Pay and Refund in Poland – a complicated withholding tax (WHT) refund procedure

The pay and refund in Poland mechanism is a withholding tax procedure that requires careful preparation, proper documentation analysis and strict compliance with statutory deadlines. In practice, it may significantly affect companies making cross-border payments from Poland, especially within international capital groups.

Below we explain what the Polish pay and refund mechanism is, when it applies to withholding tax (WHT), how the refund procedure works and what practical difficulties taxpayers and remitters may face.

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What is withholding tax in Poland?

Withholding tax (WHT) is a flat-rate income tax collected by the remitter on selected types of payments, including dividends, interest and royalties. In Poland, WHT is generally collected by entities that have their place of residence, registered office or foreign permanent establishment in Poland.

Polish withholding tax is therefore a specific form of tax collected mainly in connection with cross-border payments. Most often, WHT applies to certain types of income generated in Poland by non-residents. In specific cases, it may also apply to Polish tax residents, for example when dividends are paid to a domestic entity.

For foreign investors and international groups operating in Poland, WHT Poland rules are one of the key tax compliance areas that should be reviewed before making payments to related parties, foreign shareholders, lenders or licensors.

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Pay and refund system in withholding tax Poland

The current scope of the Polish pay and refund system for withholding tax has applied since 1 January 2022. Under this mechanism, the remitter is required to collect withholding tax at the standard domestic rate of 19% or 20%.

Only after the tax has been collected, and provided that the conditions for applying an exemption, reduced rate or non-collection of tax are met, the taxpayer or, in certain cases, the remitter may submit an electronic application for a refund of the tax collected under the pay and refund mechanism.

The pay and refund in Poland system applies to passive income payments subject to withholding tax, such as dividends, interest and royalties, made to related entities that are not Polish tax residents, where the total value of payments to the same taxpayer exceeds PLN 2,000,000 in the remitter’s tax year.

When does the pay and refund mechanism apply?

The pay and refund mechanism does not apply to every payment subject to withholding tax in Poland. Its application depends on several conditions that should be analysed jointly. The key factors include the type of payment, the status of the payment recipient, the relationship between the entities and the value of payments made during the tax year.

In practice, the mechanism mainly applies to passive payments, such as dividends, interest and royalties, if they are paid to a related entity that is not a Polish tax resident and the total amount of payments to the same taxpayer exceeds PLN 2,000,000 in the remitter’s tax year.

This means that the mere fact that withholding tax arises does not automatically mean that the pay and refund procedure must be applied. If payments do not exceed the statutory threshold or relate to categories excluded from the mechanism, standard WHT collection rules may apply. In such cases, it may still be possible to apply a reduced rate, exemption or non-collection of tax at the time of payment, provided that the statutory conditions are met.

For businesses, ongoing monitoring of payments to each foreign contractor or group entity is particularly important. The PLN 2,000,000 threshold should be analysed not at the level of a single payment, but cumulatively in relation to the same taxpayer. Without such monitoring, the obligation to collect WHT at the standard domestic rate may be identified too late.

The pay and refund mechanism does not apply to:

• payments made to Polish tax residents;
• payments for intangible services, such as advisory, accounting or legal services;
• payments made to unrelated entities;
• fees for services in the field of entertainment, artistic or sports activities.

Pay and refund versus standard WHT collection rules

The pay and refund mechanism should be distinguished from the standard collection of withholding tax in Poland. If the mechanism does not apply, the remitter may apply a WHT preference at the payment stage, provided that due diligence is exercised and the required documentation has been collected.

Such a preference may include a lower rate resulting from the applicable double tax treaty, an exemption provided for in specific regulations or non-collection of tax.

Under the pay and refund in Poland procedure, the sequence is different. First, the remitter collects the tax at the domestic rate. Only afterwards can the taxpayer or, in specific cases, the remitter apply for a refund of all or part of the tax collected. The refund depends on proving that the conditions for preferential tax treatment were met in the given case.

This distinction is highly important in practice. Under standard WHT collection rules, the key issue is proper verification before making the payment. Under the pay and refund procedure, the organisational burden also shifts to a later stage: preparing the refund application, collecting supporting documents, justifying the right to the WHT preference and responding to any questions from the tax authority.

The taxpayer is entitled to apply for a withholding tax refund. In certain cases, the remitter may also apply for the refund if it has borne the economic burden of the tax and paid it from its own funds. At the same time, the remitter is required to exercise due diligence when verifying the right to apply a preferential WHT rate or exemption.

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WHT refund procedure in Poland

The WHT refund procedure in Poland consists of four main stages:

• submitting the relevant form to the tax office;
• attaching appropriate documentation supporting the refund application;
• verification of the application by the tax authority and determination of the refund amount under the applicable provisions;
• refund of WHT without undue delay, generally no later than within 6 months from the date of receipt of the application, although in certain cases this deadline may be extended.

WHT refund documentation – what should be prepared in advance?

A withholding tax refund application should be supported by documentation that allows the tax authority to assess whether the refund is justified. In practice, preparing documents only after the tax has been collected often extends the entire process and increases the risk of additional questions from the authority.

Documents supporting the right to a WHT refund in Poland may include, in particular:

• the taxpayer’s certificate of tax residence;
• bank transfer confirmations or other documents showing how the payment was settled or transferred;
• documents confirming the obligation to make the payment, such as an agreement, resolution, invoice, interest note or licence document;
• documents or statements confirming that the conditions for applying an exemption, reduced rate or non-collection of tax have been met;
• documents confirming the taxpayer’s status as the beneficial owner of the payment, where this is relevant for applying the preference;
• documents confirming that the remitter has borne the economic burden of the tax, if the refund application is submitted by the remitter.

In addition to the taxpayer’s certificate of residence and payment confirmations, it is advisable to collect documents confirming the legal and economic basis of the payment in advance. These may include agreements, corporate resolutions, invoices, interest notes, licence documentation or other evidence showing the reason for the payment.

Documents confirming the conditions for applying an exemption or a reduced rate under the relevant double tax treaty may also be important.

If a WHT preference may be applied only on condition that the payment recipient is the beneficial owner, the documentation should also include explanations or statements concerning that status. In the case of related entities, the tax authority may analyse not only formal statements, but also the broader economic context of the transaction.

Companies should also ensure consistency between the data shown in different documents. Taxpayer details, payment amounts, payment dates, payment titles and the legal basis for applying the preference should be consistent across the agreement, accounting records, bank transfers, tax returns and the refund application. Formal inconsistencies may result in additional requests from the authority and prolong the proceedings.

Due diligence and beneficial owner status

One of the most important elements of correct withholding tax settlement in Poland is the exercise of due diligence. Holding the contractor’s certificate of tax residence alone is not sufficient. The remitter should verify whether the conditions for applying an exemption, reduced rate or non-collection of tax are met in the specific case.

The beneficial owner status of the payment recipient is particularly important. This verification is especially relevant for cross-border payments within capital groups, where the recipient may act as an intermediary, financing centre or entity transferring funds further.

In such situations, the tax authority may expect not only formal documents, but also an explanation of the recipient’s economic role in the transaction.

In practice, due diligence may include analysing the agreement, payment structure, role of the payment recipient, financing rules, use of the funds received and the actual business activity conducted by the foreign entity. The scope of this analysis should be adjusted to the value of the payment, the type of receivable, the relationship between the parties and the level of tax risk.

For companies making regular foreign payments, implementing an internal WHT procedure is often a good solution. Such a procedure helps organise the process of collecting documents, assessing contractor status, verifying the PLN 2,000,000 threshold and deciding whether a WHT preference can be applied or whether tax must be collected and later refunded.

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Practical difficulties in applying the pay and refund mechanism

The pay and refund in Poland procedure is neither simple nor quick. It involves an administrative process that requires extensive documentation and may lead to numerous questions from the tax authority reviewing the refund application.

As a result, the process may be lengthy, time-consuming and complex. Companies are often surprised by the scale of documentation required to obtain a withholding tax refund. Proper planning is therefore essential, taking into account both the payment schedule and the value of the transactions.

A broader practical context for Polish WHT settlements can also be seen in the number of WHT cases, opinions and refunds handled by tax authorities. This issue is discussed in more detail in the article: Withholding tax in numbers – what WHT statistics for 2025 show.

Another challenge is the still relatively low level of awareness among businesses as to how they can benefit from an exemption or apply rates lower than the standard 19% or 20%. To do so, the remitter must prove that the preference is available under specific provisions or the relevant double tax treaty.

One of the key challenges in the pay and refund procedure is compliance with deadlines, especially those related to submitting WH-OSC or WH-OSP statements. Submitting a WH-OSC/WH-OSP statement by the remitter is, alongside obtaining an opinion on the application of preferences, one of the available ways to avoid collecting withholding tax at the standard domestic rate.

The remitter’s statement must be submitted to the tax authority no later than on the last day of the second month following the month in which the PLN 2,000,000 threshold was exceeded. Submitting the statement after the deadline may result in the loss of this option and the obligation to collect tax at the standard rate.

WH-OSC and WH-OSP – why is the deadline crucial?

The WH-OSC or WH-OSP statement is not merely a formal information document. By submitting it, the remitter confirms that it holds the required documents and is not aware of any circumstances that would exclude the possibility of applying the WHT preference.

In practice, this means that the documentation, payment recipient status and legal basis for the exemption, reduced rate or non-collection of tax must be analysed in advance.

The practical significance of this solution is substantial. If the statement is submitted correctly and on time, the remitter may continue to apply the WHT preference even after exceeding the PLN 2,000,000 threshold. If the deadline is missed or the statement is incorrect, the remitter may lose the possibility of using this route and should collect tax at the standard domestic rate.

It should also be remembered that submitting the statement involves liability for the persons signing the document. Therefore, the decision to use WH-OSC or WH-OSP should be preceded by a genuine verification process, rather than merely collecting basic documents for formal purposes.

Opinion on the application of preferences

Another option that may help reduce the need to apply the pay and refund in Poland mechanism is obtaining an opinion on the application of preferences, referred to in Article 26b of the Polish Corporate Income Tax Act.

The application for such an opinion is subject to a fee paid to the tax authority’s bank account within 7 days from the date of filing the application. Failure to pay the fee may result in the application being left unexamined.

The opinion on the application of preferences should be issued without undue delay, but no later than within 6 months from the date on which the application is received by the tax authority.

Opinion on the application of preferences versus WHT refund – two different solutions

An opinion on the application of preferences and a withholding tax refund application serve different purposes.

The opinion is primarily preventive. Obtaining it may reduce the risk that withholding tax will have to be collected at the standard rate on future payments covered by the opinion.

A WHT refund application, on the other hand, is retrospective. It is submitted after the tax has already been collected, where the taxpayer or remitter wants to demonstrate that, under specific provisions or the relevant double tax treaty, the tax should be refunded in whole or in part.

From a business perspective, choosing the right route depends on the payment model, transaction value, frequency of payments and the level of certainty that the conditions for applying the WHT preference are met. In the case of regular high-value payments to the same group entity, obtaining an opinion on the application of preferences may be more predictable than repeatedly using the WHT refund procedure in Poland.

However, an opinion does not eliminate all remitter obligations. It remains necessary to monitor whether the facts presented in the application are still up to date and whether any conditions relevant to applying the preference have changed.

An additional organisational challenge is the concentration of many CIT WHT cases at the Lublin Tax Office in Lublin. This applies in particular to cases involving payments above PLN 2,000,000, remitter statements, opinions on the application of preferences and WHT refunds. In practice, this may affect the processing time and the scope of questions addressed to taxpayers and remitters.

For this reason, the refund application and supporting documentation should be prepared carefully, consistently and with consideration of the current approach of Polish tax authorities.

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How should a company prepare for the pay and refund procedure?

The pay and refund procedure in Poland requires advance organisational preparation. One of the biggest mistakes is treating WHT solely as an accounting matter identified only at the moment of making a bank transfer.

In practice, proper withholding tax settlement in Poland requires cooperation between finance, accounting, tax, legal and business teams responsible for relations with related parties.

Companies making cross-border payments should in particular:

• monitor the total value of payments made to each taxpayer during the tax year;
• identify payments subject to withholding tax;
• collect certificates of tax residence and update them at appropriate intervals;
• verify the legal basis for applying an exemption, reduced rate or non-collection of tax;
• document the exercise of due diligence;
• analyse the beneficial owner status of the payment recipient;
• plan in advance whether to submit WH-OSC/WH-OSP or apply for an opinion on the application of preferences;
• prepare documentation required for a potential WHT refund application.

A well-prepared WHT procedure reduces the risk of collecting tax in an incorrect amount, delays in recovering funds and disputes with tax authorities. This is particularly important for capital groups where payments of dividends, interest or royalties are a regular part of intra-group settlements.

In international transactions, WHT analysis should also be combined with a broader tax review. Withholding tax is often linked to other compliance areas, such as transfer pricing, contract documentation, the actual business activity of the foreign entity and tax reporting.

A broader overview of WHT collection rules, remitter obligations, the PLN 2,000,000 threshold and available routes for applying preferences is available in our comprehensive guide: Withholding tax WHT in Poland 2026.

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getsix® – professional tax advisory support in Poland

Preparing correctly for the pay and refund in Poland procedure may require support from experienced tax advisors and accounting specialists. As explained above, applying Polish withholding tax regulations under the pay and refund system is a complex process. It requires time, appropriate organisational resources and practical experience in analysing tax documentation.

The getsix® team supports businesses in the area of withholding tax in Poland and existing WHT exemption and refund procedures, including the pay and refund mechanism.

For companies making regular cross-border payments, professional tax advisory in Poland can help reduce compliance risk, improve documentation quality and prepare the organisation for communication with Polish tax authorities.

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