Articles & Publications
HomePage 4

Taxation of dividends paid by a Polish company to non-Polish individuals. Warsaw, September 6, 2022

According to Polish tax law, there is a general rule that a flat-rate tax of 19% is charged on income paid in the form of dividends.  If a dividend is paid by a Polish company, it withholds tax on that dividend.

The company then transfers the tax withheld to a relevant tax office.  Failure to do so (e.g., failure to withhold tax and/or transfer the correct amount of tax to a tax office) may constitute a violation of fiscal criminal law and may be subject to fiscal criminal liability.  Fiscal criminal liability is borne by specific individuals responsible for the correct tax settlement, not the company itself.

The above standard tax rate (i.e., 19%) may be reduced depending on how this matter is regulated by a double taxation avoidance agreement concluded between Poland and the country of the dividend recipient.

The application for the reduced tax rate resulting from the double taxation agreement is possible providing that the place of residence of the dividend recipient is properly documented with a certificate of his tax residence.  Therefore, one should make sure that the certificate of tax residence meets the conditions set out by the law in order not to be exposed to the aforementioned criminal liability.

For example, according to the OECD Model Tax Convention (a model for countries concluding bilateral tax conventions), dividends paid by a company established in Poland to a resident of a foreign country may be taxed in Poland.  However, the tax charged may not exceed 15% of the gross amount of the dividend.  If the Polish company does not receive a tax residence certificate from the shareholder (i.e., the dividend recipient) or the certificate does not meet certain formal conditions, then the Polish company will not be entitled to apply the reduced tax rate resulting from the relevant double taxation agreement.

Moreover, the fact that the dividend paid (by a Polish company to a resident of another country) will be taxed in Poland does not mean that such a dividend cannot be taxed in that other country, as well. The provisions of most double taxation agreements explicitly stipulate that dividends may be taxed in both countries. On the other hand, if the dividend could be exempt from taxation in that other country (as long as the internal regulations of that other country allow such exemption), it will not result in the dividend not being taxed in Poland.

In other words, foreign rules will not apply in Poland.  A Polish company paying dividends will have to apply Polish tax regulations and will not be able to apply tax regulations of another country.  On the other hand, the recipient of the dividend (i.e., a foreign tax resident) will most likely have to make his tax settlements according to the tax regulations of his/her country of tax residence, taking into account the tax paid (withheld) in Poland.

Therefore, it should be examined if another country has the analogous rules as Poland with regard to dividends received by Polish residents from abroad.  According to Polish regulations, if a Polish tax resident receives a dividend from abroad, his/her income is taxed with 19% Polish tax on dividends.  However, from this calculated amount, he can deduct (provided certain conditions are met) the tax paid abroad (e.g., withheld by a foreign company) but still no more than 19%.  Any difference created in this way is subject to payment to a Polish tax office.  The shareholder (Polish resident) shows both the income and the amounts of Polish and foreign taxes in his annual tax return.

It is worth pointing out that the above general principles may be subject to certain modifications depending, inter alia, on the rules on which a Polish company is taxed. Other circumstances concerning the foreign resident’s relation with Poland or the nature of his ties with Poland may also be relevant.

Bernard Łukomski
attorney-at-law
tax advisor
phone +48 608 093 541

The Polish Deal 2.0: Amendment of corporate income tax

A draft amendment to the CIT Law has recently been published, which is a modification of the regulations which became effective in January 2022. Below we present the most important aspects of the planned changes to the Polish Deal.

Modification and postponement of the entry into force of the minimum income tax rules

The proposed amendments provide that the minimum income tax rules will be suspended for one year (i.e. from 1 January 2022 to 31 December 2022). They would consequently only start to be applied from 2023. In addition, the legislator foresees changes in the construction of the tax itself, in particular:

  1. The profitability index will be increased from 1% to 2% and at the same time the methodology for its calculation will be changed. The following will not be taken into account:
  • Tax deductible costs being the payment under a fixed asset lease agreement
  • Revenues being the value of trade receivables sold to entities in the factoring industry, and
  • Excise duty
  • The calculation of the minimum income tax will change. Currently, the levy is 10% of an amount equivalent to 4% of the value of income other than capital gains and passive expenses (concerning i.e. debt financing and intangible services). The draft does not change the tax rate which is still 10%; however, there will be two alternative methods from which the taxpayer can choose the more favourable one. The basis, depending on the taxpayer’s preference, will be either 4% of the value of revenues or 2% of revenues plus passive costs.
  • Among others, municipal companies, medical entities, small taxpayers, entities in bankruptcy or liquidation and those whose profitability in one of the last 3 tax years was above 2% will not be subject to minimum CIT at all.

Amendment of the regulations on controlled foreign entities/company (CFC)

The modifications to the CFC are based on 3 pillars:

  • Eliminating double or multiple taxation of CFC when cascading dividends in holding structures
  • Clarification of the rationale for the high profitability of a foreign entity relative to the assets held in case of potential disposal of assets during the year
  • Clarification of the definition of a subsidiary.

Amendments to the rules on taxation of flipped income

The aim of the proposed solutions is to eliminate the doubts raised by the business community by i.e.:

  • To include in the scope of the tax on flipped income only costs that are deductible
  • Clarification that the related entity for which the costs are incurred does not have its registered office or central administration in the territory of the Republic of Poland
  • Clarification of the condition concerning 50% of the revenue generated by a related entity and the condition concerning the transfer of revenue to another entity (at least 10%)
  • Simplification of the condition relating to preferential taxation in the country of residence, management, registration or location of the related party.

Changes to withholding tax (WHT)

The new rules aim to ease the WHT mechanism in force from 1 January 2019 by:

  • Exclusion of the application of certain obligations of broadly understood payers with regard to withholding tax on interest and discount on treasury securities (treasury bills and treasury bonds) by extending the material scope of the non-resident taxpayer exemption from income tax to include also treasury bills and bonds offered in the domestic market
  • In addition, the validity of a declaration by the board of directors that, in the exercise of due diligence, the payer was not aware of circumstances preventing the application of a lower withholding tax rate or tax exemption (provided for in an international double tax treaty) is to be extended.

Amendment of the rules on debt financing costs

As regards tax treatment of debt financing costs, the Ministry intends to eliminate interpretation doubts reported by taxpayers. This includes a clear indication that the amount of PLN 3 million or 30% of EBITDA – whichever is higher – will be excluded from tax costs. In addition, the provisions on debt financing costs will not apply:

  • Where the financier of the equity transaction is a bank or cooperative savings and credit union established in an EU or EEA country
  • In the case of debt financing granted to acquire or take up shares or all rights and obligations in entities unrelated to the taxpayer.

Modifications to the Polish holding company (PSH)

The changes are also to apply to holding companies – a new institution, effective from 2022:

  • The right to exempt 100%, and not as at present 95%, of the dividend income received from subsidiaries. In parallel, the holding company will be able to take advantage of the dividend exemption under EU Directive 2011/96/EU (Parent Subsidiary Directive) – this is not currently possible
  • It will be possible to benefit from both types of preferences
  • Introduction of a new definition of domestic subsidiary and foreign subsidiary

The aim of all these changes is to allow more entities than before to benefit from holding exemptions.

Amendments to the rules on flat-rate taxation of company profits

Changes are also envisaged in the provisions on flat-rate corporate income, commonly known as Estonian CIT. The legislator plans to:

  • Introduce modifications to the way income from non-business expenses is determined when assets (e.g. cars) are used for business and other non-business purposes
  • Clarify the condition for extinguishing a tax liability for a preliminary adjustment, i.e. a temporary difference between tax and accounting results, Once the changes have been implemented, it will be clear that the obligation will lapse in full after at least one full flat tax period, i.e. four tax years
  • Modify the deadline for payment of the tax due on the income from the transformation (unambiguous indication that if the tax on the income from the transformation is paid in full, the taxpayer is obliged to pay the tax by the deadline for submission of the CIT-8 return for the tax year preceding the first year of flat-rate taxation)
  • Modify the deadline for the payment of a flat rate on distributed profit income and income from profit to cover losses (also applies to advances on anticipated dividends) and a flat rate on distributed net profit income.

Amendment of the rule on the procedure for the refund of tax on income from buildings

From June 2022, commercial property owners will pay building revenue tax again. This is a result of the abolition of the epidemic status from 16 May 2022.

The procedure for refunding tax on income from buildings will be changed. The legislator plans to specify that the tax will be refunded without the need for a decision when the amount of the refund is not in doubt.

Amendment of the rules on the documentation obligation in respect of “haven transactions”

The amendments are to address the rules on direct and indirect haven transactions:

  1. Elimination of presumption of residency of beneficial owner in tax haven
  2. New reporting limits for indirect tax haven transactions:
  3. PLN 2,500,000 – goods
  4. PLN 2,500,000 – financial
  5. PLN 500,000 – other (“basic threshold”)
  6. Further emphasis on the role of the statement as “sufficient to verify the documentation obligation”

Having regard to the above regulations, which are planned to be introduced by the Ministry of Finance, it should be unequivocally stated that taxpayers will have to face further radical changes, which will significantly affect business operations. For further information, please contact Bernard.

“Blame game” ends as no-fault divorce comes into force

In a move which will benefit many Britons and their children, new landmark divorce reforms were introduced in the UK on 6th April 2022. Aimed at reducing conflict between separating couples, the reforms have introduced the no-fault divorce to remove unnecessary conflict and to ease stress on couples and children.

As part of a wider action to improve the family justice system, the new Act has introduced a new minimum wait of 20 weeks between application and conditional order of divorce. This will offer time to reflect, and potentially turn back, or where reconciliation is not possible to agree important arrangements for the future.

We also see the simplification of the language of divorce to make it more understandable. This includes replacing the terms ‘decree nisi’, ‘decree absolute’ and ‘petitioner’, with ‘conditional order’, ‘final order’ and ‘applicant’.

Following the implementation of the Act the government has also committed to look into further the law around financial settlements after a divorce, such as the dividing of assets or maintenance payments.

The no-fault divorce is the biggest shake up in UK divorce law for more than 50 years, and ends completely the need for separating couples to apportion blame for the breakdown of their marriage, helping them to instead focus on key practical decisions involving children or their finances and look to the future.

Prior to this, one spouse was forced to make accusations about the other’s conduct, such as adultery or ‘unreasonable behaviour’, or face years of separation before a divorce could be granted, regardless of whether the couple had made a mutual decision to separate.

A spouse, or a couple jointly, can now apply for divorce by stating their marriage has broken down irretrievably. It removes unnecessary finger-pointing and ill feeling at a time where emotions are already running high, and spares children from witnessing their parents mudslinging.

Importantly, it stops one partner from vengefully contesting a divorce and keeping their spouse in an unhappy marriage. In some cases, domestic abusers can use their ability to challenge the process to further harm their victims or to trap them in the relationship. The reforms will put an end to this behaviour.

On this website, we have written various posts about divorce that you may find of interest. Please click on this link – Divorce posts.

Polski Ład (Polish Deal). Taxation of the general partner of a limited joint-stock partnership (S.K.A.) – basic aspects. Warsaw, January 24, 2022

If you are looking for a remedy or solution to Polski Ład , you may wish to consider a limited joint-stock partnership (S.K.A.).

A limited joint-stock partnership can be a very effective form of running a business post the introduction of the Polish Deal.

The advantages to the general partner in relation to the taxation of a limited joint-stock partnership are presented below:

– income tax in the amount of approximately 17.3%, if S.K.A. is a “small taxpayer” (for other companies, the taxation of the general partner will be 19%);

– profit paid to the general partner is not subject to the obligation to pay social security contributions;

– the profit paid to the general partner is not subject to the obligation to pay the health insurance premium (it is a derivative of the lack of obligation to pay social security contributions);

– the profit paid to the general partner is not subject to taxation, the so-called solidarity levy (4%);

– the possible payment of the management fee to the general partner (resulting directly from the partnership agreement).

In order to take advantage of the deduction of income tax (CIT) paid by S.K.A. from the general partner’s tax (PIT), the profit of such a company should be paid within five years (counting from the end of the tax year following the year in which the company’s profit was achieved).

For further information about this topic, please contact Bernard.

Bernard Łukomski
Attorney-at-law
Tax advisor
Tel: 608 093 541

VAT in relation to selling real estate plus the management of personal assets. Warsaw, September 2nd, 2021

Using a proxy to prepare a property for sale is equivalent to a business activity by the owner in the eyes of the tax authorities and is subject to VAT regulations. The position does not change, even if the buyer is the proxy. The authorities consider the seller of the property to be a VAT taxpayer even in the case of a one-off (occasional) transaction.

This position is enforced by the authorities (despite different assessments expressed by voivodeship administrative courts) even in the case of granting a power of attorney to the future buyer, who makes the purchase of a given property conditional on a change in its legal status and wants to take care of the relevant formalities himself.

During a recent case, the taxpayer defended himself by pointing out that the activities related to maintaining the status of the building plot and the request for exclusion from forest production were made at the express request of the buyer, who expected the property to comply with his requirements at the time of sale.

The property owner gave the buyer permission to perform the necessary activities on his behalf (conduct all formal and legal matters related to the entire process preceding the issuance of location decisions and building permits, apply to suppliers of all utilities to connect the planned investment to necessary networks, obtaining all decisions, resolutions, agreements and opinions in order to correctly connect the investment to the necessary utilities, etc.).

Despite this, the tax authorities found that in connection with the sale of the real estate, the owner of the real estate had become a VAT taxpayer for this one activity, which was the sale of the real estate. Thus, in the opinion of the tax authorities, the sale of real estate should have been subject to VAT.  The tax authorities also found that the owner’s activities went beyond the scope of private property management and should be considered as an economic activity in the field of real estate trading.

In the judgment of June 2021, the voivodeship administrative court did not agree with the authority’s assessment and recalled that economic activity within the meaning of the Value Added Tax Act is any activity of producers, traders or other service providers, also when the activity was performed on a one-off basis, but in circumstances indicating the intention to perform activities repeatedly.

In the opinion of the court, activities related to the ordinary exercise of the right of ownership cannot, by themselves, be regarded as conducting economic activity. The sheer number and scope of sales transactions made is not decisive, since the scope of the sales transactions cannot be used as a criterion for distinguishing between activities carried out privately which are outside the scope of the VAT directive and activities constituting an economic activity.

The situation is different when an owner takes active measures in the field of real estate trading and engages funds similar to those used by producers, traders and service providers. Such active activities may consist, for example, in preparation of the site for the installation of utilities or in marketing activities. Such activities do not fall within the scope of the day-to-day management of private property, therefore, in such a situation, the delivery of building land cannot be regarded as an activity related to the ordinary exercise of the ownership right.

According to the court, to recognise that a given person acts as a VAT taxpayer, it is necessary to establish that he or she carries out professionally, business activities in the field of real estate trading. Each time it requires checking whether a given transaction was carried out in connection with conducting business activity in this specific scope. It is not enough to state that a given person conducts economic activity at all. It must be an activity with a specific profile, because the performance of a given activity does not prejudge its taxation even on several occasions. The assumption that a given person, selling land, acts as a VAT taxpayer conducting commercial business activity, requires establishing that his activity in this field takes a professional (business) form, which is manifested in the activity of that person in the field of real estate transactions, which may indicate that his / her activities take an organized form.

When assessing the activities of the person selling the real estate, one should also take into account the activities at individual stages of the seller’s activity as a whole, and not only separately.

For these obvious reasons, in the opinion of the court, there were no grounds to recognize the seller’s activities as an economic activity within the meaning of the VAT Law.

Despite the clear and – it seems – convincing position expressed by the voivodeship administrative court, the tax authorities decided to bring a cassation appeal. This means that taxpayers selling real estate will soon be exposed to disputes with the tax authorities. At the same time, it will cause uncertainty on the real estate market and increase transaction risk.

Bernard Łukomski
Attorney-at-law
Tax advisor
Tel: 608 093 541

Fiscal offense and exclusion of punishment – art. 16a of the Tax penal code. Warsaw, September 10, 2021

On July 26, 2021, the Polish government presented a draft law introducing extensive changes to the tax and social security laws, which were the subject of public consultations conducted by the Ministry of Finance up until August 30, 2021. These changes were partially announced earlier this year and are referred to as the “Polish Deal”.

The latest draft of the Polish Deal provides for an amendment to Art. 16a of the Tax Penal Code, which enables the avoidance of criminal liability in relation to the defective filing of a tax return. The draft regulation will also release the persons responsible for submitting the books from liability.

According to the current wording of this provision, it only applies to the person who:

(1) has submitted a legally effective (within the meaning of the provisions of the Tax Ordinance or within the meaning of the provisions of the Act on the National Revenue Administration) correction of the tax declaration, and
(2) paid in full, immediately or within the time limit set by the authorized body, the tax depleted or subject to depletion.

However, in the case of tax returns relating to legal persons, it is difficult for the perpetrator (i.e. a natural person) to meet the requirement to “pay” a public debt (e.g. VAT payable by the company). After all, a board member, CFO, accountant, etc. cannot pay taxes from their own resources on behalf of the companies they manage. The proposed wording of Art. 16a of the Tax Penal Code provides only for the necessity to pay the amount due without demanding that the amount payable be paid by the perpetrator himself.

The draft provision stipulates that if, in connection with a prohibited act, there has been a reduction in taxes paid, avoidance of liability is possible only when the liability has been paid immediately, but not later than within the time limit set by the financial authority of the preparatory proceedings. In other words, it is necessary to pay the tax without awaiting any indications in this regard from the tax authorities. However, it is important that the amount paid is in the correct amount. Otherwise, it will not be possible to avoid criminal liability.

Moreover, the proposed provision of Art. 16a of the Tax Penal Code specifies who may take advantage of its benefits, indicating that it is the perpetrator of a prohibited act concerning:
(1) submitting a return or
(2) submitting the books.

The provision in the current wording defined the beneficiary of this regulation, indicating this person in a general way, by referring to actions (activities) that exculpate him, taken post factum.

What is very important, the proposed provision clarifies that the exemption from liability shall not apply if, prior to the submission of a correction to the declaration or book, preparatory proceedings for a fiscal offense were initiated, or a fiscal offense was revealed in the course of the pending preparatory proceedings.

Bernard Łukomski
attorney at law
tax advisor
tel. +48 608 093 541

UK Divorce laws overhaul will ‘end blame game’ for couples

Existing UK divorce laws mean spouses have to provide evidence for a divorce if one partner does not agree to it.

For the first time in 50 years, UK divorce laws are being overhauled in an attempt to end the “blame game” for couples trying to end their marriage.

Current laws in England and Wales dictate that unless someone can prove there was adultery, unreasonable behaviour or desertion, the only way to get divorced without a spouse’s agreement is to live apart (be separated) for five years.

The new laws state that one side will now only have to submit a “statement of irretrievable breakdown” to say the marriage has broken down; instead of having to provide evidence about length of separation or their spouse’s behaviour. In addition to this,the ability of one partner to contest a divorce will also be scrapped.

The existing two-stage process of a decree nisi, a document which says the court cannot see any reason why you cannot divorce, followed by a decree absolute, the legal document which ends a marriage, will remain the same; however, a six month minimum period will be introduced between the lodging of a petition to the divorce being made absolute.

Couples will also be able to make joint divorce applications, alongside the current option for one partner to start the process.

Similar changes will also be made to the law governing the dissolution of civil partnerships.

The overhaul follows a government consultation last year, when details of the proposals were first unveiled.

The Ministry of Justice said the new legislation is expected to be introduced as soon as parliamentary time allows.

The cost of divorce

The cost of divorce in the UK has soared by 17 per cent in the past three years, with divorcing and separating couples now typically spending £14,561 on legal and lifestyle costs, a new report by Aviva reveals.

On top of this, couples who move house as a result of the separation spend tens of thousands of pounds on moving house. Those who rent – which applies to more than half of divorcees – spend around £35,000, while those who go onto buy a new property (16%) spend £144,600 on average.

The report reveals soaring legal fees and the cost of redecorating homes, as well as moving house, are central to this rise.

Legal fees have more than doubled since 2014, up by 109% from £1,280 to £2,679, with any additional costs in child custody battles having also increased by 62%, from £3,500 to £5,671.

The cost of redecorating a previously shared home has also risen by around 73%.

Concern about the cost of divorce

Due to these soaring costs, for a significant proportion of separated couples – 16% – affordability remains such a concern that they remain living together in the same house because they can’t afford to move.

Aviva’s findings indicate the majority (68 per cent) of couples who divorce or separate have financial issues to resolve, with the process taking on average 14 and a half months – three months longer than in 2014.

The report comes as new data revealed the number of divorces in England and Wales increased by 6% between 2015 and 2016 to 106,959 – in what marked the first rise since 2009.

In light of the findings, Paul Brencher, Aviva’s health and protection director, said: “The breakdown of a marriage or long-term relationship is likely to be one of the most emotionally demanding life events for people who experience it. While it may seem completely unnecessary to plan for such an unfortunate life event, it is important that both partners in a relationship take an active interest in their financial affairs, even if one tends to take the lead.”

Help

If you need expert advice on any aspect of family law, Kancelaria Prawna Bernard Łukomski is the place to turn to. Our lawyers are highly trained, experienced and knowledgeable in everything from marriage and divorce to issues involving children. If you are going through a difficult time and need expert advice you can trust, we can help.

VAT Taxation on rental of residential property. Warsaw, April 16, 2020

Rental of residential properties may be subject to three different VAT taxation regimes:

(a) exemption;
(b) the 23% VAT rate and
(c) the 8% VAT rate (so-called accommodation related services).

I. General comments

The purpose of the services provided is decisive for determining the applicable VAT rate.

The tenant’s actual use of the property should also be consistent with the intended purpose of the services.

For example, a short stay of a tourist or a businessman should be treated as non-residential stay.

Non-residential stay is typically offered by hotels, guesthouses, rooms offered for short-term rent.

The residential purpose excludes temporary stay and vice versa.

The residential purpose is related to satisfying the tenant’s vital needs.

In other words, the rental services can be exempted from VAT (e.g. renting an apartment) depending on whether the rented property satisfies the vital needs, regardless of the duration of the rental period.

II. Rental services exempted from VAT

Only a rental of real property for residential purposes is VAT-exempt.

In addition, rental services must be provided by the landlord acting on his own account.

The possibility of taking advantage of the VAT-exemption is therefore conditional upon the fulfilment of both objective and subjective criteria.

The property must be of a residential character (objective criterion) and the purpose of the rental agreement must be to satisfy the customer’s residential needs (subjective criterion).

The possibility of benefiting from a VAT exemption is therefore conditional and depends on meeting the specific requirements:

– the residential nature of the rented property and

– the purpose for which the property is used must also be residential.

As a consequence, the VAT-exemption does not apply to a rental of residential property for non-residential purposes.

The availability of the VAT exemption does not depend on the type and/or legal form of the service provider or the entity purchasing such services.

If the tenant is not a tourist, spa visitor, business traveler etc., but his/her intention is to permanently reside in a given place, then the provider of the rental services will qualify for the VAT-exemption.

Real property rental services are VAT-exempted provided that all the conditions regarding (a) the parties, (b) the object and (c) the purpose of the specific contract, are met.

Therefore, the VAT taxpayer will be able to take advantage of the VAT exemption if the lease agreement contains, inter alia, provisions clearly stipulating that it concerns residential premises and the premises may be used by the tenant only for his personal residential purposes.

III. Rental services taxed at the 23% VAT rate

A rental of residential premises by a person who does not personally provide accommodation services but provides such services, for example, to a company conducting business activities involving the provision of short-term accommodation services, is taxed at the rate of 23%.

In addition, any rental of residential property for business purposes is taxed at the rate of 23% VAT (e.g. office, company headquarters).

IV. Services taxed at the 8% VAT rate

In accordance with art. 41 section 2 of the VAT Act, the so-called accommodation-related services are subject to the 8% VAT rate.

The accommodation-related services include, among other things:

(a) accommodation and associated services provided by hotels, motels, boarding houses, wellness centers and other hotel facilities

and

(b) temporary or long-term accommodation in student hostels, boarding schools and dormitories, workers hotels, apartment houses.

The differences between a typical rental and the accommodation-related services include:

(1) the availability of auxiliary services (laundry and basic equipment for the rented premises are usually provided in addition to the accommodation services);

(2) the period of stay in the premises (usually shorter for accommodation-related services).

Where the taxpayer:

– runs a business of short-term rental of apartments for tourists and people traveling for business purposes,

– the apartments are not his /her property, but he/she manages them on the basis of separate contracts concluded with their owners,

– prepares offers and accepts reservations via online booking portals,

– responds to customers’ inquiries,

– makes sure the apartments are available to guests on time,

– provides fresh towels, linen and refreshments,

– is responsible for keeping apartments clean,

– is responsible for minor repairs, etc.

thus enabling the visitors to conveniently use the premises, then the VAT exemption will not apply.

However, such services as described above are subject to the 8% VAT rate.

V. Summary

The taxation regime for rental of real property depends on the objective purpose and manner of using the property by the tenant, as well as the subjective intentions of the parties to the lease agreement.

Bernard Łukomski
Legal counsel
Warsaw, April 16, 2020

A prerequisite for adjudicating divorce. Warsaw, May 19, 2020

A prerequisite for adjudicating divorce (a so-called positive premise) is the “irretrievable and complete breakdown of marital life”. It is a mandatory condition.

A “breakdown of the marriage” means a cessation of common marital life in its emotional, physical and economic aspect (Polish “wspólne pożycie”) that the spouses are obliged to conduct. Hence, there is a strict conceptual and substantive connection between the obligation of the spouses concerning the “common marital life” and the prerequisite for divorce formulated as “irretrievable and complete breakdown of marital life”.

According to the Supreme Court “Marital life is characterized by a unique kind of spiritual, physical and economic bond”.

According to the Supreme Court for a marital breakdown to be declared irretrievable it is not necessary to establish that it is absolutely impossible for the spouses to restore their marital life. It is sufficient to conclude, based on practical life experience, that in the circumstances of the case the spouses will not restore their marital life.

Hence, a marital breakdown manifests itself in the cessation of a marital emotional, physical and economic bond.

In the light of decisions of the Supreme Court, the fundamental bond of marital life is the spiritual bond. The absence of the spiritual bond is always a manifestation of a marital breakdown.

For the purposes of adjudicating divorce, unlike in the case of a separation, the marital breakdown must be not only complete but also irretrievable. The breakdown may be declared irretrievable only if it is already complete. The marital breakdown is irretrievable if there are no prospects (anticipation) for restoring marital life by the spouses.

According to the Supreme Court the spiritual (emotional, physical bond) “community consists in mutual positive emotional attitudes of the spouses, respect, confidence, sincerity, loyalty, understanding, acceptance of personal qualities of the spouses, taking into account their personal needs and readiness to make concessions”.

The Supreme Court also explains that “in order to assert the absence of spiritual community between the spouses it is not necessary to conclude that they have hostile or at least reluctant attitudes to each other. Maintaining civil relations, contacts in the interest of their children, etc. does not necessarily mean that a spiritual bond between the spouses exists and therefore no marital breakdown occurred. The spiritual bond being sought here is not that between any two humans, but that characteristic of a spiritual marital community”. The Supreme Court points out that such “spiritual community” can be manifested even in correspondence alone”.

In the light of Supreme Court’s judicial practice, “common marital life” generally includes sexual intercourse between the spouses referred to as the “physical” (intimate, sexual or bodily) bond. A disappearance of this bond may be a manifestation of complete breakdown of the marital life.

In judicial practice, the economic bond is considered tantamount to running a common household. The legal commentaries take this view further and indicate that the economic life is usually manifested by living together, having common property, running one household, preparing and having meals together.

A complete and irretrievable breakdown of the marital life is also attested to by the spouses’ mutual consent to divorce. The spouses’ consent in this respect does not release the court from the obligation to examine all material circumstances of the case. If one of the parties consents to divorce, the court should examine if she/he is not being pressed by the other spouse to agree to the divorce, and whether such consent is indeed a result of her/his reflection upon the future of the communion, rather than an effect of some other circumstances” (sentence of the Appellate Court in Rzeszów).

For further information about adjudicating divorce, please contact us.

Bernard Łukomski
Legal counsel
Warsaw, May 19, 2020