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WHT

TLA Kancelaria > Specializations > WHT
Collecting and updating documents
Key areas of focus for authorities
Withholding Tax audits
How can we assist you?

Withholding Tax (WHT) payments becoming increasingly complex

Withholding Tax (WHT) refers to a flat-rate income tax collected by the payer on certain types of income (including interest, royalties, dividends, and intangible services) earned in Poland by non-residents (and in the case of dividends, also by residents).

In 2019, a “revolution” in WHT regulations began, when a provision was introduced into the law stipulating that due diligence is required when verifying the conditions for applying a preference.

The lack of detailed explanations and regulations in this area has caused difficulties for payers in fulfilling this obligation.

The situation was further complicated by the introduction of the so-called “pay and refund” mechanism in 2022, which requires that when making payments for:

  • interest, royalties, and dividends,
  • if the sum of payments for the above receivables made in a single tax year to the same taxpayer, who is a foreign related entity, exceed 2 million PLN, according to the general rule:
    • payers will be required to withhold WHT on the excess amount over 2 million PLN at a rate of 19% or 20%;
    • and only after withholding the tax will it be possible to apply for a refund of the withheld tax (in accordance with the exemption or reduced rate specified in the Double Taxation Treaty).
    • It is also possible to use alternatives to tax withholding: submitting a payer’s statement or applying for an opinion on the application of the preference.

What challenges are our Clients facing?

Collecting and updating documents

Increasing expectations from tax authorities regarding, among other things, due diligence related to collecting a very broad range of documentation, which must be:

  • obtained from the foreign entity,
  • and then verified,

causes many issues for Polish WHT payers.

There is also the issue of updating the documentation held by clients—once “collected,” documents do not automatically suffice for exemptions in subsequent years, as they must be regularly updated.

TLA continuously updates the “list” of documents required by tax authorities to ensure that Clients fulfill their documentation obligations with due diligence.

Key areas of focus for authorities

Currently, a highly “popular” topics (including in audits) are dividends, interest and royalties paid abroad and related issues, for example:

  • meeting the condition of not benefiting from the exemption from income tax on the entire income, regardless of its source,
  • the possibility of applying the look-through approach,
  • the requirement to meet the condition, according to the tax authorities, of the beneficial owner of the dividend,
  • interest from cash pools and the application of withholding tax exemptions.

These are just a few of the areas in which TLA actively assists Clients.

Additionally, there are still technical issues related to submitting various applications and statements. TLA’s experience in this area helps save time and minimizes the risk of missing deadlines.

Withholding Tax audits

There is a noticeable trend of tax authorities conducting audits specifically focused on Withholding Tax (WHT).

As previously mentioned, tax authorities pay particular attention to dividends paid abroad and interest from cash pools.

The fact that tax authorities investigate issues such as board members of foreign companies crossing borders during the controlled period demonstrates how deeply they go to find grounds for denying the application of a given preference.

How can we assist you?
How can we assist you?
  • We guide you through the entire process:- obtaining an opinion on the application of preferences
    - submitting a payer's statement allowing for tax exemption (in cases where a statement is submitted, we assess the risk associated with it)
    - obtaining a refund of the withheld tax
  • We conduct internal, comprehensive WHT audits focusing on due diligence, concluding with a report that includes:- an assessment of the situation—opportunities and risks associated with applying an exemption, a lower rate, or not withholding WHT
    - recommendations and guidance on further actions
  • We verify individual cases, such as meeting the actual owner requirement and the possibility of applying an exemption for dividend payments.
  • We obtain tax rulings regarding WHT, particularly for payments that are subjects of disputes with tax authorities (e.g., issues related to partners in a foreign limited partnership and collecting residency certificates).
  • We prepare guidelines (known as WHT procedures) that describe step-by-step actions to be taken when making payments subject to WHT.
  • We offer ongoing advisory services on WHT, including tasks such as verifying payments for WHT compliance and handling information/declaration requirements.
  • We represent clients in audits and disputes related to WHT.
TLA's Experience
  • The TLA team comprises experienced specialists with extensive practical experience in areas including:
  • Obtaining opinions on the application of preferences
  • Withholding tax refunds
  • Conducted due diligence audits for the purpose of submitting payer's statements
  • Representation of Clients in disputes with tax authorities and during audits dedicated to WHT
TLA

We are closely involved in legislative processes, including participation in meetings with organizations representing the interests of Polish entities (e.g., the Lewiatan Confederation) and discussions with the Ministry of Finance.

Continuously monitors developments in legislative changes and the evolving practices of tax authorities.

We regularly review current case law related to WHT.