Clarified beneficial ownership rules and introduction of overseas investment fund exemptions

Ministry of Finance has recently published long-awaited explanatory notes on Withholding Tax (WHT), addressing long-standing ambiguities, which taxpayers had to face. These notes concern particularly the definition of beneficial owner, which lies at the heart of WHT regime and constitutes the condition for applying preferential rates under EU directives or tax treaties.

Explanatory notes confirm that the beneficial owner must not only by the legal recipient of income, but also have the economic control over it. They also contain a few negative indicators which aim to identify entities which do not qualify as beneficial owners, which are likely to form a part of standard due diligence procedures.

This document also clarifies the economic substance, introducing tailored expectations – the level of required business substance may vary depending on the nature of entity. In other key parts of the notes the “consolidated substrate” concept is discussed, as well as the look-through approach is formally recognized.

Justyna Bauta-Szostak, partner, and Gniewomir Parzyjagła, senior manager, underline that the notes are expected to have broad implications for many taxpayers:

“The explanatory notes on Withholding Tax may improve legal certainty in ongoing tax audits, facilitate faster tax refunds under the ‘pay-and-refund’ procedure, as well as help businesses to prepare for future WHT scrutiny by aligning group structures and internal procedures with the new standards”.

Although publishing of the notes constituted a big step forward for businesses operating across borders and overseas funds investing in Poland, notes are not without shortcomings.

***

Read #MORE in International Tax Review >> https://www.internationaltaxreview.com/article/2f2q2u2snd990spkw23uo/sponsored/poland-clarified-beneficial-ownership-rules-and-introduction-of-overseas-investment-fund-exemptions.