November 25, 2024 Poland publishes Minister of Finance General Ruling on Parent-Subsidiary Directive Subject-to-Tax Requirement for dividends exemption
Following months of intensive discussions with business representatives, on 18 November 2024 the Minister of Finance published a general ruling concerning the conditions for applying the dividend exemption specified in Article 22(4)(2) and (4) of the Corporate Income Tax (CIT) Act in the context of withholding tax (WHT). Background Polish tax authorities and courts have issued numerous rulings denying the WHT exemption for dividends paid abroad because, broadly, the dividend was exempt from tax in the hands of the recipient (even if all other exemption conditions were met). This approach resulted from a broad interpretation of one of the exemption conditions (Article 22(4)(4) of the CIT Act) — i.e., that the dividend recipient could not benefit from "an exemption from income tax on all of its income, regardless of the source of its income." General ruling The general ruling explicitly confirms, among other things, that:
Implications The ruling aims to eliminate discrepancies in understanding the dividend exemption conditions, particularly regarding the "effective taxation of dividends." Although the ruling is not a source of law, it serves as an interpretative guideline. Multinational groups receiving or planning to receive dividends from Poland should verify whether they may benefit from the protective power of the general ruling, which could make it easier to obtain WHT clearance opinions and dividend distributions and/or refunds of WHT paid in the past.
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