Withholding Tax in Poland: A Comprehensive Guide for Corporate Payments and Exemptions

Poland, as a member of the European Union and a signatory to numerous double tax treaties, maintains a well-developed system of withholding tax (WHT) regulations. These rules apply to cross-border payments such as dividends, interest, royalties, and certain intangible services. In this article, we provide a comprehensive overview of the withholding tax system in Poland, focusing on tax rates, exemptions, and compliance obligations for both Polish and foreign corporate entities.

What Is Withholding Tax in Poland?

Withholding tax (WHT) in Poland refers to income tax withheld at the source of payment on certain types of outbound payments made by Polish tax residents or entities with a registered office in Poland. The tax is collected by the Polish remitter (usually a corporate payer) and remitted to the tax office. This mechanism ensures the tax authorities receive the appropriate amount of tax on income sourced in Poland.

Types of Payments Subject to WHT in Poland

The most common payments subject to withholding tax in Poland include:

Dividends
Interest and Royalties
Payments for certain intangible services (e.g., advisory, legal, accounting services)

These payments are considered Polish-sourced income and are taxed according to domestic law, unless a tax exemption or reduced tax rate applies.

Standard Withholding Tax Rates in Poland

Type of Payment	Standard WHT Rate	Conditions/Notes
Dividends	19%	May be reduced under EU directives or DTT
Interest	20%	Subject to DTT or exemption
Royalties	20%	Subject to DTT or exemption
Intangible Services	20%	Includes legal, advisory, accounting

These rates apply unless modified by a double tax treaty concluded by Poland with the recipient’s country of residence.

Reduced WHT Rates and Tax Exemptions

Entities may benefit from reduced WHT rates or full exemptions under either:

Applicable double tax treaties (DTTs) concluded between Poland and the recipient’s country
EU directives, such as the Parent-Subsidiary Directive or the Interest and Royalties Directive

To benefit from the reduced rate or exemption, the recipient must:

Be a tax resident in a country with which Poland has a DTT
Provide a valid certificate of tax residence
Fulfil substance and beneficial ownership requirements (especially in light of recent anti-abuse rules)

Importance of the Certificate of Tax Residence

A certificate of tax residence is a fundamental requirement when applying for any tax treaty benefit or exemption from Polish withholding tax. It must:

Be issued by the competent tax authority in the recipient’s country of residence
Confirm that the recipient is a tax resident under the local laws for a specific tax year
Be valid on the date the payment is made
Be obtained prior to or at the time of payment and kept on file

Polish tax authorities may require a Polish or English translation of the certificate if it is in another language. The certificate typically remains valid for 12 months, unless stated otherwise. However, if the circumstances change (e.g., relocation, corporate restructuring), a new certificate should be obtained immediately.

Failure to obtain or present a valid certificate may result in the denial of treaty benefits, and the application of the full domestic withholding tax rate.

Withholding Tax Exemption on Dividends: Parent-Subsidiary Directive

Under the EU Parent-Subsidiary Directive, dividends paid by a Polish company to a company resident in another EU member state may qualify for a full withholding tax exemption, provided the following conditions are met:

The dividend recipient is a company subject to corporate income tax in its home country, without the possibility of being exempt
The foreign company holds at least 10% of shares in the Polish subsidiary
The shareholding is maintained for a minimum of two years (this condition can be fulfilled post-payment)
The recipient is the beneficial owner of the dividend income

To benefit from the exemption, the following documents must be collected and stored:

Valid certificate of tax residence of the parent company
Ownership confirmation (e.g., share register or documentation from a commercial registry)
Statement of beneficial ownership
Compliance with Polish anti-abuse rules

If these conditions are not met, the standard 19% withholding tax applies unless a reduced treaty rate is available.

Withholding Tax Exemption on Interest and Royalties: Interest and Royalties Directive

Similarly, under the EU Interest and Royalties Directive, cross-border payments of interest and royalties between associated companies may be exempt from withholding tax if the following criteria are satisfied:

Both the payer and recipient are companies within the EU, subject to taxation and not exempt
One company holds at least 25% of shares or voting rights in the other, or both are owned by a common EU parent with at least 25%
The shareholding is held for an uninterrupted period of at least two years
The recipient is the beneficial owner of the income

Documents required to apply the exemption include:

Tax residence certificate of the recipient
Evidence of shareholding structure
Written beneficial ownership statement
Confirmation of taxability in the home jurisdiction

Failing to meet the conditions means the standard 20% WHT applies, subject to any applicable DTT reductions.

The PLN 2 Million Threshold and Pay-and-Refund Mechanism n Poland

As of 2019, Poland introduced a special rule for payments exceeding PLN 2 million per year to the same recipient. In such cases, the remitter is obliged to withhold tax at the standard domestic WHT rate (19% or 20%) even if a reduced rate or exemption could apply under a treaty or directive.

However, the recipient or remitter may apply for a refund from the Polish tax authorities after paying the tax. This “pay-and-refund” mechanism ensures that the tax authorities can assess whether the taxpayer meets the conditions for a reduced WHT rate or exemption.

Alternatively, the remitter may apply in advance for:

An individual tax ruling (binding opinion)
A WHT exemption clearance from the competent tax office

This allows the payer to apply the reduced rate or exemption upfront, avoiding the need for a refund procedure.

Compliance Obligations for Polish Payers

The Polish tax remitter (e.g., company making the payment) is obliged to collect withholding tax and submit it to the tax office within the appropriate deadlines.

Key obligations include:

Withholding and remitting the tax within 7 days of payment
Filing information forms such as IFT-1/IFT-2 and CIT-10Z
Maintaining documentation proving the right to apply a reduced tax rate or exemption

Failure to comply may result in penalties, additional tax assessments, or denial of the exemption.

Tax Authorities and Individual Tax Rulings

The Polish tax authorities play a central role in monitoring withholding tax compliance. In complex cases, taxpayers may apply for individual tax rulings or a general tax ruling to clarify how tax law should apply to a given transaction.

These rulings can be particularly important in verifying eligibility for:

Tax exemptions
Beneficial owner status
Reduced withholding tax rates

Advance rulings provide legal certainty and reduce the risk of penalties during tax audits.

Practical Considerations for Foreign Investors

Foreign investors and multinational corporations making or receiving payments in Poland should:

Verify whether the recipient qualifies for tax treaty benefits
Collect and renew certificates of tax residence regularly
Monitor whether PLN 2 million threshold is exceeded
Apply for advance clearance or individual rulings where necessary
Ensure the beneficial ownership and substance criteria are met
Keep records for at least 5 years in case of future audits

Summary: Key Takeaways on Withholding Tax in Poland

Poland applies WHT to dividends, interest, royalties, and some services
Standard WHT rates are 19% (dividends) and 20% (interest and royalties)
Reduced WHT rates or exemptions may apply under DTTs or EU directives
Payments over PLN 2 million require upfront tax payment, followed by refund or advance clearance
Tax residence certificate and beneficial ownership documentation are essential
Polish remitters must comply with strict filing and payment obligations

Understanding withholding tax in Poland is essential for ensuring tax compliance and avoiding unexpected liabilities. Whether you’re making outbound payments from Poland or receiving income from a Polish source, it’s crucial to plan ahead and ensure all requirements are met.

For more detailed legal reference, see the official information on the Polish Ministry of Finance website. https://www.podatki.gov.pl/wht/podatek-u-zrodla-wht/

Contact us today at office@intertax.pl for a consultation and stay compliant with Polish tax law.