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rates, if provided for in the concluded bilateral agreement or the provisions of EU directives – relief at source), has been replaced by the procedure of tax payment and refund, which consists in imposing on the paying agent the obligation to collect withholding tax at the national rate (19%,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.