Withholding tax changes deferred again

Another postponement

The Ministry of Finance has published regulations on CIT and PIT deferring certain withholding tax provisions introduced in 2019 until 31 December 2021.

According to the explanatory memorandum to regulation published by the Ministry of Finance, the postponement is due to the exceptional circumstances of the COVID-19 pandemic in which it is unjustified to burden withholding agents and taxpayers with additional obligations. The Ministry has also announced that the legislative process is underway to amend the statutory withholding tax rules and incorporate the changes earlier consulted with the representatives of the business sector.

New WHT regime since 2019

Certain very significant changes were introduced to the Polish WHT legislation on 1 January 2019. The “relief at source” mechanism has been replaced by the “tax refund” regime. Under the new mechanism, which will be applicable to the payments to the same taxpayer in excess of PLN 2m in a given tax year, as a rule, withholding tax must be paid first, and only then it is subject to refund by the tax authorities. Based on the regulations published on 30 June 2021, the application of the new mechanism is deferred until 31 December 2021.

However, the application of the WHT exemption or a reduced WHT rate could be still possible (without the use of the new mechanism) if (i) the withholding agent submits a statement to tax authorities confirming that all conditions for applying the WHT exemption or a reduced WHT rate have been fulfilled or (ii) an advance tax ruling is obtained in that respect from tax authorities.

Nevertheless, certain provisions introduced in 2019, inter alia, those putting withholding agents under an obligation to exercise due care when applying the WHT exemption or a reduced rate (even if the relevant payments do not exceed the threshold of PLN 2m in a given tax year) must still be applied.