RSM Poland


Withholding tax on software

Withholding tax on software - conclusions of judgements of the Supreme Administrative Court 


We would like to draw your attention to two judgements of the Supreme Administrative Court (SAC) of 4 December 2015 (file no. II FSK 2789/13 and II FSK 2544/13) concerning the issue of withholding tax on royalties for the use of software rights. In the said judgements, the Supreme Administrative Court stated that if in a given treaty for the avoidance of double taxation on income and on capital (hereinafter: DTT) the software has not been clearly included in the definition of royalties, it shall not be artificially included in that definition by recognising that in such case it is a work subject to copyright. In the issued rulings the Supreme Administrative Court emphasised that they remain consistent with the existing uniform jurisprudence of the SAC.

Let us recall what the dispute of taxpayers with tax authorities was about

It should be emphasised that the income categories under the provisions of the DTT recognised as royalties have a different scope than the catalogue of revenues referred to as royalties included in both income tax acts. Through the prism of the provisions of the DTT, software can be divided into three categories depending on its purpose (the nature of rights that the customer acquires under the concluded treaty):

  • software used only for the internal purposes of the customer (end user type licence) – this category is clearly indicated in the Commentary to the OECD Model Convention (hereinafter: Commentary) as excluded from the scope of the concept of royalties;
  • software purchased for resale (sales brokerage without the right to sublicense) - according to the Commentary, in this respect we are also not dealing with royalties as, under such transactions, the rights acquired in relation to copyrights are limited only to the rights necessary for the broker that enable the distribution of the software copies;
  • software purchased for sub-licensing (the buyer acquires the right to reproduce, modify the purchased software or to make it available to third parties) - in relation to this category controversy has aroused in the context of the treaties that failed to mention directly software in the definition of royalties. In such cases, tax authorities were in favour of including the software in the definition of royalties, ascertaining that it is the subject of copyright and it shall be treated as a work for the purposes of the aforementioned treaties.

The said judgements are of utmost importance for the last of the aforementioned categories, i.e. software purchased for sub-licensing.

Establishment of the SAC jurisprudence favourable for taxpayers

Although the said rulings concern the treaty between the Republic of Poland and the Federal Republic of Germany for the avoidance of double taxation on income and on capital, they constitute an important interpretative guidance during the analysis of the provisions on royalties with similar wording, regulated in other DTTs concluded by Poland. This will apply to treaties that fail to explicitly mention royalties on software or fail to define royalties in a broad manner, e.g. as receivables obtained in connection with the use of or the right to use each copyright. Examples of DTTs to which the interpretative guidelines from the above judgements of the SAC may be applied directly are the treaties concluded between Poland and Austria, Denmark, the Netherlands, the UK, the USA, China and South Korea.

To sum up, based on the treaties for the avoidance of double taxation, with respect to income from the provision of software with the right to sub-license, there may be two cases:

Case 1

The definition of royalties included in the DTT clearly includes also software, e.g. the DTT with Portugal. This means that the Polish entity paying the receivables thereunder shall have the obligations of the payer, in particular the obligation to levy the withholding tax at the rate of the withholding tax provided for in a given DTT, e.g. 10%.

Case 2

The definition of royalties included in the DTT does not include software. In such case, the Polish payer is not obliged to levy the withholding tax on royalties. This is the case that the said judgements apply to.

In conclusion, it is worth noting that the application of the provisions of treaties for the avoidance of double taxation on income and on capital is possible, provided that the payer holds the tax residency certificate of the contractor (the foreign taxpayer).


If interested, do not hesitate to contact our expert Tomasz BEGER:


tel. +48 61 8515 766

fax +48 61 8515 786