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September 14, 2022
2022-1373

Poland issues draft amendments to address potential issues when applying withholding tax relief at source based on management board's statement

  • Poland's current pay and refund withholding tax (WHT) regulations have certain requirements for applying WHT relief at source for qualifying payments.
  • Until recently, based on the practice of the tax authorities, Polish entities applying WHT relief at source based on management board statements (one of the alternatives), might have been allowed to do so only for a single period of a maximum four months during a tax year.
  • On 29 August 2022, the Ministry of Finance issued a decree extending the above period until the end of the tax year of the Polish entity (for statements filed until the end of 2022).
  • Also, there are planned amendments to the Polish WHT regulations to address the above issue from 2023 and allow Polish entities to apply the WHT relief at source based on the management board's statement for the entire tax year.

This Alert is a continuation of the prior EY Global Tax Alert, Poland | Tax Authority's approach may lead to potential issues when applying withholding tax relief at source based on management board's statement, dated 20 July 2022.

Based on Poland's current pay and refund WHT regulations, if the total amount of payments subject to WHT (i.e., dividends, interest and royalty payments) to a related party exceeds PLN2 million (m) annually (approximately US$400,000) per recipient, applying the WHT relief at source by a Polish payer would only be possible upon either:

  • Obtaining a WHT clearance opinion of the Polish Tax Authority.
  • Filing a statement with the tax authorities by the management board of the Polish paying entity, confirming that all requirements to apply the WHT relief have been met, including the beneficial owner status and a real business activity criterion.

The current regulations provide that the above statement of the management board should be filed by the seventh day of the month following the month when the PLN2m threshold was exceeded (i.e., within the statutory deadline for paying the WHT for a given month).

If the Polish payer intends to apply the WHT relief on subsequent payments to the same taxpayer without obtaining a WHT clearance opinion, it generally was allowed to do so for three months following the month in which the PLN2m threshold was exceeded (in such a case additional procedural steps were required as at the end of that period).

However, based on the recently issued decree of the Ministry of Finance, this period has been extended until the end of a current tax year of a Polish paying entity (for a statement filed by the end of 2022).

Also, based on the draft corporate income tax amendments submitted recently to the Polish Parliament, from 2023, the above statements of the management board should be able to cover the whole tax year of the Polish paying entities which want to apply the WHT relief at source based on them.

For more information on the new draft regulations covering various tax topics, see EY Global Tax Alert, Poland proposes significant changes to Corporate Income Tax law, dated 7 September 2022)

Future Global Tax Alerts will report on further developments in this area.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

EY Doradztwo Podatkowe Krupa sp.k., Warsaw

EY Doradztwo Podatkowe Krupa sp.k., Wroclaw

Ernst & Young LLP (United States), Polish Tax Desk, New York

 

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