Poland’s new explanatory guidelines ‘create tension’ with EU over beneficial ownership

The Polish Ministry of Finance published explanatory guidelines (hereinafter: the Guidelines) on the application of the beneficial owner (BO) clause in Withholding Tax (WHT). These document has been long-awaited as it addresses ambiguities faced by taxpayers. Although it resolves a few of long-standing problems, such as confirming the look-through approach, it also takes a restrictive position, requiring BO status to be demonstrated as a condition for applying the dividend exemption under the Parent–Subsidiary Directive (PSD).

As Monika Dziedzic and Paweł Wyciślik, MDDP experts, point out, this stance is controversial, because the PSD does not impose a BO requirement. This approach was presented in landmark CJEU judgements, such as the Danish cases (Joined Cases C-116/16 and C-117/16, 2019), in which the Court set out a two-step abuse test, confirming that the absence of BO may serve only as one indicator.

“The impact on businesses may be significant. Refund proceedings are already being prolonged, and the explanations provided in the Guidelines do little to prevent these delays, effectively confirming to the tax authorities that they should carry out detailed examinations of circumstances that are not actually statutory conditions for exemption. This results in ongoing uncertainty and cash-flow constraints” – say Monika Dziedzic and Paweł Wyciślik.

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