One of the taxpayers submitted a request to the tax authority for an interpretation regarding value-added tax (VAT) in relation to the donation of a trademark to a close relative, i.e., a spouse. According to the applicant, the basis for VAT taxation in the case of the gratuitous transfer of the right to a trademark to her husband should be only the actual expenses incurred in connection with obtaining such a right, and not also the personal efforts and labor involved. The taxpayer justified her position by stating that only the reduction of the taxpayer’s assets can be included in the costs, which is difficult to translate into the time and personal effort devoted to creating a given trademark. The applicant also referred to Article 22g, paragraph 4 of the Personal Income Tax Act, which defines the concept of the cost of production and confirms that “the value of the taxpayer’s own work, that of his/her spouse, and minor children (…) is not included in the cost of production.”
The tax authority disagreed with this position, stating clearly that the applicant’s own work should be included in the VAT tax base, and therefore their position was incorrect.
Appealing against this interpretation, the case was brought before the Regional Administrative Court in Gliwice, which in its judgment of June 21, 2017 (case file number III SA/Gl 252/17) agreed with the applicant’s position and stated that personal efforts and the work invested in the creation of a trademark should not be included in the tax base for goods and services.
However, the tax authorities did not give up, and as a result of the cassation complaint filed by the Head of the National Tax Administration, the case ultimately ended up in the Supreme Administrative Court.
When considering the case, the Supreme Administrative Court highlighted an important issue, namely the fact that the trademark was created by the applicant and then gifted to her husband for purposes unrelated to her business activities. Furthermore, the court emphasized that the key to resolving the interpretative dispute lies in the national Article 29a, paragraph 5 of the VAT Act and the EU Article 75 of Directive 112. Consequently, the basis for the decision is the correct definition of the concept of expenditure and, as a result, determining whether the personal effort involved falls within the scope of this concept. Therefore, after analyzing the provisions, the NSA concluded that the taxpayer’s personal effort cannot be equated with expenditure, i.e., the disbursement of funds.
In light of the above, in its judgment of February 25, 2020 (case file number I FSK 1574/17), the Supreme Administrative Court agreed with the applicant’s and the Voivodeship Administrative Court’s opinion.
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