Wednesday, 20 November 2024, saw publication of the Finance Minister’s public tax ruling number DD9.8202.1.2024 concerning certain application conditions for the exemption from withholding tax (WHT) on dividends.

The WHT exemption applies to dividends when all of the following requirements are satisfied (as listed in Article 22(4) of the Corporate Income Tax Act):

  • the dividend is paid by a company which is established or has its management in Poland (resident);
  • the recipient is subject to income tax on all of its world-wide income in Poland or another EU or EEA country;
  • the recipient has directly owned at least 10% of the shares in payer’s share capital for an uninterrupted period of 2 years;
  • the recipient does not enjoy an exemption from income tax on all of its income, regardless of its source.

The ruling addresses requirements 2 and 4.

The Minister stated that requirement 2 is satisfied where the recipient is a tax resident of an EU or EEA country (is subject to unlimited taxation in that country). As regards requirement 4, the authority held that if the dividend is exempt from tax in the recipient’s country (exemption with respect to subject-matter), this alone does not preclude use of the Polish dividend tax exemption. However, the Polish exemption is not available where the recipient itself is fully exempt from income tax in its home country (exemption with respect to entity). The ruling further suggests that, according to the Finance Ministry, exemption with respect to entity includes also a situation where the recipient is fully subject to tax at the rate of 0%

That is important in so far as a lower-tier Polish tax tribunal has recently issued a concerning line of authority to the effect that the requirement of “not enjoying exemption on all of one’s income” in fact means that the dividends should be subject to effective taxation in the beneficiary’s country. In such circumstances, the recent tax ruling should help resolve certain interpretation issues with respect to conditions for application of the dividend tax exemption, including those concerning the “effective dividend taxation” requirement.

The Bill involves a consultation process regarding the legal and business arrangements in mandatory KSeF. This will continue until 19 November 2024 for legal arrangements and until 22 November 2024 for business ones. The Finance Ministry has also published the FA(3) and  FA_RR schemes for consultations that will continue by 22 November 2024.  We are taking part in the consultation process and will keep you up to date on the legislative process.

If this issue pertains to your business and you are interested in our assistance, please contact us.

This blog post is provided for general information purposes to keep you up-to-date with changes in tax law, tax rulings by authorities, case law of courts and interesting commentaries. Doradztwo Podatkowe WTS&SAJA shall not be held legally liable for any acts or omissions resulting from reliance on such information.