This article will answer the following questions:

• Can the tax authorities give binding information on the classification of the taxpayer’s business activity as included in the Polish Classification of Goods and Services (PKWiU)?
• What is worth knowing when applying to the Head of the National Revenue Administration Information Centre for a tax ruling concerning the proper tax rate?

On 26 January 2024, the Supreme Administrative Court issued a judgment (file no. II FSK 487/23), which is beneficial for taxpayers, holding that taxpayers who apply for a tax ruling do not have to provide the Polish Classification of Goods and Services (PKWiU) code if they file a request with the tax authorities to determine the proper rate of lump-sum tax on recorded revenue.

Before moving on to describing to what extent the judgment of the Supreme Administrative Court has an impact on the relations between the tax authorities and taxpayers and on the tax ruling application process, the origin of the dispute will be presented.

A woman being a sole trader made an inquiry to the Head of the National Revenue Administration  Information Centre about the tax rate which she should apply to the revenues generated from her business activity. Besides being a sole trader, the woman was a partner in a general partnership and a limited partner in a limited partnership. She was also a member of the board in a limited liability company. The said LLC was the sole general partner in the above-mentioned limited partnership.

The taxpayer decided to apply lump-sum tax on recorded revenue to all her generated revenue. In her opinion, the proper tax rate should be 8.5%. 

Wrong interpretation of the tax authorities to leave the application for a tax ruling without consideration

The Head of the National Revenue Administration Information Centre summoned the taxpayer to provide more details with regard to the factual status, more specifically to indicate the PKWiU codes for the services provided as part of her business activity.

Eventually, the application was left unconsidered. The authority stated that the Act on Lump-Sum Tax on Certain Revenues Generated by Natural Persons refers, in certain cases, to the Polish Classification of Goods and Services. The Head of the National Revenue Administration Centre concluded that it is the taxpayer’s obligation to assign the right codes to the services with no possibility to obtain binding information on the classification from the authority. The taxpayer objected to this interpretation.

Standpoint of the Supreme Administrative Court

The Provincial Administrative Court in Poznań was the first one that took the taxpayer’s side. In its judgment of 30 November 2022 (file no. I SA/Po 639/22), the court ruled that the tax authority had wrongfully summoned the taxpayer to indicate the PKWiU codes for the services defined in the application. However, the authority did not give up and decided to appeal the judgment to the Supreme Administrative Court.

The latter upheld the judgment of the lower court ruling that the tax authority, in light of the factual status presented by the party, had not been in the position to demand that the taxpayer should supplement the application with providing the PKWiU codes for the services provided by her as part of her business activity.

The court pointed out that the assignment of proper PKWiU codes to individual services may in particular not be deemed to constitute an element of the factual status, which a person applying to the tax authorities for a tax ruling is obliged to present.

The judgment is very important for taxpayers applying for a tax ruling concerning the proper lump-sum tax rate

In line with the right interpretation of the provisions of the Act on Lump-Sum Tax on Certain Revenues Generated by Natural Persons, the classification of a given activity as a service taxable with a specific rate may not depend on the explanations (or opinion) of the Statistical Office.

When resolving a tax ruling issue, it is crucial to consider the kind of services rendered by the taxpayer, i.e. whether those are the services listed in Article 12(1)(2) of the Act on Lump-Sum Tax on Certain Revenues Generated by Natural Persons (with PKWiU codes assigned) or whether they fall under service provision activity in general.

In the matter in question, it was irrelevant that the taxpayer had already applied to the Chief Statistical Office for making the classification but had not received a reply until the day of answering the authority’s summons to supplement her application.

Summoning taxpayers to provide PKWiU codes by themselves, and in the absence thereof, leaving applications unconsidered is an unacceptable practice. Fortunately for taxpayers, the decisions of tax authorities may be reviewed by administrative courts, which, as this case shows, protect entrepreneurs from illegitimate actions.