WHT regime in Poland – changes announced for 2022
What to expect – evolution or revolution?
REal Knowledge –about the Polish real estate market 3/ 2021
Almost three years have passed since tax consultations on the guidelines relating to new WHT rules started. Judging from the continuous postponement of the regulations as well as the guidelines - still at the draft stage - it was hard not to wonder – quo vadis? But maybe we no longer have to wait for the answer, because the end of July saw the publication of a bill introducing changes referred to as the "Polish Deal".
Among the multiple tax changes the bill also contains those concerning the WHT regime. Nevertheless, not all the comments submitted during the consultation process have been addressed in the bill and some practical concerns and questions remain unanswered. Below, we present an overview of the proposed changes to the withholding tax set to come into force as from 2022.
Ruling on claiming tax benefits
The ruling will cover not only the exemptions under the EU Parent-Subsidiary and Interest-Royalties Directives (as it was before), but also preferences resulting from relevant DTTs (lower rate or non-taxation). Moreover, the application may be submitted by a tax remitter, even if such tax remitter did not bear the economic burden of tax.
New “beneficial owner” and “due care” definitions
The beneficial owner still cannot be “an intermediary, representative, trustee or other entity obliged to transfer all or part of the receivables to another entity”, however, the "legal or factual" element has been abandoned.
In addition, a higher standard of due care will be expected in distributions between related parties. So far, this has not resulted directly from the regulations, but from the draft WHT guidelines. Unfortunately, the new regulations do not provide for an analogous differentiation between levels of due care depending on the transaction’s threshold (although it was provided for in the guidelines).
„Pay and refund” regime
The tax refund mechanism will continue to apply (applicable to < PLN 2m payments), but to a limited extent. Firstly, it is to apply only to payments to Polish non-residents and related entities. Secondly, the mechanism will no longer be used for payments for intangible services (only passive income will be covered).
At the same time, however, a new provision was introduced whereby the refund mechanism will be used for payments that, with no economic justification, were not included in the payments subject to this mechanism. If the regulation is to maintain its wording, it may raise numerous doubts.
Simplification of formalities
The changes also apply to statements confirming that the conditions for applying DTT benefits have been met. These will no longer have to be signed by the entire management board (signatures will be made in accordance with the company's representation rules).
The obligation to notify the tax office of not collecting the withholding tax on receivables relating to the operations of a permanent establishment located in Poland, will no longer apply. The condition will be, however, that the sum of such uncollected tax should not exceed PLN 500,000 PLN per year.