When is it appropriate to request an opinion on the use of WHT preferences?

When is it appropriate to request an opinion on the use of WHT preferences?

An opinion on the application of preferences is one of the ways to exclude the payer’s obligation to withhold withholding tax (so-called WHT) at the “standard” tax rate when paying certain receivables above PLN 2,000,000.

In the request for an opinion, it is necessary to demonstrate the fulfillment of the conditions necessary for the application of the exemption or preferential rate or the non-collection of tax, and to attach any documents that will prove the fulfillment of the requirements stipulated in the tax law.

When will an opinion be a favorable solution?
The main advantage of an opinion on the application of the exemption is the possibility for the payer not to collect WHT for receivables exceeding the value of PLN 2,000,000 and to apply an appropriate preference (e.g. exemption from taxation) already at the time of payment of the receivables. This prevents the “blocking” of funds in the tax authority’s account – in the absence of an opinion, it would be necessary to collect the tax and wait up to 6 months for the authority to refund it. This is particularly important for entities that often pay benefits to related companies with a value exceeding PLN 2,000,000 in a year (as a preference opinion is, in principle, valid for 36 months).

Another advantage of an opinion on the application of preferences is the absence of criminal liability – in contrast to the submission by the payer of a statement on the fulfillment of the conditions for the application of the relevant preference (the submission of a statement that is untrue is punishable by a fine of up to 720 daily rates).

Disadvantages of an opinion on the application of preferences
The process of obtaining an opinion is relatively complex – because the applicant must adequately motivate the application, demonstrate that the conditions for the application of a reduced rate or exemption or non-exemption are met, and support them with relevant documents.

In addition, the procedure is not one of the fastest – the authority has 6 months from the date of receipt of the application to issue an opinion, and our experience shows that it often uses the possibility of extending the deadline in question. Time is also prolonged by calls for documents or explanations. A disadvantage may also be the high fee for the application-compared, for example, to the fee for an application for an individual interpretation of tax law-amounting to PLN 2,000.