Withholding tax in Poland
VON ZANTHIER & DACHOWSKI
Withholding tax
The withholding tax (WHT) applies to cross-border dividends (rate of 19%), interest and royalties (rate of 20%), among other things. However, there are exemptions and tax concessions that can reduce these rates. Don't pay more than you have to. Contact us so that we can do this in accordance with the regulations.
Who do we support?
We can help you in particular if you are dealing with the following challenges:
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You do not know how to secure tax exemptions for cross-border distributions, especially for dividends, interest and licence fees
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You have difficulties interpreting withholding tax provisions in the context of double tax treaties, which can lead to incorrect application of tax exemptions and benefits
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You are wondering how you can efficiently organise the transfer of documents related to withholding tax, including residence certificates and other documents to secure tax exemptions
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As a shareholder, you must fear a tax penalty due to an incorrect declaration regarding the applicability of a tax exemption or tax concession
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You need support in managing your company's liquidity, including by avoiding tax payments or tax refund procedures.
How can we help?
We support our clients primarily in the following areas:
Analysing and reviewing payments subject to withholding tax:
We analyse transactions with regard to withholding tax liability and advise on tax exemptions and preferences
Due diligence:
We assist in the collection and preparation of the documents required for due diligence . We review the transactions and activities of the counterparties with regard to the status of the beneficial owner
Standardisation and implementation of internal procedures:
We create internal procedures that protect cross-border settlements from excessive taxation
Protection of shareholders:
We protect shareholders from criminal and tax liability in connection with withholding tax
Optimisation for holding companies and capital groups:
We secure dividend payments within capital groups, taking into account the special features of profit distribution (e.g. in the case of a profit transfer agreement)
Tax exemptions:
We ask Polish tax authorities for comments on the application of tax concessions and exemptions
Support in tax proceedings:
We represent clients in withholding tax proceedings and tax disputes.
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Why is it worth it?
It's worth making use of our services, because:
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We understand capital groups:
We have over 30 years of experience working with international capital groups. We understand cross-border payments and the challenges involved
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What is needed:
We focus on pragmatic and concrete measures. We focus on what is important and what is needed
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Documentation under control:
We know how to manage the documentation of your capital group so that you can concentrate on growing your business;
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No surprises:
We ensure budget transparency and predictability through appropriate management of tax exemptions and concessions
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Stress-free management:
We protect you from criminal liability by informing you transparently about the available alternatives and solutions
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Your experts in Poland: withholding tax
FAQ
How does the "pay & refund" mechanism in Poland work in connection with withholding tax?
In Poland, a "pay & refund" mechanism applies to payments of more than PLN 2,000,000 per year to a related taxpayer. According to this regulation, Polish companies making payments must apply the basic withholding tax rate if the payment exceeds the above threshold. The overpaid tax resulting from the application of tax exemptions or favourable withholding tax rates can then be reclaimed.
Can the "pay & refund" mechanism in Poland be circumvented in connection with withholding tax (WHT)?
The "Pay & Refund" mechanism can be circumvented in two ways: either by obtaining a preferential opinion or by submitting a special declaration by the management making the payment.
A preference report will be issued on request within 6 months of the application being submitted.
Whilst the directors' declaration allows for the application of tax exemptions or reliefs, it can also mean taking on additional responsibility for proper compliance.
Another requirement is that the company making the payment carries out what is known as due diligence, which involves verifying the business substance of the payee, i.e. analysing the actual business activities of the payee and identifying the ultimate owner of the receivable (the so-called beneficial owner).
What are the most important requirements for dividends to be exempt from withholding tax in Poland in the case of a distribution to a German shareholder?
A dividend distribution from a Polish company to a German shareholder can be exempt from tax. The following conditions must be met in order to be able to claim the exemption: i:
- The dividend payer is a company that has its registered office or management in Poland
- The recipient of the dividend is a German company whose entire income is subject to income tax in Germany, irrespective of where it is generated
- A direct equity interest of the dividend recipient in the company distributing the dividend of at least 10% (for an uninterrupted period of at least two years, which may end after the date of the dividend distribution) is required
- The recipient of dividends cannot be exempt from income tax in Germany for his entire income, regardless of its origin
In addition, certain documentary conditions are required, e.g. the possession of a valid tax residence certificate and the submission of a special declaration by the dividend recipient.
Which claims fall under the PLN 2,000,000 threshold?
The threshold of PLN 2,000,000 includes, for example, interest, licence fees or dividends. The basis for calculating this threshold is the total amount of the above receivables from a related party in the tax year applicable to the entity making the payment.
Is due diligence required for the pay & refund mechanism in every case?
Yes, due diligence is required in all cases, regardless of the amount of the transaction. For all payments, the applicability of tax exemptions or preferences must be carefully checked. For group transactions, where access to information is easier, higher due diligence standards are required.
What is the scope of the opinion on the application of withholding tax preferences in Poland?
It is currently possible to obtain a preferential assessment that includes both tax exemptions and tax preferences. Tax preferences result from both European Union directives and double taxation agreements.
When is withholding tax payable in Poland?
If withholding tax is levied, the paying entity is obliged to pay the tax to the competent tax office by the 7th of the following month. Withholding tax may be waived after the threshold of PLN 2,000,000 has been exceeded if the management of the paying entity has obtained a preferential opinion or made a special declaration.
Who is entitled to apply for a refund of withholding tax in Poland in the case of a dividend distribution?
In the case of a dividend distribution, the recipient of the dividend must always apply for a tax refund.
Who can make a declaration that no withholding tax is withheld in Poland?
As a rule, only one shareholder can make such a declaration. If the management consists of more than one person, the declaration is made by a specific person who is a member of the board. It is not possible for the declaration to be submitted by an authorised representative.
What sanctions can be imposed for a false statement?
In the event of an incorrect declaration, omitted or insufficient audit, an additional tax liability may be imposed under Polish law. Furthermore, in such a situation, the shareholder may be held personally liable in accordance with the provisions of the Polish Fiscal Penal Code.
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