Poland Exempts Cryptocurrencies From The Tax On Civil Law Transactions

In addition to solutions that are intended to rescue Polish entrepreneurs, the legislator under the so-called shield 2.0 introduced a change to the Act on the tax on civil law transactions ("PCC"), which will exclude crypto currency from this act.

The above change will enter into force on July 1, 2020, after the regulation of the Minister of Finance ceases to apply. In Poland, since July 13, 2018, an ordinance of the Minister of Finance on discontinuing the collection of PCC from a contract of sale or conversion of a virtual currency has been in force. Due to the lack of introduction of statutory solutions, the Ministry of Finance changed the ordinance twice and postponed the deadline to June 30, 2020. On the following day, on July 1, 2020, the amendment to the Act on PCC will come into force, which definitely determines that digital currencies will not be taxed on PCC.

Why did the Ministry of Finance introduce the ordinance regarding the cessation of PCC, and now the legislator introduced a provision that will definitely exclude digital currencies from the PCC Act?

According to the judgment of the Supreme Administrative Court, reference number II FSK 488/16 of 6 March 2018, virtual currencies should have been treated as property rights, to which the provisions of the PCC Act apply.

The judgment of the Supreme Administrative Court obliged persons who trade cryptocurrencies to pay one percent tax on the value of each transaction (investors sometimes carry out hundreds of operations a day) and submit a declaration to the tax office.

What about people who purchased crypto currency before July 13, 2018?

The Ministry of Finance has not decided to introduce a broader time frame to discontinue PCC collection from digital currencies, which means that people who concluded a sale or exchange contract before July 13, 2018 are required to submit a PCC-3 declaration and pay tax to the tax office. This position is confirmed, among others in the individual tax interpretation of November 4, 2019 issued by the Director of National Tax Information - 0111-KDIB4.4014.328.2019.1.ASZ.

What to do if we have not submitted the PCC-3 declaration and paid the tax on time?

The obligated person has 14 days from the day the payment obligation arises to pay PCC and submit the PCC-3 declaration. An exception to this rule are situations when the tax is collected from the payer - for example, when a notary public collects PCC in connection with the conclusion of a contract in the form of a notarial deed.

Failure to submit the PCC-3 declaration with the intention of reducing tax liabilities may be considered as a fiscal offense or criminal offense defined in the Penal Fiscal Code ("KKS").

A taxpayer can easily avoid proceedings before a tax prosecutor and discharge himself from liability with KKS. It is enough for the "late" declaration to be accompanied by a letter referred to as voluntary disclosure. The settlement of the tax liability and submission of the PCC-3 declaration along with voluntary disclosure will help to avoid a penalty to a person who has concluded a contract for the sale or exchange of a digital currency before July 13, 2018 and hasn’t complied with formalities.

Legal basis:

• ordinance of the Minister of Finance of 11 July 2018 on abandoning the collection of tax on civil law transactions from a contract of sale or conversion of a virtual currency (Journal of Laws 2018 item 1346, as amended),
• act of 16 April 2020 on specific support instruments in connection with the spread of the SARS-COV-2 virus,
• act of September 10, 1999 - Penal Fiscal Code.

Author Bio

Patryk Ryszewski is a legal counsel in Warsaw based startup company that operates in blockchain industry. He also runs a blog – NaGrunciePrawa (www.facebook.com/nagruncieprawa/) where, together with colleagues, they write about legal and tax issues that affect individuals and entrepreneurs in Poland.