The United Kingdom is no longer a member of the European Union (EU) or the European Economic Area (EEA) as of 1 January 2021.

While the EU and the UK did conclude a trade and cooperation agreement on 31 December 2020, it is silent on withholding tax.

Thus, as of 1 January 2021, dealings with UK-resident entities no longer fall within the Polish CIT Act regulations which, subject to certain conditions, exempt payments within the EU or the EEA from withholding tax in accordance with the following implemented directives:

  • Council Directive 2003/49/EU of June 2003 (Interest- Royalty Directive) – with respect to interest and royalties,
  • Council Directive 2011/96/EU of 30 November 2011 (Parent-Subsidiary Directive) – with respect to dividends.

Accordingly, as of 1 January 2021, Polish withholding agents are not allowed to apply withholding tax exemptions to dividends, interest or royalties paid to UK recipients.

However, UK’s exit from the EU and the EEA is not prejudicial to rights arising from the double tax treaty between the Republic of Poland and the United Kingdom of Great Britain and Northern Ireland dated 20 July 2006. Dividends and other corporate profit distributions as well as interest and royalties paid to UK companies may now be taxed:

  • in accordance with the double tax treaty at a reduced rate, if conditions laid down in the treaty are satisfied, or otherwise
  • pursuant to the general rules laid down in Articles 21 and 22 of the Polish CIT Act, i.e. at the rate of 20% (interest, royalties) or 19% (dividend).

Given those changes, corporate groups with entities located in the UK will find it necessary to review their tax treatment of intra-group payments with the involvement of those entities.

If these issues pertain to your business and you are interested in our assistance, please contact your WTS&SAJA consultant.

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This Newsletter 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.

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