Last updated: 26.02.2025
Preventing Tax Avoidance in Withholding Tax (WHT) Exemptions
The Specific Anti-Avoidance Rules (SAAR) have been in force since 2016 and are designed to combat tax avoidance related to withholding tax (WHT) exemptions on interest, royalties, and dividend payments in cases involving aggressive tax planning with tax optimisation schemes.
Under Polish tax legislation, the participation exemption for dividends or other profits paid by a Polish company does not apply if the main purpose (or one of the main purposes) of the legal transaction is to obtain a tax exemption without justified economic reasons.
A non-genuine transaction, as defined by Polish tax authorities, refers to a legal arrangement that lacks valid economic justification and is conducted primarily for tax benefits, rather than business purposes. More about this kind of transactions you can read in our article about GAAR.
Additional Tax Liability Under SAAR
According to the Polish Tax Ordinance Act, if the General Anti-Avoidance Rules (GAAR) or SAAR provisions are invoked, the taxpayer or tax remitter (paying company) may be subject to an additional tax liability ranging from 10% to 40% of the corporate income tax (CIT) base.
However, if the decision is issued in the field of CIT and the tax base is an income – then the additional tax liability is 10% of the sum of the components resulting from this decision.
Tax Remitter’s Additional Tax Liability
In the case the tax remitter (paying company) failed to perform the required verification or the verification made by the tax remitter (paying company) was not adequate to the nature and scale of the tax remitter’s (paying company) activity, The Polish tax authorities determine an additional tax liability of 10% of the taxable amount where:
- A lower tax rate was applied, or
- The withholding tax was not collected as required.
Increased Penalty Tax Rates
Under certain specific anti-avoidance rules, the penalty tax rate may be doubled (20%) or tripled (30%) if:
- The tax base for the additional tax liability exceeds PLN 15 million (on the excess amount).
- The taxpayer fails to submit transfer pricing documentation covering the disputed transaction.
These anti-avoidance measures are part of Poland’s commitment to ensuring tax compliance and preventing abusive tax planning by multinational corporations and other entities seeking to avoid taxes through artificial arrangements.
Differences and Similarities Between GAAR and SAAR in Poland
What Are the Differences Between GAAR and SAAR?
Both General Anti-Avoidance Rules (GAAR) and Specific Anti-Avoidance Rules (SAAR) serve as legal instruments to combat tax avoidance in Poland. However, they differ in their scope, application, and legal provisions.
Scope of Application
GAAR applies broadly to any transaction that results in a tax benefit contrary to the income tax act or other tax laws. It covers all types of tax arrangements, regardless of the specific tax category.
SAAR, in contrast, is more targeted and applies specifically to withholding tax (WHT) exemptions on interest, royalties, and dividends. It prevents multinational corporations and other entities from using avoidance schemes to benefit from tax advantages without economic substance.
Legal Justification & Economic Substance
GAAR is triggered when a transaction is considered artificial—meaning it lacks a legitimate business purpose and exists primarily to avoid taxes.
SAAR specifically denies tax exemptions if transactions do not have genuine economic character, particularly in cases involving profit shifting or the use of tax havens.
Assessment & Enforcement
GAAR enforcement is broader and grants Polish tax authorities the power to invalidate transactions that violate tax legislation. The burden of proof is on the taxpayer to demonstrate the legitimacy of their transactions.
SAAR enforcement focuses on cases where a lower withholding tax rate was applied or no tax was collected due to an exemption. If the taxpayer or tax remitter fails to conduct proper verification, additional tax liability is imposed.
Similarities Between GAAR and SAAR
- Both are anti-avoidance measures designed to prevent tax evasion and aggressive tax planning.
- Both require economic substance in transactions—artificially high prices or other manipulative tax structures may trigger an audit.
- Both can result in penalty tax rates ranging from 10% to 40%, depending on the tax burden and nature of the violation.
- Both reinforce fair taxation within Poland and the European Union, ensuring multinational companies and other businesses pay their fair share of taxes.
While GAAR and SAAR share a common goal of combatting tax avoidance, GAAR is a broad mechanism applicable to all taxpayer transactions, while SAAR specifically targets withholding tax exemptions and profit shifting strategies. Both rules reinforce tax compliance and discourage unacceptable tax avoidance practices in high-tax countries.
FAQ – Specific Anti-Avoidance Rules (SAAR) in Poland
What are Specific Anti-Avoidance Rules (SAAR) and what is their purpose?
Specific Anti-Avoidance Rules (SAAR) are tax laws in Poland designed to prevent tax avoidance by restricting unjustified tax advantages resulting from avoidance schemes. These anti-avoidance rules target artificial tax arrangements aimed solely at avoiding paying taxes without a legitimate business purpose.
What are the consequences for taxpayers or tax remitters violating SAAR?
If anti-avoidance rules apply, the taxpayer or tax remitter (paying company) may face an additional tax liability ranging from 10% to 40% of the tax base. If the tax base is income, the additional tax burden is 10% of the total taxable amount specified in the tax decision.
When can Polish tax authorities impose an additional tax liability on a tax remitter?
Polish tax authorities may impose an additional tax liability of 10% if:
- A lower tax rate was applied, or
- The required withholding tax was not collected,
and the tax remitter failed to conduct adequate verification in line with its activity’s nature and scale.
In what cases do SAAR impose higher penalty tax rates?
An increased penalty tax rate of 20% or 30% applies when:
- The tax base for additional tax liability exceeds PLN 15 million, or
- The taxpayer fails to provide transfer pricing documentation for the disputed transaction, indicating possible profit shifting or other abusive tax planning practices.
How do SAAR regulations align with the General Anti Abuse Rule (GAAR) and the Internal Revenue Code?
SAAR and General Anti Abuse Rule (GAAR) are complementary anti-avoidance rules aimed at preventing tax avoidance and abusive tax planning. While GAAR applies broadly to various tax arrangements, SAAR specifically targets withholding tax exemptions.
Both such rules are enforced by tax authorities to ensure compliance with the internal revenue code and international tax regulations.
How does SAAR affect multinational companies?
SAAR prevents the use of tax havens, base erosion, and double taxation mechanisms to artificially lower tax liability. These measures align with the Anti-Tax Avoidance Directive implemented by the European Union to ensure that large businesses pay their fair share of taxes in the member states where they operate.
Why is economic substance important in assessing transactions under SAAR?
Under Polish tax legislation, a transaction lacking economic substance is considered artificial if its primary goal is to obtain a tax benefit.
If a transaction lacks real business justification and is solely designed to evade taxes, it can be challenged by the internal revenue service under General Anti-Avoidance Rules (GAAR) and SAAR, leading to additional tax liability.
