From 1 January 2022 as part of a package of amendments introduced by Polish Deal the amendments to the CIT Act on withholding tax (WHT) entered into force.
Payment and refund mechanism
First of all, it should be stressed that the so-called payment and refund mechanism enters into force. According to his assumptions, the payers will be required to collect the tax (at 20%, 19% or 10%) on certain passive claims (e.g.
interest, dividends, royalties), paid to foreign affiliated entities not having the status of a Polish tax resident or not having a tax establishment in Poland.
The obligation to collect will not arise if the value of the receivables paid in the tax year does not exceed 2,000,000 PLN to the same taxpayer, provided that the registered office of the company is documented with the relevant residence certificate (and, in the case of a tax establishment, an appropriate certificate).
Crossing that threshold will, in principle, make it impossible to benefit from the preferences provided for in double taxation agreements.
The exception will be that the payer will make a declaration that the requirements are met and have the relevant documentation confirming the right to benefit from preferences under the rules, including double taxation agreements.
An important noveum is also the fact that this declaration no longer needs to be made by all members of a multi-stakeholder body that is the manager of an entity within the meaning of the accounting rules (e.g. all members of the management board of the Polish limited liability company.) and can only be made by a designated member of that body. However, it should be noted that this declaration cannot still be made by a proxy.
Extended possibility to use a copy of the residence certificate
As part of this amendment, the legislator has also extended the possibility of using a copy of the residence certificate, but provided that it does not raise reasonable doubts as to compliance with the facts. Until now, a copy of the certificate could only be used if the value of the claim (for the same entity) did not exceed 10,000 PLN in the calendar year. Thus, that limit was abolished.
Clarification of the grounds for due diligence
Withholding tax payers should bear in mind that, as part of this amendment, the legislator has clarified the grounds for due diligence when examining the possibility of benefiting from a preferential tax rate (which results from double taxation agreements – UPOs), exemption or non-collection conditions, thus making such a possibility subject to prior consideration of the taxpayer's relationship (relationship) with the payer (between related parties).
Furthermore, according to the introduced regulations, the withholding tax payer is no longer obliged to inform the tax authorities of the non-receiving tax, but only if the claims are paid in connection with the activity of an undertaking belonging to an entity which is not resident in the Republic of Poland and the total value of the charges on which the withholding tax has not been collected does not exceed 500,000 PLN in the tax year.
Extended scope of the so-called opinions on the application of preferences
It should also be noted that the extension was the scope of the so-called opinion on the use of preferences (a former opinion on the application of the exemption).
From the top 2022, taxable persons, payers or entities making payments through securities account holders may request the tax authority to give its opinion on the application of the tax rate by the payer or its failure to collect dues under the provisions of the UPO.
Until now, only the rules for the application of exemptions under the Act could be included in the opinion on the application of the exemption.
New cost allocation in connection with the change of law
Finally, it should be mentioned that with the repeal Article 15e The CIT Act, taxpayers have been given the right to take into account in the cost of obtaining the income of expenses incurred for:
- advisory services, market research, advertising, management and control services, data processing, insurance, guarantees and similar benefits;
- fees and charges for the use or rights to exercise the rights or values in question under Article 16b(1)(4-7) (e.g. copyright or related rights, licences, industrial property rights or know-how;
- transfer of the debtor's default risk for loans other than those provided by banks and cooperative savings and loan funds
- - directly or indirectly to related parties within the meaning of Article 11a(1)(4)) CIT or entities domiciled, established or managed in the territory or country applying harmful tax competition.
Author: Tomasz Mankiewicz
Lawyer, graduate of the Faculty of Law and Administration of the University of Szczecin. From 2017 entered on the list of lawyers at the District Bar Council in Warsaw. He has extensive professional experience in representing Clients - natural persons and economic entities before courts and offices and in conducting negotiations on behalf of Clients. His professional interests include civil and economic law in particular. Associated with Russell Bedford Dmowski and Associates Law Firm since 2021