Principles for resolving linguistic discrepancies in the interpretation of double taxation agreements.
On 28 October 2024, the Supreme Administrative Court issued an important resolution regarding the interpretation of tax legislation in Poland. In the resolution I FPS 1/24, it clarified the principles concerning the resolution of linguistic discrepancies within the framework of double taxation treaties concluded by Poland.
What does the resolution address?
This is a situation where, as a result of a mistranslation of an international double tax treaty, its Polish version reads differently from the conclusive version (most often the English version).
On the one hand, the treaty explicitly indicates the foreign-language version (most often the English version) as being conclusive. On the other hand, the rule is that ‘international agreements concluded by the Republic of Poland should have the Polish language version as the basis for interpretation, unless specific provisions provide otherwise’. This follows from Article 6 of the Polish Language Act.
The resolution was passed against the background of the Polish-Swedish agreement on the avoidance of double taxation.
In accordance with the provisions of Article 30 of the Polish-Swedish agreement, in the event of ambiguity, it is the English version that takes precedence over any amendments to the Polish translation. Against the background of the application of the provision indicated, an important interpretative doubt has emerged over time concerning directly the content of Article 11(1) of the agreement.
It follows from the resolution that, in the event of a divergence, the version which the States have indicated between themselves as the conclusive version should be followed. Against the background of the case at hand, the English language version of the double taxation agreement was conclusive.
Importance of the resolution
The resolution was made against the background of the Polish-Swedish agreement, but the position of the of the Supreme Administrative Court is not only relevant to this particular double taxation treaty. The NSA’s ruling is relevant, inter alia, for the withholding taxation of royalties paid abroad, dividends, interest. The NSA resolution emphasises the importance of diligence in the translation of international tax treaties and the key role played by the content of the treaty in the version deemed binding by the parties to the treaty (most often the English version). The NSA’s resolution also means that other double tax treaties that contain similar clauses may also require Polish taxpayers to look closely at the foreign-language versions of the provisions.
