Intangible services in withholding tax (WHT)

The CIT Act and the PIT Act contain a list of intangible services, the income from which, as a rule, is subject to a 20% flat-rate income tax (withholding tax / WHT). These services include:

• • consulting,
  • accounting,
  • market research,
  • legal,
  • advertising,
  • management and control,
  • data processing,
  • employee recruitment and personnel acquisition,
  • guarantees and sureties, and
  • services of a similar nature.

In the case of payments for the above-mentioned services, the income tax payer is responsible for calculating, collecting, and paying the tax.

In determining whether tax is due, double taxation treaties [DTT] are also applied, which may result in the exemption of payments from taxation or the application of a lower rate.

Position of the Ministry of Finance

The Ministry of Finance [MF] has taken numerous measures in the area of withholding tax aimed at: providing information on aggressive (prohibited) tax practices, interpreting specific provisions, and explaining the applicable tax law provisions which, in practice, have caused the most significant problems from the perspective of Polish entities. From the perspective of withholding tax on intangible services, the explanations of July 3, 2025, concerning the application of the so-called beneficial owner clause for withholding tax purposes [Explanations] are an relevant document.

Intangible services in the Explanations

The Explanations clearly indicate that in the case of payments for intangible services (e.g., remuneration for legal or advertising services), which, in accordance with the provisions of the applicable DTT, constitute so-called “business profits,” there is no need to examine whether the entity receiving the payments can be considered the beneficial owner of the payments.

Earlier drafts of tax explanations from both 2019 and 2023 lacked a clear indication. Therefore, the Explanations regarding intangible services should be assessed as positive. On the one hand, they respond to a significant practical problem that has existed to date, which in turn increases the certainty and stability of current tax practice, and on the other hand, they are an expression of rational action by the ministry in this area.

Do the Explanations solve all problems?

The Explanations do not solve all problems related to the taxation of intangible services subject to withholding tax. In this regard, three areas of concern for taxpayers can be most frequently identified.

Firstly, the structure of the catalog of services subject to withholding tax continues to cause a number of problems for income tax payers, where the legislator referred in the provision to “services of a similar nature.” In the past, this structure of the provision has led to a number of disputes between tax authorities and income tax payers in areas such as:

• • insurance services, which in the past, in the opinion of the tax authorities, were similar to guarantees and, as a consequence, should be subject to withholding tax (for example: interpretation of January 28, 2020, Director of National Tax Information, ref. no. 0114-KDIP2-1.4010.479.2019.2.JF);
  • intermediary services which, from the perspective of the tax authorities, are similar in nature to the services listed in the statutory catalog, i.e., consulting, advertising, or market research services (e.g., interpretation of October 31, 2023, Director of National Tax Information, ref. no. 0111-KDIB1-2.4010.388.2023.3.EJ).

This structure of the provisions of the PIT Act and the CIT Act leads in many cases to disputes with tax authorities as a result of the extension interpretation applied by the authorities.

Secondly, it is still unclear how to identify intangible services subject to withholding tax. The dynamically developing economic world, the multitude of types of contracts and the diversity of services provided by foreign entities often raise significant doubts as to whether these services are included in the statutory catalog or are sufficiently similar to the services explicitly listed therein.

Thirdly, income tax payers making payments to foreign entities, including for intangible services, should also fulfill with their information and reporting obligations to the tax authorities in a timely manner.

Actions of the payer in the field of intangible services

The payer should always perform the following 4 steps:

• • Step 1: determine whether the services are included in the legal catalog;
  • Step 2: if the services are included in the catalog from the law, the payer should determine the appropriate DTT;
  • Step 3: assess whether, on the basis of the DTT, a lower rate or tax exemption (e.g., as business profits) can be applied; the explanations specify that this step does not require verification of the actual owner of the amounts paid;
  • Step 4: fulfill information and reporting obligations and/or pay tax.

Summary

With regard to intangible services, the Explanations provide a clear indication that there is no obligation to investigate the actual owner of the receivables.