The situation
Invoices for a software licence and a cloud service from a foreign supplier
A Polish logistics company pays a Czech software house for two things: an annual licence to install its route-planning software on the company’s own servers, with the right to customise it, and a monthly subscription to a hosted analytics module. Together the invoices come to about PLN 1.8 million a year.
The finance team must decide before the next payment whether either amount is a royalty for withholding tax, at what rate, and what documents it needs to apply the treaty. The hard part is the line between paying for the use of a copyright and paying for a service or for a copy of software for the company’s own use.
What the research has to settle
The rules behind the answer
- The payer carries the risk
- In Poland, the company paying a royalty to a non-resident is the withholding agent. If it withholds too little, it can be liable for the shortfall.
- Not every software payment is a royalty
- Under the OECD Commentary, payments for rights to use a copyright, such as rights to reproduce or adapt software, are royalties. Payments for a copy of software for the payer’s own use are generally business profits. National law and practice decide how this applies.
- The treaty and its conditions
- The tax treaty between Poland and the Czech Republic can reduce the rate. The payer needs the recipient’s certificate of residence and must exercise due care in checking the conditions.
- Hosted software needs its own analysis
- Whether a subscription to software running on the supplier’s servers is a royalty or a service is a question the research must settle on the facts and on the national decisions, which are not uniform.
How it runs in azta
From the question to the document
The question, as you would type it
Polish company pays a Czech software house an annual fee to install and customise route-planning software, plus a monthly fee for a hosted analytics module. Is either payment a royalty subject to Polish withholding tax, what does the Poland–Czech treaty provide, and what documents do we need?
You start with
Invoices for a software licence and a cloud service from a foreign supplier
- 01
Describe the payments
Give what each fee pays for and the rights the contract grants. azta searches the Polish income tax acts, the treaty and the OECD-based reasoning applied to them.
Cited research· Free - 02
Find the decisions on software payments
Ask how the courts have treated licence and cloud fees. azta summarises the decisions it holds, with links to the full text.
Case-law search - 03
Draft the note
Ask for a note per payment type with the conclusion, the conditions and the documents to collect. Edit it in Canvas.
Canvas · Ask azta· Pro - 04
File it with the payment run
Export to Word and keep it with the due-care file for the payments.
Word export· Pro You send
A withholding tax note on each payment and the documents needed
What you get
A withholding tax note on each payment and the documents needed
Withholding tax note · draft
Payments to the Czech software house: withholding tax
Annual licence. The licence grants the right to install and customise the software, which includes rights to reproduce and adapt it. This points to a royalty. We should withhold at the treaty rate, provided we hold a valid certificate of residence and have checked the conditions with due care.
Analytics subscription. We use the module on the supplier’s servers and receive no rights in the copyright. On the reading in this note, the fee pays for a service, not a royalty. The annex lists the decisions relied on, which are not uniform.
Next steps. Request the supplier’s certificate of residence before the next payment, keep the due-care file, and report the withholding in the required information returns.
Outcomes on your numbers
What azta is worth on this task
Pro pays for itself after
18 minutes a month
At €90 an hour, that is all the time Pro (€27 a month) has to take off your desk to cover its price.
Example figures. Replace them with your own.
- Hours back a year
- 25
- Capacity at your rate
- €2,268
- More withholding tax notes a quarter
- 1.4
- Return on Pro
- 7×
- Research
- Drafting
- Your review
A scenario you set, not a promise. The hours that come back go to another client, or deeper into this one.
Want these numbers on your team’s real workload?
Book a demoWhat stays with you
- The contracts and what rights they actually grant.
- The withholding decision and the due-care file.
- Filing the returns.
Frequently asked questions
- Does the EU Interest and Royalties Directive help?
- Only between associated companies that meet its holding and other conditions. Between unrelated companies, the treaty and national law decide.
- Does azta hold Polish tax rulings?
- It holds legislation and published court decisions. Coverage of other material varies, and azta says what it cites.
- Can it read the licence agreement?
- Yes. Upload it and ask which rights it grants. azta points back to the clauses it relied on.
