The option to use a copy of a certificte of residence will not be available for everyone

On October 26, 2018, the Senate adopted draft amendments to the income tax regulations. One of these amendments provides for the possibility of using a copy of a certificate of residence in order to confirm the place of residence for tax purposes. It turns out, however, that only a few people will actually be entitled to use a copy of their certificate.

Certificte of residence

According to the PIT and CIT laws, the certificate of residence is a certification of the place of residence (the registered seat) of the taxpayer, which is issued by the competent state tax administration authority. However, the regulations do not specify the form that such certificate should take. It can be very difficult to determine which of the documents is considered official for the purpose of entitling the taxpayer to apply a tax rate or not to collect tax in accordance with the relevant agreement on avoidance of double taxation.

To date, the tax authorities accepted only the original of the certificate of residence, or an official copy. An official copy means one which has been certified by a notary in Poland or a legal representative of the entity, i.e.: a lawyer, a legal counsel or a tax advisor. In some cases, the certificate of residence was also accepted in electronic form, but only in the cases that the relevant country did not issue the original in paper form.

The amendment of the regulations in this respect is a response to the arguments of taxpayers, who pointed out that in the case of some receivables (especially those for lower amounts) it is impossible or economically unreasonable to obtain the original. The fact that the authorities would not accept a copy of the certificate was hindering taxpayers, as foreign contractors found it unacceptable that the amounts paid to them were reduced by the amount of tax.

Who has the right to use a copy of the certificate of residency?

Taking into account the regulations that existed to date, the possibility of using a copy of the certificate seems to be a favorable solution for payers. However, according to the amendment, in the case of revenues referred to in art. 21 par. 1.2a of the CIT Act, in order to be able to use a copy, the value of payments to a non-resident may not exceed PLN 10,000 for a given taxpayer during the calendar year.

Taxpayers who want to exercise this right have to fulfill two more conditions. First of all, the information presented on the copy of the certificate should not raise any doubts as to the actual status. Secondly, the collection of withholding tax must concern services provided from the following services: advisory services, bookkeeping, market research, legal services, advertising services, management and control, data processing, recruitment services, guarantees and sureties, and similar services.

Undoubtedly, the amendment of the regulations regarding the use of copies of certificates of residence, is a step in the right direction. However, the very low payment limit specified and the fact that the changes will apply only to certain intangible services, mean that few taxpayers will be able to benefit from the changes.