Here is a question from a reader: "In Good Company - Issue 165/106 you took up the topic of representation gifts. Reading this article, a question came to my mind, to which I would like to ask for an answer, if possible. According to you, should the company issue PIT- 8C to foreign clients to whom gifts worth more than 76 PLN are given on the occasion of a stay in the company or during a trip to a client for business talks?"

The obligation to issue a PIT-8C stems from Article 42a of the updof and applies to natural persons who are entrepreneurs and legal persons and organizational units without legal personality making payments of receivables or benefits referred to in Article 20(1) (income from other sources), except for income (revenue) exempt from tax and in respect of which tax collection has been abandoned, from which no advance tax payments or lump-sum income tax are collected.
The provision of Article 42a of the updof does not contain restrictions (exclusions) as to the fact that a PIT-8C should not be issued for benefits and receivables paid to foreign persons. Thus, if one were to consider only the Polish law, the above document should be issued to all persons, both foreign and domestic, to whom the receivables or benefits listed in the provision are paid.
However, the decisive factor in this regard is the provisions of the double taxation treaty of the foreign counterparty's country of residence, the application of which takes precedence over Polish domestic regulations.
The provision formulated in most double taxation treaties that should be referred to in resolving the tax consequences of giving gifts to contractors is an article (usually Article 21 or 22) on the rules for taxing income from other sources not mentioned in the other provisions of the treaties. According to this provision, such income is taxable only in the country of residence (tax residence) of the foreigner, according to the rules applicable in that country. In this case, there will be no double taxation of the income received.
As a rule, a foreign person is not domiciled in the territory of Poland, i.e. remains under limited tax liability. Such a person is then subject to tax in Poland, in accordance with Article 3, paragraph 2a of the updof, on income from work performed in the territory of Poland on the basis of a business relationship or employment relationship, and on other income earned in Poland. As written above, the provisions of double taxation treaties provide for taxation of income from gifts received only in the foreigner's country of residence, which means that no tax will be paid in Poland.
The foreigner will have to add the value of the gift to the total income received and tax the value of the benefit received in the country of his tax residence (domicile), provided, of course, that the domestic laws of the country in question tax such income.

The above-described consequences of the receipt of gifts by foreign counterparties result from the wording of the updof regulations and double taxation treaties. However, the question arises whether, since the value of the income received will not be taxed in Poland most often and the payer will not collect advance tax payments, there is really an obligation to prepare a PIT-8C. The essence of the introduction of the obligation to prepare such a document was to notify the tax office of the benefits made to individuals, which benefits are to be taxed in the annual settlement. Typically, taxpayers who received such gifts in the past did not disclose their value in their annual accounts and consequently did not tax the gift received. The introduction of the PIT-8C was intended to prevent such occurrences.
The above purpose will not be realized if the income is taxable abroad. Polish tax offices are generally not interested in the fact that a foreigner pays tax abroad. They also often do not have the ability to verify and steps are not taken to check whether the foreigner will pay tax on the gift received from the contractor.

The necessity of preparing a PIT-8C can only be supported by the informative nature of this document and the wording of Article 42a of the updof, which no double taxation treaty explicitly excludes the applicability of this provision. Of course, this applies if the foreigner will be taxing income earned abroad in Poland. If the foreigner will be adding the value of the gift to income that is taxed abroad he will need to know the value of the gift received.

From a practical point of view (this also applies to domestic contractors), the obligation to prepare such a PIT-8C is cumbersome and, in many situations, downright awkward. When donating, for example, an album or a pen, in order to issue a PIT-8C we will need data such as residential address, date of birth, which may frighten rather than attract a potential customer. The doubts that arise call into question the wisdom of such regulations.

Thus, as is clear from the law, there is an obligation to prepare a PIT-8C when giving gifts to foreign contractors. Therefore, in order to adapt the legal regulations to economic realities and make the provision more useful, it would be appropriate to exempt entities giving gifts to foreigners from the obligation to prepare PIT-8C if, on the basis of the relevant double taxation avoidance agreement, they are not subject to taxation in Poland on income from other sources.