Withholding Tax (WHT) and Transfer Pricing – how do tax authorities use the Master File? Practical and case law insights

May 4, 2026
4 minuty

Transfer pricing (TP) documentation within multinational capital groups has become an invaluable tool not only in the context of transfer pricing verification, but also in relation to other taxes, including withholding tax (WHT). In Poland, tax authorities are increasingly referring to group documentation, namely the Master File, during WHT audits, which represents a new reality for Polish companies acting as WHT remitters.

The role of the Master File in WHT analysis

Until now, group transfer pricing documentation, namely the Master File, has mainly been treated as an appendix to the local documentation (Local File), and used to defend the applied transfer prices. In recent years, as WHT audits have intensified, Polish tax authorities have started to treat the Master File as a source of information used not only to assess the correctness of transfer pricing, but also in the WHT context. Based on this documentation, tax authorities are increasingly drawing conclusions concerning:

the group’s ownership structure;

the functions performed by individual group companies and where key economic decisions are made;

financing models (including loans, on-lending arrangements and cash pooling), as well as licensing arrangements;

the entities bearing the actual risk related to payments and the entities with decision-making autonomy over particular payments.

Change in the approach taken by tax authorities in practice

During WHT audits, Polish tax authorities are increasingly referring to transfer pricing documentation, in particular the Master File, in order to assess whether:

the recipient of a payment may be treated as its beneficial owner;

the application, for withholding tax purposes, of an exemption or a reduced rate under a double tax treaty is justified.

Judgment of the Voivodeship Administrative Court in Szczecin – how Master File documentation affects WHT

In the analysed case, a Polish company incorrectly assumed that interest paid to a Swedish company was exempt from withholding tax (WHT). As a result, the Polish company failed to comply with its statutory obligations as a WHT remitter. The tax authorities demonstrated that the beneficial owner of the interest was a company registered in Luxembourg, while the Swedish company acted only as an intermediary. The administrative court confirmed that the Polish company was aware of this, as evidenced, among other things, by the transfer pricing documentation approved by the Deputy CEO.

Risks related to incorrect Master File documentation

A lack of precise and up-to-date information in the Master File documentation may lead to serious tax risks, particularly in the WHT context. Examples of risks related to incorrectly prepared documentation include:

WHT risks: tax authorities, relying on excessive simplifications in the Master File, may challenge the beneficial owner (BO) status of the entity to which payments are made. This, in turn, will result in the denial of an exemption or a reduced rate under a double tax treaty.

Transfer pricing risks: an incorrectly defined role of entities in the Group from a transfer pricing perspective may lead to an incorrect transfer pricing calculation method and/or transfer pricing verification method.

Lack of alignment with reality: Master File documentation may fail to reflect the actual substance of transactions, for example a loan or on-lending arrangement. This may create issues during a tax audit or customs and fiscal audit and lead to the risk of transaction recharacterisation.

National Revenue Administration (KAS) – identified irregularities

According to information published by the Polish National Revenue Administration (KAS), many WHT irregularities have been identified in Poland in recent years. Examples include:

PLN 512 million related to the payment of dividends and interim dividends which were ultimately transferred to companies outside the EU/EEA;

PLN 67 million related to the unjustified application of an exemption from the collection and payment of WHT on interest and dividend payments;

over PLN 135 million related to the failure to withhold WHT on the payment of a dividend from a Polish company to a US owner through a company registered in Luxembourg.

These cases show that the materialisation of WHT-related risks may have multi-million-zloty consequences for companies.

How to mitigate risks related to the Master File and WHT

To mitigate WHT-related risks, Polish companies should:

conduct a detailed review of the Master File documentation “through the eyes of the WHT remitter”;
compare group documentation, namely the Master File, with local documentation, namely the Local File, and settlement practices;
identify areas where the description in the Master File is too general or outdated;
identify any inconsistencies and report them to headquarters in order to update the documentation.

At the same time, it is crucial that the Master File documentation complies with local regulations and reflects the actual conduct of transactions within the capital group. Otherwise, it may generate a risk of additional sanctions and penalties.

Summary

Master File documentation has become a key tool in WHT analysis. Polish companies acting as WHT remitters can no longer treat this documentation only as a formal document prepared for the purpose of meeting transfer pricing obligations. Instead, they should treat it as an element of tax risk that must be verified and updated. It is worth ensuring that the Master File is aligned with reality and accurately reflects the group structure and the substance of intra-group transactions.

We encourage you to read our brochure, “Transfer Pricing in case law. A review of trends in 2025 | MDDP”, in which we discuss this and other issues in detail – a total of 18 selected judgments of Voivodeship Administrative Courts and the Supreme Administrative Court, grouped into nine key areas, additionally supplemented with a review of 11 foreign judgments and practical guidance for taxpayers.Początek formularza

Dół formularza

The publication is available here: https://www.mddp.pl/transfer-pricing-in-case-law-a-review-of-trends-in-2025/