Interest, royalties and others
Interest and royalties paid to a non-resident and fees for certain intangible assets and legal services (e.g. consulting, accounting, legal and technical services, advertising, data processing, market research, recruitment, management, inspection services and guarantees, etc.) are subject to 20% withholding tax, unless the rate is not reduced under the agreement on the avoidance of double taxation, or the EU Directive on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States.
If the payments for the same taxpayer exceed the amount of 2,000,000.00 PLN, the payer will be obliged to collect the full amount of tax (19% or 20%) at the rate resulting from the Polish regulations, notwithstanding whether it is possible to apply a reduced rate.
The tax charged in this way will be refunded on the request of:
- taxpayer, or,
- witholding agent – where the taxable person has paid the tax from his own resources and has borne the economic burden of that tax.
The application shall be made in electronic form and the provisions shall specify the information to be included in it and the list of attachments to be attached to it.
Requirements for exemption from withholding tax on interest and royalties
The condition for exemption from the withholding tax, in the case of interest and royalties arising between affiliated companies, is that the recipient of the claims is the actual beneficial owner of these claims.
For the exemption to be applied, the Polish taxpayer must obtain a certificate which, in addition to the previous elements, contains
a statement that the company or the foreign enterprise, which is the recipient of the creditor claims, is the actual economic owner.
The obligation to collect withholding tax on the purchase of flight tickets (in the amount of 10%) was abolished, if the purchase of such
flight ticket concerns a regular scheduled passenger flight.
From 2022, the following revisions will take place with regard to the withholding tax:
Narrowing down the material and subjective scope of the WHT levy procedure:
The application of the WHT pay and refund mechanism is narrowed down with respect to related parties as defined in the transfer pricing rules and to the payments of a passive nature. The new regulation also provides for the exclusion of dividends paid to Polish residents from the above mentioned mechanism.
This indicates that taxpayers will still, as a rule, be obliged to pay WHT once the PLN 2 million threshold is exceeded, and only after withholding tax is deducted will they be able to claim a refund, but this will only apply to the payments to related entities that are not Polish tax residents.When verifying the conditions of the application of an exemption or a tax rate resulting from special regulations or double taxation conventions, the payer is obliged to exercise due diligence
Amendment of the due diligence criterion:
As of 2022, the criterion of due diligence has been changed: when assessing due diligence, now not only the nature and scale of the payer‘s activity is taken into account, but also its relationship with the taxpayer. This change is intended to clarify the requirements related to the verification of due diligence and will enable differentiation of due diligence requirements in relation to the related and the unrelated entities.
Extension of the material scope of the opinion on the use of preferences:
The material scope of the existing opinion on the use of exemption is extended also to preferences provided for the double tax treaties (i.e. reduced withholding tax rates or exemption from the withholding tax).
The previously issued opinions on the use of the exemption from the withholding tax will be valid until 2025.
Use of copies of certificates of residence:
Whereas it is currently possible to use copies of certificates of residence in the context of an epidemic, without limitation to so-called intangible services and without limitation of the amount, it is planned to make this a general rule
If you have any questions regarding this topic or if you are in need for any additional information – please do not hesitate to contact us:
CUSTOMER RELATIONSHIPS DEPARTMENT
Head of Customer Relationships
Department / Senior Manager