Please note judgments of the Provincial Administrative Court (“PAC”) in Warsaw (case no. III SA/Wa 2264/19, III SA/Wa 2265/19, III SA/Wa 2400/19) repealing the tax rulings confirming the required detailed verification of the payee in the case of payments below PLN 2M, which are classified as payments subject to withholding tax in Poland.

The legislator’s intention was to implement in 2019 a new withholding tax mechanism in Poland, which assumes that if payments subject to withholding tax made by a withholding agent to a taxpayer exceed PLN 2M during a tax year, the tax on any further such payment made to the taxpayer in excess of the threshold would have to be withheld using the standard rates prescribed by the CIT Act or PIT Act.

Two regulations of the Finance Minister dated 19 June 2020 (1) to amend the regulation excluding or restricting the application of Article 26(2e) of the Corporate Income Tax Act and (2) to amend the regulation excluding or restricting the application of Article 41(12) of the Personal Income Tax Act defer again the new withholding mechanism until 31 December 2020.

Please note however that the above regulations do not affect the requirements which came into force on 1 January 2019, such as:

  • due diligence verification if conditions for preferential treatment have been satisfied, and
  • the beneficial owner test including actual activities.

However, a doubt arose whether the required beneficial owner test applies to each payment or only after the threshold of PLN 2M is exceeded.

In their tax rulings ref. 0114-KDIP2-1.4010.234.2019.2.MR, 0114-KDIP2-1.4010.231.2019.2.JC and 0111-KDIB1-2.4010.266.2019.2.BG the tax authorities consistently argued that tax agents were required to examine whether the payee is their beneficial owner and actually carries out business activities in its home country, regardless of whether or not payments made to the payee exceed the threshold of PLN 2M.

In turn, Polish taxpayers were of the opinion that the required detailed verification of the payee applies only after the threshold of PLN 2M is exceeded, while for payments below PLN 2M, the certificate of residence will suffice. In consequence, all tax rulings cited above were complained about to the PAC in Warsaw. Although the grounds for the decisions have not been published yet, the operative parts demonstrate that the court repealed the tax rulings in question and thus acknowledged the position of the Polish taxpayers.

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