has been substantially amended with the 2019 corporate income tax reform. Under the new rules, WHT becomes obligatory for certain cross-border payments (including interest). Even when a lower rate or an exemption is available, for example under a bilateral tax treaty entered into by Poland, the WHT has to be withheld in full by the withholding agent based on Polish domestic law and remitted to the relevant tax authority. The tax authority may provide a refund after it has verified the right of the non-resident taxpayer to benefit from a reduced rate or an exemption. There are also alternative procedures which may allow to mitigate WHT (a description of these procedures can be found here).

In principle, the changes affect cross-border payments exceeding PLN2 million annually paid to a non-resident taxpayer.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes, the comments outlined above are applicable to interest payments under a debt security (like bond). However, with respect to new obligatory WHT, such WHT regime is excluded in case of receivables received by non-residents due to interest or discount on bonds issued by the State Treasury/BGK and offered on foreign markets

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.