Withholding tax (WHT) obligations under the changes introduced by the Polish Deal

In addition to the popular changes with respect to personal income taxation, the Polish Deal has also introduced significant changes with respect to withholding tax. Below we present the most important of them.

First of all, it is necessary to bring the context of the changes closer. A fundamental change in withholding tax policy was introduced in 2019. It consisted in the introduction, to a certain extent (i.e. in the situation of a payment to the same taxpayer of an amount exceeding PLN 2 million) of the obligation to collect the tax by the payer, with the possibility of obtaining a later refund, after verification by the authority. It replaced relief already applied at the time of the payment by the payer. The regulations that came into force in 2019 provided for the possibility of not withholding tax once the threshold of PLN 2 million is exceeded on the basis of certain simplifications, listed below. The regulations also allowed the limit not to be applied, after meeting certain conditions on the basis of regulation of the Minister of Finance. In practice, in most cases the limit was not applied due to exemptions included in the regulation.

As of 1.01.2022 the following changes in this respect have been introduced, among others:

• Narrowing of application to transactions of related parties and to payments of passive nature (royalties, dividends, interest).

The way to avoid the application of the limit is:

• to obtain an opinion from the tax authority (In 2019-2021, such an opinion could not apply to preferences arising from double taxation treaties. From 2022, the scope of the opinion also includes such preferences), or
• to file a WH-OSC statement.

• Due diligence

When assessing whether due diligence is exercised, the nature and scale of the payer's business activity and the payer's relations with the taxpayer must be taken into account, which means that in the case of links between entities, it is necessary to verify compliance with the conditions for the application of preferences even more strictly.

•    Amendment of the definition of   beneficial owner

When assessing whether an entity is carrying out a real economic activity, the nature and scale of the activity carried out by the entity with respect to the receivable received shall be taken into account.

• Use of copy of certificate of residence

During the pandemic, regulations were issued that temporarily allowed the use of copies of certificate of residence. However, the amendment introduced a permanent rule that the taxpayer's place of residence for tax purposes may be confirmed by a copy of the certificate of residence if the information arising from the such copy does not give rise to justified doubts as to its accuracy.

In view of the above, as PKF, we offer our assistance in verifying withholding/non- withholding tax obligations, as well as in obtaining refunds.

Downloads

• PKF Alert - Withholding tax (WHT) obligations under the changes introduced by the Polish Deal.pdf [PDF]