FLast updated: 21.01.2025
Non-residents who obtain revenues from Polish sources, in particular in the form of dividends, interest and royalties paid by Polish tax residents, receive their payments decreased by withholding tax collected by the tax remitters (paying companies).
The general withholding tax (WHT) rate for dividends is 19%. The 20% WHT rate is applicable to interest, royalties and to intangible services (such as consulting, management etc.) paid to non-residents.
WHT rate may be reduced based on the Double Tax Treaty (DTT).
19% withholding tax | Dividends |
20% withholding tax | Interest, Royalties and Intangible Services |
Reduced rate or Exemption | Based on Double Taxation Treaties (DTT) |
Withholding Tax – Reduced Rates & Exemptions
Polish withholding tax rate may be reduced based on the Double Tax Treaty (DTT) concluded by Poland, provided that the tax remitter (paying company) has i.e. a tax residence certificate of taxpayer.
A certificate of tax residence is a document that indicates the registered office (for legal entities) or place of residence (for individuals) of a taxpayer and specifies in which country the taxpayer will pay their taxes.
Having a contractor’s certificate of tax residence allows for the application of WHT exemption wherever the relevant DTT provides such possibility.
On the basis of the Polish CIT Act and relevant DTTs, under certain conditions (i.e. certain shareholding level, shareholding period or beneficial ownership of the payments), WHT exemptions for interest and dividend payments may apply (and as a consequence the tax remitter (paying company) is not obliged to collect withholding tax in Poland.
Please note however that above exemptions apply only to the payments made to the companies – i.e. they do not apply to individuals.
Above means that the payments of interest and dividends from SPVs made directly to the individual, will not be exempt from withholding tax based on the domestic rules and the relevant DTT will apply. Interest rate from DTT will be applicable, provided that the Individual is the beneficial owner of the payments. In certain cases, given DTT may provide for no taxation in Poland (which for example would be the case for intangible services).
Please note that even though the Individual may not be receiving dividends / interest directly from the SPVs, it could be subject to beneficial ownership status examination by the Polish tax authorities (as it results from so called ‘look through approach’).
International double tax treaties between countries provide different methods to avoid double taxation when withholding tax (WHT) is collected in Poland on payments like dividends, interest, or royalties. The applicable method depends on the specific treaty between Poland and the investor’s country of residence, and may vary for different types of income.
Both main approaches – either exempting the income from tax or allowing Polish WHT to be credited against domestic tax – aim to prevent the same income from being taxed twice.
Withholding Tax Exemption on Interest (Interest / Royalties Directive)
Withholding tax exemption on interest payments made from Polish subsidiaries to companies located in EU/EEA member state (and Switzerland) shall apply, if all of the following conditions are met:
- paying company is a Polish corporate income taxpayer with a place of management or registered office in Poland;
- recipient is subject to income tax in EU/EEA member state (other than Poland) or Switzerland on its total income, regardless of the source of the income;
- recipient do not benefit from income tax exemption on its total income (which should be documented with written statement);
- for at least two years (uninterrupted period), recipient holds directly at least 25% of the capital of the company paying interest. Holding period can be met after payment is made;
- paying company possesses valid certificate of the tax residency of the recipient;
- a legal basis exists for a tax authority to request information from the tax administration of the country where the taxpayer is established, under a double tax treaty or other ratified international treaty to which Poland is a party;
- paying company is provided with a written statement confirming that the recipient does not benefit from exemption from income tax on its worldwide income, regardless of the source from which such income is derived and that it is the “beneficial owner” of the interest payments;
- if the above conditions will not be met, double tax treaty provisions are applicable assuming that certificate of tax residency is provided.
Withholding Tax Exemption on Dividends (Parent-Subsidiary Directive)
Withholding tax exemption (domestic) on dividend payments made from Polish subsidiaries to companies located in Poland or other EU / EEA member state (and Switzerland) shall apply, if all of the following conditions are met:
- recipient is subject to income tax in Poland, an EU / EEA member state or Switzerland on its total income, regardless of the source of the income;
- recipient do not benefit from income tax exemption on its total income (which should be documented with written statement);
- for at least two years (uninterrupted period), recipient holds directly at least 10% (25% for companies based in Switzerland) of the capital of the company paying the dividend; holding period can be met after payment is made;
- paying company possesses valid (not older than 12 months) certificate of the tax residency of the recipient;
- a legal basis exists for a tax authority to request information from the tax administration of the country where the taxpayer is established, under a double tax treaty or other ratified international treaty to which Poland is a party;
- paying company is provided with a written statement confirming that the recipient does not benefit from exemption from income tax on its worldwide income, regardless of the source from which such income is derived.
It should be stressed out that based on the recently established standpoint of the Polish Tax Authorities and lower grade administrative courts, if the recipient’s effective CIT rate abroad is 0% or some domestic exemptions are available, e.g. to dividend received from Poland, then the Polish withholding tax exemption may not be available.
In our view such an approach is not in line with both the wording of the Polish regulations, as well as the EU law. Generally, this issue currently affects all multinational groups investing in Poland and planning the distributions to EU / EEA countries. Currently and based on our experience, the approach in this regard seems to be changing in favour of taxpayers.
Generally, according to the Polish tax authorities, dividends shall be WHT / CIT exempt in Poland if the recipient of dividends is recognised as a beneficial owner of such dividend payment.
The dividend anti-abuse clause (SAAR) has been in force since 2016. The participation exemption on paid dividends or other profits derived from a participation in a Polish company shall not apply if the main aim (or one of the main aims) of the agreement or other legal transaction is to obtain tax exemption and these acts do not have genuine character. Term ‘not genuine’ means that a legal transaction has been conducted without justified economic reasons.
If the above conditions to apply the WHT exemption are not met, double tax treaty provisions are applicable provided that in principle a certificate of tax residency is provided. The recipient should be recognised as a beneficial owner of the payment.
If the aforementioned conditions are not met, 19% WHT is applicable.
Polish WHT remitter (i.e. a company making a dividend payment) is responsible for the due diligence with respect to payments being subject to WHT.
Withholding Tax for Payments up to PLN 2 Million Annually
If qualified payments to a given taxpayer do not exceed PLN 2 million during a tax year of the tax remitter (paying company), generally the standard rules are still in force, except for:
- extension of conditions for the beneficial owner;
- due diligence requirement for a tax remitter (paying company) in order to apply preferential WHT rate or exemption this condition suggests that the tax remitter (paying company) should introduce a due diligence procedure to be able to prove that the required verification was made.
Pay & Refund of Withholding Tax – Payments Above PLN 2 Million Annually
Generally, the tax remitter (paying company) will be required to calculate, collect and pay withholding tax applying standard (statutory) rates specified in the CIT Act. WHT is to be collected based on this rule from the excess of payments over PLN 2 million.
Pay & refund mechanism applies only in the case of payments between related companies. It does apply to dividends, interest and royalties (and not e.g. to remuneration for the intangible services such as management or advisory).
The taxpayer or (in some cases) the tax remitter (paying company) will be entitled to ask for WHT refund (Withholding Tax Refund).
There are two possibilities to be exempted from an obligation to collect withholding tax with application of the standard (statutory) rate:
- submitting the relevant statement by the tax remitter (paying company);
- applying for WHT binding opinion.
Opinion on Withholding Tax Preferences in Poland
To obtain an opinion on WHT preferences without using the “pay and refund” mechanism, taxpayers or remitters must submit an electronic application via the Public Information Bulletin on the Ministry of Finance website. The correct form depends on the applicant type:
- WH-WOP – for remitters
- WH-WOZ – for taxpayers
- WHWOE – for disbursing entities handling securities accounts
As of January 2024, applications can only be submitted through the Ministry’s online form. This method also applies to any supplementary submissions or supporting documentation.
Required Information
The application must include:
- Identification details of the applicant (remitter, taxpayer, issuer, or disbursing entity)
- Purpose and jurisdiction of the application
- Substantiation of the request
- Contact details
- List of attached documents
- A declaration affirming the accuracy of the provided information and documents
Supporting Documents
The CIT Act does not specify a mandatory document list, but historically required documents include:
- Valid tax residency certificate
- Business register excerpt
- Banking confirmation of the taxpayer’s account
- Beneficial owner declaration
- Articles of association
- Balance sheet
- Loan/licensing agreement (for interest or royalties)
The Lubelski Tax Office has recently tightened requirements, demanding more documentation to verify business activity. Any foreign-language documents must be translated into Polish, with official documents requiring certified translations.
Substantiating the Application
Applicants must demonstrate compliance with the CIT Act (Articles 21(3) and 22(4)) or double taxation agreements. This involves presenting clear arguments supported by relevant documents proving eligibility for WHT preferences.
Who is a Beneficial Owner – Definition in WHT
In order to apply WHT exemption or the lower WHT rate from the interest paid out (or capitalized) to the lender, the foreign entity shall be the beneficial owner of the received payment (in particular interest) and should conduct an economic activity. Beneficial ownership is a term closely related to business substance and this requirement is also important regarding the dividend payments.
According to a new definition contained in the CIT Act, the beneficial owner is an entity that meets jointly all of the following conditions:
- it receives a payment for its own benefit, takes individual decisions on its use and bears economic risk associated with the loss of this amount or its part;
- it is not an intermediary, representative, trustee or other entity legally or factually obliged to transfer all or part of the receivables to another entity;
- it conducts an actual economic activity in the country of its registered office, if the receivables are obtained in connection with economic activity.
The assessment whether an entity is an intermediary, representative, trustee or another entity that is legally or actually obliged to transfer its receivables in whole or in part to another entity should take into account the actual course and circumstances of the conclusion and execution of the transaction. This means that it should be examined who is actually entitled to obtain the receivables and whether the recipient thereof is not obliged to transfer said receivables to another entity.
If this is the case, i.e. the beneficial owner of the receivables is such other entity (which needs to be demonstrated or examined), then the WHT will be subject to the DTT applicable to the country of residence of such entity (the look-through approach). For example, acting as an intermediary in the case of interest may be directly linked by the tax authorities with the fact that the financing company was also financed by a loan from the related entity (back-to-back loans).
In assessing whether an entity pursues actual economic activity, the following circumstances are taken into account (in particular):
- registration of an entity involves existence of an enterprise as part of which the company actually carries out business activities, including in particular whether this company has its premises, qualified personnel and equipment used in pursued economic activities;
- the entity does not create a structure functioning in isolation from economic reasons;
- there is adequacy between the scope of activity carried out by an entity and the premises, personnel or equipment actually possessed by it;
- the arrangements concluded reflect the economic reality, have economic justification and are not manifestly contrary with the general economic interests of that company;
- the entity independently performs its basic economic functions using its own resources, including the executives present on site.
In order to exercise due diligence, including verification whether if the recipient of the receivables (company) conducts genuine economic activity, the tax remitter (paying company) can in particular enquire the taxpayer as follows and analyse i.e. what kind of personnel, equipment and premises does the company have
The accuracy of such an assessment is verified by tax authorities. Due diligence should include obtaining group documents demonstrating the financial flows between the entities in the group and the role of the individual entities within the structure thereof, as well as the documents that would allow to determine the business substance of the related recipient of receivables.
Documents allowing to determine the business substance of the related recipient of receivables may include the following: description of the object of activity of the recipient of receivables, its financial statement, organizational and managerial structure, descriptions of positions of persons that it employs.
Criminal Responsibility with respect to Withholding Tax
It should be noted that the Polish provisions provide a criminal liability for submitting false information to the tax authorities. The managers (e.g. members of the board) might be subject to a fine, imprisonment or both at the some time.
Moreover, under the existing provisions, penal fiscal responsibility will be applicable to the manager who submits untruth or conceals the truth in:
- a statement regarding verification and possession of documents proving the legitimacy of applying a reduced rate or WHT exemption;
- a statement attached to the request for WHT return about the accuracy of the circumstances given in the application;
- an application for the opinion on the WHT exemption;
- a declaration that all due diligence had been exercised.
By submitting a false or concealing information in the above documents, the manager of the entity will be subject to a fine of up to 720 daily rates (up to ca. PLN 41.3 million from 1 July 2024).
In the case of an act of minor significance (low social harmfulness, in particular when the public law claim exposed to depletion does not exceed five times the minimum remuneration – i.e. PLN 21,500 from 1 July 2024) the manager of the unit is subject to a fine for tax offense, i.e. from one tenth to 20 times the minimum remuneration (from 1 July 2024, PLN 430 – PLN 86,000).
FAQ – Withholding Tax (WHT) in Poland
What is the general withholding tax rate for non-residents in Poland?
The general withholding tax rate for nonresident aliens receiving employment income, dividends, or capital gains in Poland is 19%. A 20% withholding tax rate applies to interest, royalties, and intangible services such as consulting and management fees.
How can withholding tax (WHT) be reduced under Polish tax law?
A foreign person may reduce income tax through a Double Tax Treaty (DTT) if the paying company provides a tax residence certificate. The amount of income tax withheld depends on the tax law applicable under the treaty.
What are the withholding tax exemptions for interest and dividends?
Under Polish tax law, certain payments such as interest and dividends may be exempt from withholding tax if the recipient meets exemption table conditions, including substantial presence test, filing status, and tax withholding requirements. These exemptions apply only to companies, not foreign-born individuals.
What is the “pay & refund” mechanism for withholding tax on payments above PLN 2 million?
For business days when payments exceed PLN 2 million annually, the paying company must withhold tax at the statutory rate. However, a taxpayer or employer can request a tax refund. This applies to income tax, tax withholding, and estimated income taxes for related companies.
How is the beneficial owner of payments determined for withholding tax purposes?
A beneficial owner is an entity that:
- Receives payment for its own benefit, without obligation to transfer it.
- Is not an intermediary, trustee, or agent.
- Meets employment income conditions such as having premises, personnel, and business operations.
- Complies with withholding requirements and due dates for tax return filings.
What are the penalties for incorrect withholding tax statements?
Providing false information about tax withheld, standard deduction, or tax credits may result in penal fiscal responsibility. A paying company or employer that does not withhold the correct amount of tax may face fines up to PLN 41.3 million, imprisonment, or both, as per Polish tax law regulations.
How does withholding tax affect non-residents receiving payments from Polish sources?
Withholding tax is generally withheld on employee’s wages, dividends, interest, and royalties paid to non-residents. The tax rate depends on Polish tax law and international agreements. The employer withholds the correct amount from payments, ensuring compliance with internal revenue service regulations.
How is the amount of tax withheld calculated for foreign persons?
The amount of tax withheld depends on the tax rate, pay period, and whether a tax treaty applies. Employers collect the tax based on recent pay stubs and the recipient’s filing status. Non-residents can check the tax withholding estimator to determine how much tax is due.
Can a non-resident apply for a tax refund on withholding tax?
Yes, if too much withholding tax was collected, a tax refund may be requested. The refund process considers factors like the amount of income tax paid, deductions, and available tax credits. The paying company must ensure compliance with due dates and relevant documentation.
What happens if the employer withholds the wrong amount of withholding tax?
If the employer does not withhold the correct amount of tax, the taxpayer may owe a tax bill or face penalties. A paycheck checkup can help verify if enough tax is being withheld based on the recipient’s earned income, additional income, and wages.