WHT pay and refund mechanism applicable to payments made on or after 1 January 2022


WHT pay and refund mechanism applicable to payments made on or after 1 January 2022

As of 1 January 2022, pursuant to an amendment to the CIT Act, a pay-and-refund (“P&R”) mechanism has been introduced in relation to certain amounts in excess of PLN 2 million transferred to a single related party being a foreign tax resident.

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P&R mechanism

Consequently, if the threshold of PLN 2 million is exceeded in relation to payments transferred to the same taxpayer, the Polish entity is required to deduct the withholding tax (“WHT”) at the standard rate (20 or 19 percent) and cannot use WHT exemption or a reduced rate of this tax based on appropriate double taxation treaties.

In general, the P&R mechanism applies to liabilities including in particular income from:

  • profit sharing in legal entities (in particular dividends);
  • interest, royalties or related rights, invention rights including sale thereof, fees for access to a proprietary formula or production process, or for the right to use an industrial facility (including means of transport, a commercial or scientific facility), or for industrial, commercial or scientific know-how.
    If a tax remitter fails to apply the P&R mechanism to certain payments with no valid economic reason, they will anyhow qualify for this procedure. Tax authorities shall develop an approach to determine the qualifying payments.

Non-application of P&R

Furthermore, non-application of P&R, i.e. not collecting WHT or not applying a reduced WHT rate when the threshold of PLN 2 million has been exceeded is possible if one of the following conditions is met:

  • a tax remitter/taxpayer has a WHT ruling issued on its request that confirms the preferential treatment (i.e. the application of a reduced WHT rate or WHT exemption) under the Polish CIT Act or an appropriate double taxation treaty – which is option preferred in market; or
  • a tax remitter provides tax authorities with a statement confirming that:
    • it holds documents required for the application of a reduced WHT rate or WHT exemption resulting from the Polish CIT Act or from applicable double tax treaties; and that
    • to its best knowledge, no circumstances exist to justify the assumption that the reduced WHT rate or WHT exemption cannot be applied;
    • the statement is submitted by the head of the entity (and if the entity is managed by a body consisting of several persons, by an authorised member of this body; the statement cannot be submitted by an agent), in an electronic form, otherwise resulting in a risk of fiscal sanctions.

WHT refund

  • A WHT refund may be applied for with regard to amounts exceeding PLN 2 million if taxpayers are entitled to tax exemption or a tax rate reduction.

Please note that although the refund may be requested both by tax remitters and taxpayers, the former can only apply for it if they were actually charged with the WHT cost (e.g. under a gross-up clause).

  • WHT refund request is quite complicated process and required multiple documentation to be provided to Tax Authorities.
  • To be effective, such application must be supported by appropriate documentation and takes of 6 months to proceed.



Although at present requesting a protective tax ruling seems to be the most popular solution allowing future tax refunds, future business practice will show which option is most preferred by taxpayers and tax remitters.

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