The Director of National Revenue Information (“Authority”) issued a tax ruling on 22 May 2024 (ref. 0115-KDIT1.4011.322.2024.2.MR) in which he reiterated that the safe harbour provided under Article 23s of the Personal Income Tax Act (“PITA”) and Article 11g of the Corporate Income Tax Act is available only for variable rate loans.

The ruling was sought by an individual holding 50% of the share capital of a Polish-based limited liability company. The applicant wished to extend a loan to this company using the safe harbour provisions in Article 23s PITA.

The applicant’s intended loan was supposed to meet all the conditions qualifying it for the safe harbour, namely:

  • the loan term would be 5 years;
  • the interest rate would be three-month WIBOR plus a margin of between 2.2% and 3.1%;
  • the total principal amount of intercompany loans repayable to (for loans granted) or by (for loans received) the company would be no more than PLN 20 million (or equivalent in other currency) in a tax year;
  • the lender (applicant) does not reside in a tax haven.

According to the applicant, the loan interest would be charged at a fixed rate to be established at the contract date in accordance with the above-mentioned rules.

The Authority held that the loan does not qualify for the safe harbour because the applicant wishes it to have a fixed interest rate.

According to the Authority, the safe harbour provisions prescribe that interest rate must be determined on the basis of the base rate and margin resulting from the relevant official notice. The language of the law is not that the interest rate is one “corresponding to a base rate increased by a margin announced in the notice”. Instead, the relevant provision expressly mentions that interest rate is to be defined on a variable rate basis. Accordingly, the safe harbour for loans (and, by extension, for bank credit facilities and bonds) applies only to variable rate instruments.

If this issue pertains to your business and you are interested in our assistance, please contact us.

This blog post is provided for general information purposes to keep you up-to-date with changes in tax law, tax rulings by authorities, case law of courts and interesting commentaries. Doradztwo Podatkowe WTS&SAJA shall not be held legally liable for any acts or omissions resulting from reliance on such information.