Mandatory withholding tax collection mechanism postponed again
At the end of June, the Minister of Finance, Funds and Regional Policy published two regulations:
- a regulation on exclusion or limitation of applicability of Article 26 (2e) of the Corporate Income Tax Act (Journal of Laws Item 1159) and
- a regulation on exclusion or limitation of applicability of Article 41 (12) of the Corporate Income Tax Act (Journal of Laws Item 1158),
under which the obligation to collect the withholding tax on high-value payments, i.e. above PLN 2 million during a tax year to a single entity, was postponed again until 31 December 2021.
According to the regulations which should have taken effect on 1 January 2019 but were postponed upon repeated regulations, when payments of e.g. dividend, interest, royalties or remuneration for certain intangible services are made, the Polish entities would be obliged to collect the tax at the domestic rate (19% or 20%), and later they could apply for a refund of the tax. The refund procedure is to take about 6 months and a number of formal requirements must be satisfied.
It bears emphasizing, however, that starting from 1 January 2019, one more new rule applies to withholding tax, related to exercising due diligence. The postponements do not apply to this rule, which means that withholding tax payers should pay special attention to the documentation in their possession when they apply exemptions from the withholding tax or rates lower than applicable in Poland. The tax authorities present quite a strict approach to observance of due diligence, so it is recommended that taxpayers review the documents in this respect, especially that we are informed about intensified inspections performed by the Tax Office of Lublin, which is competent for the withholding tax.
Additionally, the Ministry of Finance informs that it works on a change of the regulations governing the withholding tax, especially the mandatory collection of this tax. The scope of the changes is to be known by the end of 2021.
Should you have any questions or doubts regarding the issues discussed here, we are ready to assist you.