Proposed amendments to the laws under the so-called "Polish Deal” to a large extent, tax legislation will apply, including a number of changes in the scope of withholding tax (WHT).
The main changes proposed in this respect include:
- rod first limiting the scope of the entity and the procedure for refunding the withholding tax paid;
- rod second changes in accordance with the draft will allow opinions to be given on the application of rates or exemptions resulting from international agreements;
- rod third The rules relating to the signing of declarations of compliance with the conditions for applying the preferential rate or exemption provided for in the international agreement on the avoidance of double taxation are to be simplified.
In addition, changes in the understanding of the due diligence of the payers of this tax are expected.
It will be sufficient to sign the declaration in accordance with the rules of representation of the company, and not as has so far been the case by all members of the board of directors of the company
Source tax currently
Amendment with 23 October 2018 (Journal of Laws, item 2193) introduced rules on the so-called withholding tax (WHT) which require taxpayers.
On the basis of the above-mentioned provisions, Polish entrepreneurs who make payments to the same foreign counterparty of claims exceeding 2,000,000 PLN in respect of intangible services, interest, dividends, and royalties, they were required to deduct flat-rate tax - most often at 20%.
The reimbursement of any excess tax due to the application of international double taxation agreements may be requested only after the tax has been deducted.
As a general rule, payers may only exempt themselves from tax deductions in the event of a declaration of compliance with the conditions for the application of preferences from an international agreement or a special safeguard opinion from the tax authorities.
The above mentioned provisions have not yet fully entered into force since the Minister of Finance regularly, every six months under the Exemption or Restriction Regulation Article 26(2e) Corporate Income Tax Act extends the suspension period for most of them.
At source tax Polish Deal
Draft Polish Deal provides for changes in the withholding tax which are to enter into force at the beginning 2022 Under the terms of the draft law, simplifications are to be introduced concerning the collection of this tax, which will be linked to the limitation of the entity's scope and the tax in question.
Withholding tax would be limited to transactions to foreign affiliates (the link is defined in accordance with transfer pricing rules). In addition, the rules will not cover payments to non-Polish tax residents.
The tax refund mechanism would be limited to payments of a passive nature, such as royalties, interest or dividends specified under Article 21(1)(1) and Article 22(1) Corporate Income Tax Act. Payments related to so-called intangible services, i.e.
advisory or legal services (Article 21(1)(2a) the Corporate Income Tax Act) would be excluded from the scope of the tax at source. For these services it will be possible to apply the preferences provided for in international agreements immediately.
Within Polish Deal the rules for the issuance by the tax authorities at the request of the Polish payer, the foreign taxpayer, as well as the person making the payment of claims through entities holding securities accounts or the summary accounts of opinions on the possibility of applying preferences under the international agreement on the avoidance of double taxation (the so-called opinion on the application of preferences).
In addition, the requirements for signing a declaration of compliance with the conditions for applying the preferential rate or exemption provided for in the international agreement on the avoidance of double taxation will also be amended, namely, it will be sufficient to sign a declaration in accordance with the rules of representation of the company, and not as has been the case so far by all members of the company's board. Moreover, it will no longer be necessary to add additional annexes to the above-mentioned declaration.
If the proposed provisions Polish Deal will enter into force, this change is also to be subject to the verification of due diligence, namely due diligence will also be assessed taking into account the relationship between the payer and the taxpayer. This means that, in the event of payments made between related entities, the tax will require greater care, since, theoretically, related entities should have greater knowledge of the activities of other entities in the group.
Solutions Polish Deal are also to eliminate the obligation to notify the tax authorities of the fact that the tax is not collected when the claims are paid abroad in connection with the activity of a nonresident establishment located in the Republic of Poland. This is only the case, however, where the amount of tax not collected exceeds 500,000 PLN.
The proposed solutions are to be introduced to the same extent in corporate income tax as in personal income tax.
Changes in the scope of the withholding tax will significantly increase legal certainty, in particular given the uncertain legal status associated with the continuous suspension of the provisions of the Act by the Minister of Finance.