Act of 23 October 2018 the amendment of the Personal Income Tax Act, the Corporate Income Tax Act, the Act – Tax Ordinance and some other laws (Journal of Laws of 2018, item 2193), it has introduced quite significant changes in the rules on withholding tax collection.
In principle, the withholding tax is flat-rate. Revenue is taxed without deducting the cost of obtaining it. The basic rate resulting from the Income Tax Act is 19%. The entities liable for clearing — collection and payment of the tax — are payers, i.e.
those making payments of benefits specified by the legislature, such as dividends, interest, royalties, trade mark claims, etc.
However, the tax rates provided for in the laws may be reduced and the duty may be exempt from tax on grounds of preferences arising from the provisions implementing the European Union Directive or from the provisions of double taxation agreements.
To date, the income tax laws have established that the use of these preferences was already at the time of payment. A payer who had a residence certificate may have abandoned the tax collection or collected it in a lower amount. This solution is referred to in English as relief at source. Therefore, a check of the correct collection of the tax is carried out. In the assessment of tax authorities, this leads to a number of abuses and irregularities resulting in a lack of tax.
Introduction tax refund
The legislator therefore decided to introduce, to a certain extent, a tax refund, instead of the relief already applied at the time of payment by the payer. The refund will follow an appropriate verification of the right to preferential withholding tax. This procedure will apply to the largest payers, as well as to the beneficiaries of the receivables paid and has been subject to the amount of benefit received in the tax year concerned from a single payer.
Amount 2,000,000 PLN the existing rules for the payment (collection) of withholding tax will apply. The payer who receives the residence certificate will be able to apply the tax exemption (under additional conditions) without levying or applying a lower rate in accordance with the provisions of the relevant double taxation agreement.
As regards the exemptions provided for in tax laws, the legislator provided for a separate simplification of the application of preferences (not collecting tax) on the basis of the tax authority's opinion on the application of the exemption
Obligation of due diligence
In the event of payment of claims above that amount, in order to apply the current tax accounting rules, the payer will be required to submit to the tax authority an appropriate statement under criminal liability that he has the documents required by the tax law entitling him to apply preferential tax rules resulting from double taxation agreements.
This statement will also include a confirmation of the lack of knowledge of the existence of circumstances excluding the possibility of non-collection under tax law. With these provisions, the legislator imposes a duty of due diligence on the payers.
Failure to make an appropriate statement, to submit a false statement, or to verify the circumstances that exclude the possibility of non-collection under the relevant double taxation agreement, will be sanctioned by a decision on an additional liability of 10% the fees paid.
Separate simplification
With regard to the exemptions provided for in tax laws, the legislator provided for a separate simplification of the application of preferences (not collecting tax) on the basis of the tax authority's opinion on the application of the exemption.
If the threshold is exceeded two one million gold receivables paid and non-use one from the above simplifications, the payer will be required to collect withholding tax at a statutory rate of 19%.
Any tax refund in favour of the taxpayer or the payer (if covered by his own funds) will follow a request made and verified by the tax authorities. The tax refund will be paid to the head of the tax offices 6 months.
It is likely that new regulations, in particular as regards the possibility of imposing an additional tax obligation on the payer, will effectively discourage the payers from not collecting or charging at a lower rate. It will be up to the payer to demonstrate that he has properly verified the circumstances giving rise to the application of tax preferences. If the tax authority considers that it has not exercised due diligence, it will impose an additional obligation on it.
Author:
Marcin Kołkowicz
Tax adviser, tax consultant At Russell Bedford Poland Sp. z o.o., a graduate of the Administration, Management and Marketing of the Catholic University of Lublin named after John Paul II. The subject of tax law deals with from 2012. He gained experience in Lublin and in Warsaw tax advisory offices. Author and co-author of many tax publications, in particular for the legal and tax portal TaxFin.pl. In his career, he dealt with both direct and indirect taxation issues, with particular emphasis on VAT.