HOW CAN MDDP HELP YOU?

  • Verification of withholding tax settlements with WTH remitters

    • Assessment of documentation (contracts, orders, invoices, payments, including dividend payments) and arrangements with representatives of the remitter or its contractors
    • Verification of transactions on which the remitter should settle withholding tax and assistance in determining its amount and reliefs and exemptions applicable in the case
    • Identification of transactions that may raise doubts as to whether they are subject to withholding tax
    • Preparation of tools for verification and determination of withholding tax obligations, including those indicating due diligence exercised by the WHT remitter
    • Issuing an opinion on the possibility of applying preferential rates / exemptions, as well as the scope of activities required at that time in terms of exercising and documenting due diligence
    • Preparation of an application for confirmation of overpayment in withholding tax for remitters and taxpayers
    • Preparation of an application for an official opinion on an exemption from withholding tax or an application for an individual advanced tax ruling
  • Review of the structure of the Polish WHT remitter and audit of the actual business activity of payment recipients (taxpayers)

    • Assessment of the qualifications of foreign partners, lenders, service providers and other contractors as beneficial owners of payments / entities conducting actual business activity, usually determining the application of exemptions or preferential withholding tax rates
  • Developing procedures for determining the scope of taxation and withholding tax settlements and model documentation

    • Developing recommendations for payments subject to withholding tax and rules for determining the amount of this tax and modes of collection
    • Preparation of draft documents / statements regarding the application of preferential settlement principles and withholding tax rates
  • Training for employees of finance, tax, legal and other departments (e.g. procurement department)

    • Training to explain practical doubts related to withholding tax and the procedure required by the law
Withholding Tax (WHT)

Since 2019, really significant changes have been introduced in Poland in the method of settling withholding tax (WHT). The previous regime consisting in taxation of paid claims in a preferential manner (i.e. taking into account an exemption or reduced rates, if provided for in the concluded bilateral agreement or the provisions of EU directives – relief at source), has been replaced by the procedure of tax payment and refund, which consists in imposing on the paying agent the obligation to collect withholding tax at the national rate (19%, 20%) already at the time of payment of the amount due, and then requesting the refund by that taxpayer or the remitter itself. It will be possible not to collect the tax provided that the sum of payments from various sources (including claims for intangible services, e.g. management services) paid to one recipient does not exceed PLN 2 million in a tax year (approx. EUR 460 thousand) or if the remitter’s management board submits statements regarding recipient verification. The new regulations contain many unclear concepts (e.g. due diligence, actual business activity, beneficiary recipient) and are in practice difficult to apply.

The time taken for the tax authorities to consider the application (and thus tax refund) is 6 months (this period may be extended). The new regulations may significantly reduce the financial liquidity of entrepreneurs or, in the worst case, even prevent the use of reduced rates.

The application of, but only part of, the above provisions has been recently, once again, suspended until 30 June 2020, so it is even more difficult for entrepreneurs not to get confused by the new rules.

From the beginning of 2019, however, new due diligence regulations apply to all payments. The concept of due diligence is not defined in the Act, and the issued individual advanced tax rulings also avoid explicit and binding explanation of what actions the authorities will expect from the entrepreneur paying foreign contractors claims subject to withholding tax, arguing that this is an issue to be assessed during any possible inspection. Hence, ensuring tax security in the area of ​​withholding tax requires consideration and good preparation of procedures on the basis of which the remitter will be able to demonstrate the correctness of its accounts and exercise of due diligence.

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