Withholding Tax (WHT)

Withholding tax (WHT) is a flat-rate income tax (PIT and CIT). The remitters, i.e. Polish entities that make payments to foreign recipients, are obliged to collect it in Poland.

With the fulfilment of certain obligations indicated in the CIT/PIT Act and/or double taxation treaties the following options are possible:

  • the application of an exemption from withholding tax or a preferential tax rate;
  • no collection of withholding tax;
  • request for a refund of overpaid tax at source (taxpayer – foreign company or remitter – Polish company in certain cases).

The legislation imposes an obligation on the remitter to exercise due diligence when verifying the conditions for applying an exemption, preferential rate or refraining from collecting withholding tax.

In the case of certain passive payments subject to withholding tax (dividends, interest, royalties), exceeding PLN 2 million per annum to one related entity, Polish entities (remitters) are obliged to withhold tax at the basic rate regardless of whether the aforementioned conditions for the application of the exemption / preferential rate have been met. The foreign taxpayer (or remitter, if it has incurred the tax burden) will be then able to apply for a refund of the tax in separate proceedings. It is commonly referred to as “pay and refund” mechanism.

The obligation to apply the pay and refund mechanism is excluded if the taxpayer / remitter has WHT exemption binding ruling or submits a special statement (usually WH-OSC form).

How can we help?

Analysis of transactions for the purposes of withholding tax obligations

Verification of your settlement as a withholding taxpayer / remitter

Analysis of the fulfilment of the conditions enabling the application of the withholding tax exemption / preferential withholding tax rate including, among others, analysis of source documentation

Audit of genuine business activity of taxpayers - analysis of source documentation and/or on-site visit

Support for documenting substance of entities based abroad (taxpayers)

Preparation of an internal procedure for withholding tax settlements and due diligence

Support for filing a claim for refund of overpaid withholding tax

Support for submitting application for WHT exemption binding rulings or WH-OSC statements

Assistance in dealing with authorities on withholding tax matters

Assistance in meeting compliance obligations, e.g. preparation of IFT, CIT-10Z forms

Organizing training for staff in finance, tax, legal and other departments (e.g. purchasing department)

Importantly, in the application for WHT exemption binding ruling, the remitter should prove that the transaction was market-based. The determinant of ‘marketability’ is the amount of the transaction – it must be at the relevant level, i.e. the level that unrelated parties would have agreed between themselves. If it turns out that the value of the transaction was above the market level, the WHT exemption is only available up to the market level. It is applicable to interest and royalties. And how do you check whether a transaction was market-based or not? – We would be happy to support you in this! We will verify the method for determining the market value of a transaction or develop it from scratch. Under this link you will find more information about our solutions – #CHECK


Application of withholding tax exemption

Application of a preferential withholding tax rate or refraining from collecting WHT

Refund of overpaid withholding tax

Protection against penalties under the Criminal Code

Smooth and effective proceedings before tax authorities

Assistance in gathering required documentation, among others genuine business activity abroad

Well-balanced practice-based approach with respect to withholding tax requirements

Our experiences

Assistance in obtaining numerous WHT exemption binding rulings also in big cases for example regarding the payment of dividends amounted to approx. PLN 30 million

Complex analyses for large international groups, e.g. verification of over 1,000 payments for one group and assistance in completing the required documentation and tax forms

Local substance survey reports based on visits to several different countries e.g. Cyprus, the Netherlands, Luxembourg

Feel free to contact us

Monika Dziedzic

Partner | Tax adviser | Attorney at Law
E: monika.dziedzic@mddp.pl

Justyna Bauta-Szostak

Partner | Tax adviser | Attorney at Law
E: justyna.bauta-szostak@mddp.pl
T: (+48) 502 241 631

Piotr Paśko

PPartner | Tax adviser
E: Piotr.Pasko@mddp.pl
T: (+48) 602 197 893

Bartosz Głowacki

Partner | Tax adviser
E: bartosz.glowacki@mddp.pl
T: (+48) 603 980 382