Answer ... As from 1 January 2019, the Polish tax regulations have provided for the taxation of virtual currencies.
Corporate income tax: Article 7b, Section 1, point 6, letter f of the Corporate Income Tax Act states that revenues from the exchange of virtual currency for legal tender, goods, services or property rights other than the virtual currency, or from the payment of other liabilities with the virtual currency, shall be considered revenues from capital gains.
In the case of taxpayers whose activities involve the exchange or intermediation of virtual currencies (as referenced in Article 2, paragraph 1, subparagraph 12 of the Anti-Money Laundering and Counter-Terrorism Financing Act (‘AML Act’)), the revenues referred to in paragraph 1, subparagraph 6, letter f will be included in the revenues other than revenues from capital gains.
At the same time, according to Article 12, Section 4, point 27 of the Corporate Income Tax Act, the value of virtual currency obtained in exchange for other virtual currency shall not be considered as revenue.
Under Article 15, Section 11 of the Corporate Income Tax Act, the revenue earning costs referred to in Article 7b, Section 1, point 6, letter f of the act constitute documented expenses incurred directly for the acquisition of virtual currencies and costs relating to the transfer of virtual currencies, including documented expenses incurred for the benefit of the subjects referred to in Article 2, paragraph 1, subparagraph 12 of the AML Act – that is, entities carrying out business activities involving:
- exchange between virtual currencies and means of payment;
- exchange between virtual currencies;
- intermediation in the exchange referred to the points above; or
- retention of the accounts referred to in paragraph 2, subparagraph 17, letter e.
These revenue earning costs will be deducted only in the tax year in which they were incurred; Article 12, Section 13 of the Corporate Income Tax states that any surplus of revenue earning costs referred to in paragraph 11 over the revenues earned in a tax year will increase the revenue earning costs incurred in the following tax year.
As in the case of revenues, expenses incurred in relation to the exchange of virtual currency for another virtual currency will not be considered as revenue earning costs (Article 16, Section 1, point 75 of the Corporate Income Tax Act).
According to Article 22d, Section 1 of the Corporate Income Tax Act, income from the transfer of virtual currencies against consideration shall be taxable at a rate of 19%.
Income from the transfer against consideration of virtual currencies will constitute the difference gained in a given tax year between the total revenues referred to in Article 7b, paragraph 1, subparagraph 6, letter f and the revenue earning costs determined under Article 15, paragraphs 11 to 13.
The provisions of paragraph 1 will apply taking into account the double tax treaties to which Poland is a party. To avail of the preferential tax rate or tax exemption under a relevant double tax treaty, the location of the taxpayer’s seat for tax purposes must be documented by a certificate of residence obtained from the taxpayer.
Income from the transfer of virtual currencies against consideration may not be combined with other income of the taxpayer.
At the end of the tax year, the taxpayer must show, in the tax statement referred to in Article 27, paragraph 1 of the Corporate Income Tax Act, the income earned in that tax year from the transfer of virtual currencies against consideration and calculate the income tax due.
In the tax statement referred to in Article 5, the taxpayer must show the revenue earning costs referred to in Article 15, paragraphs 11 to 13 – including where, in a given tax year, the taxpayer earned no revenues from the transfer of virtual currencies against consideration.
Personal income tax: According to Article 17, Section 1, point 11 of the Personal Income Tax Act, revenues from the transfer of virtual currency against consideration are considered revenues from money capital. The transfer of virtual currency against consideration is understood as the exchange of virtual currency for legal tender, goods, services or property right other than the virtual currency or payment of other liabilities with the virtual currency (Article 17, Section 1f of the Personal Income Tax Act).
These provisions will also apply to revenues obtained through the economic activity pursued, with the exception of activity referred to in Article 2, paragraph 1, subparagraph 12 of the AML Act; in this case, the revenues earned will be included in the revenues from non-agricultural economic activity.
As in the case of corporate income tax, revenue earning costs incurred in the transfer of virtual currency against consideration will constitute documented expenses incurred directly for the acquisition of virtual currency and costs relating to the transfer of virtual currency, including documented expenses incurred for the benefit of the subjects referred to in Article 2, paragraph 1, subparagraph 12 of the AML Act (Article 22, Section 14 of the Personal Income Tax Act).
Once again, the revenue earning costs referred to in paragraph 14 will be deducted only in the tax year during which they were incurred; Article 22, Section 16 of the Personal Income Tax Act states that any surplus of such revenue earning costs over the revenues from transfer against consideration of virtual currency that are earned in a tax year will increase the revenue earning costs on account of transfer against consideration of virtual currency incurred in the following tax year.
As in the case of corporate income tax, expenses incurred in relation to the exchange of virtual currency for another virtual currency will not be considered revenue earning costs (Article 23, Section 1, point 38d of the Personal Income Tax Act).
Income from the transfer against consideration of virtual currencies is the difference gained in a given tax year between the total revenues earned from the transfer of virtual currencies against consideration and the revenue earning costs determined under Article 22, paragraphs 14 to 16 of the Personal Income Tax Act. This income will be subject to tax at a rate of 19%.
Income from the transfer of virtual currencies against consideration must not be combined with other taxable income. In addition, where a Polish tax resident earns income from the transfer of virtual currency against consideration both within and outside the territory of Poland, that income will be combined and the amount equal to the income tax paid in a foreign state will be deducted from the tax calculated for the total income. However, this deduction may not exceed that part of the tax calculated before the deduction and proportionally corresponding to the income earned in a foreign state. The same rules apply where a Polish tax resident earns income from the transfer of virtual currency against consideration exclusively outside the territory of Poland.
At the end of the tax year, the taxpayer must include in his or her tax statement the income earned in that year from the transfer against consideration of virtual currencies and calculate the income tax due.
Tax on civil law transactions: Before 1 July 2020, the most controversial topic in relation to virtual currencies concerned the tax on civil law transactions. Previously, in the opinion of the tax authorities and the Polish Ministry of Finance, trading in virtual currencies was subject to this tax as:
- a sale of property rights (where cryptocurrency units were sold in exchange for cash); or
- a change of rights (where units of cryptocurrency were sold in exchange for another cryptocurrency).
This position was controversial, because the tax base was:
- in case of the sale of virtual currencies, the market value of the virtual currencies sold; and
- in case of the exchange of virtual currencies, the market value of the virtual currency which was liable to the higher tax.
The tax – at a rate of 1% of the tax base – was borne by:
- the buyer, in case of the sale of virtual currencies; or
- both parties to the agreement, in case of the exchange of virtual currencies.
Thu, as the tax on civil law transactions is payable on each transaction, taxpayers carrying out many transactions involving the purchase and sale of virtual currencies units each day had to pay tax multiple times on the full market value of the virtual currencies obtained.
Due to this controversy, the Polish Ministry of Finance decided to temporarily cease collecting tax on civil law transactions against this type of instrument. This solution was introduced by the Regulation of the Minister of Finance of 11 July 2018 on the withdrawal of tax on civil law transactions on the contract of sale or conversion of virtual currencies, which entered into force on 13 July 2018.
The Polish legislature then decided to resolve this issue from 1 July 2020. On that date, Article 9, point 1a was introduced to the Tax on Civil Law Transactions Act of 9 September 2000 (Journal of Laws of 2020, Item 815), pursuant to which the sale and exchange of virtual currencies, as understood under Article 2, paragraph 2, subparagraph 26 of the AML Act, are exempt from tax.
Value added tax: From the point of view of the Goods and Services Tax Act of 11 March 2004 (Journal of Laws of 2020, Item 106, as amended) (‘VAT Act’), trading in virtual currencies will be considered as the provision of services.
The issue of the taxation of cryptocurrency trading on the basis of VAT was resolved at the European level by the Court of Justice of the European Union (CJEU) in its judgment of 22 October 2015 in Case C-264/14 (Skatteverket v David Hedqvist), in which the CJEU found that the provision of services involving the exchange of cryptocurrencies into traditional currencies and the exchange of traditional currencies into cryptocurrencies should be subject to the exemption set out in Article 135, Section 1, letter e of the EU VAT Directive (2006/112), implemented in Article 43, Section 1, point 7 of the Polish VAT Act.
Thus, in Poland, trading in virtual currencies remains exempt from VAT. Where virtual currencies are sold to a taxpayer established in a territory outside the European Union (export of services), the trade will not be subject to VAT in Poland, while the taxpayer retains the right to input a VAT deduction (Article 86, Section 9 of the VAT Act).