Michał Gosek

Tax adviser (Poland)
Associate Partner
Phone: +48 61 624 49 39

In its ruling dated 20/08/2015 (II FSK 1551/13) the Supreme Administrative Court ("SAC") held that for the exemption of components manufactured in a Special Economic Zone in Poland (SEZ) it does not matter that those products have been leased outside the SEZ. This judgement is especially important because the tax authorities often try to charge CIT on the revenue gained from sales of goods manufactured in a SEZ which are outside the SEZ at the moment of sale or are sold via a trade department working outside the SEZ. We are of the opinion that the standpoint of the tax authorities has no legal basis. 

In the case at issue the taxable person manufacturing components for combine harvesters and leasing them decided to sell them  assuming that if they were manufactured in the Special Economic Zone after the required permit had been granted, they should be subject to exemption from CIT pursuant to Article 17(1)(34) CIT Act.

The tax authority issuing the advanced tax ruling as well as the PAC came to the conclusion that revenues from the sale of components which were previously leased does not constitute income from business activity in a SEZ. Moreover, justifying its standpoint, the court of first instance stated that the income from the sale should have been classified as trading and not manufacturing activities. And, as the trading activities are performed outside the SEZ and the components were outside the SEZ upon being sold, the taxable person's income should be taxed as earned outside the SEZ. 

Nevertheless, the SAC concurred that the taxable person could enjoy the tax exemption because the components had been manufactured in the SEZ, and it was irrelevant that the goods were at the lessor outside the SEZ at the moment of sale.

The reasonable approach of the SAC is also to be welcomed: the Court found the separation of the sale of zone products from the manufacturing activities to be wrong, because the manufacturing activities alone do not generate any income. The sale of goods is, therefore, an imminent part of business process and without it there is no possibility to reach the basic purpose of business activity, namely to generate income.  

The approach taken in the SAC's judgement was also presented in its judgement of 22/05/2015 (II FSK 1140/13) in which the Court underlined that the lawmakers surely did not aim to press enterprises to bring together all elements of their activity (including especially the trade department) in the SEZ. Therefore, the place where contracts are concluded with the customers cannot be decisive when it comes to classifying the earned income as taxable or tax-exempt.  

In our opinion, the SAC's judgements prove that the Court has taken a reasonable approach and give hope to many enterprises which were often forced to restructure their business at high costs to meet the requirements of the tax authorities which, like in the cases considered above, had no legal basis. In this context, we recommend re-analysing the taxation of the sales of goods manufactures in Special Economic Zones. 

In case of further questions, please do not hesitate to contact us. Our tax advisers working for Rödl & Partner offices in Gdansk, Gliwice, Cracow, Poznan, Warsaw and Wroclaw will gladly review your tax documentation related to your investment in the Special Economic Zones in Poland and propose a solution allowing minimising your tax risks. We are also at your service to answer any other questions you may have with respect to tax advisory services in Poland. Our offices offer legal support with conducting business within a SEZ and with legal advisory services in Poland in any other aspects of your operations.