mBank Hipoteczny is planning a EUR300m debut euro covered bond following a roadshow, after Poland’s finance ministry on Wednesday solved a tax dispute that had previously obstructed such issuance, with the bank’s head of treasury calling this a “a great step forward”.

The Polish issuer announced today (Monday) that it has mandated Commerzbank, Erste, JP Morgan, LBBW and SG as joint bookrunners to arrange a three-day European roadshow starting next Monday, with a EUR300m Reg S transaction to follow. An intermediate maturity and rating of A from Fitch are expected.

The announcement comes after the Polish ministry of finance on Wednesday issued a ruling that confirms that interest paid for Polish covered bonds to non-domestic investors is exempt from a withholding tax on interest payments transferred out of the country, and that there is no obligation for issuers to identify the tax status of bondholders.

As previously reported, a dispute over the law had prevented mBank Hipoteczny from issuing its first international covered bonds, via a EUR3bn international covered bond programme established in July.

When Poland’s covered bond law was updated in January 2016, interest paid for Polish covered bonds to non-domestic investors, both individuals and legal entities, was made exempt from the 20% withholding tax.

PKO Bank Hipoteczny, mBank’s compatriot, has issued four euro benchmark covered bonds internationally since making its debut in October 2016.

However, acting upon independent legal advice, mBank requested an individual interpretation from the Polish tax authorities regarding the rules. In their response, the tax authorities stated that the exemption to the withholding tax can only be applied once mBank Hipoteczny, as issuer and tax remittent, had identified the tax status of the bondholder. mBank had said it was unable to do so, as investors in the bonds would be anonymous and the bonds could be sold on secondary markets.

Krzysztof Dubejko, head of treasury at mBank Hipoteczny, told The CBR that the general tax interpretation is “a great step forward” for the market.

“First, it confirms that there is no withholding tax to be paid by either the issuer, the paying agent, or the international investor,” he said. “Second, some market participants were concerned whether identification of end investors needs to occur in order for the foreign tax investor exemption to be applied.

“This interpretation eliminates this concern and makes it clear that no identification is required.”