WHT regulations – general overview

As of January 1, 2022, a “pay and refund” mechanism has been introduced for withholding tax (WHT), which requires payers to collect WHT at basic rates (19% or 20%) even if the conditions for exemption or reduced rate are formally met.

The mentioned mechanism is applicable if the following conditions are met together:

  • the receivables paid are of a passive nature (for example: interest, remuneration for copyright or related rights, dividends and other income from participation in the profits of legal entities),
  • the amount of receivables paid to a single taxpayer exceeded PLN 2,000,000 in the tax year (as WHT is obligatorily levied on the excess over this amount);
  • the recipient of the receivables is an entity related to the payer,
  • the recipient of the receivables is a foreign tax resident.

Application for a tax refund
If the payer, in accordance with the above rules, collects tax at the “standard” tax rate, and the conditions for the application of an exemption or preferential rate (arising, for example, from a double tax treaty) were met, it is possible for the taxpayer or payer to apply for a tax refund.

If the authority recognizes the legitimacy of the submitted WHT refund application, a tax refund is made within 6 months from the date of receipt of the application.

The application shall be accompanied by the taxpayer’s certificate of residency, documentation indicating how the receivable was settled, documents relating to the obligation to pay the receivable and a number of other documentation to establish its legitimacy.

Due to the complexity of the procedure and the long waiting period for the refund of funds, which are unavailable to the taxpayer during this time (“blocked” in the tax office’s account), it may be more advantageous to use a preference opinion or the payer’s submission of an appropriate statement.

Statement of the payer
The payer is not obliged to collect WHT if he submits a statement that he has the necessary documents to apply the exemption or preferential rate, and has no knowledge of the existence of circumstances that prevent the application of the preference. The statement is submitted by the members of the board of directors to the relevant tax authority. Submission of an incorrect statement is punishable by a fine of up to 720 daily rates.

Opinion on the application of preferences
Another way to exclude the obligation to collect WHT at the standard tax rate is to obtain a preference application opinion, in which the authority authorizes the use of an exemption, the non-collection of tax or the application of a preferential rate to receivables paid by the payer.