Withholding tax in Poland – general tax rulings by the Polish Ministry of Finance | News Flash

The Polish Ministry of Finance has recently issued two general tax rulings regarding withholding tax in Poland – one regarding the possibility of applying the withholding tax exemption to the payment of dividends to a non-resident by the payer and the other to the payment of royalties and interest. Both general tax rulings concerned the prerequisites for taxation included in Polish tax regulations implementing the EU exemption under the IR Directive (Directive of the Council of the European Union No. 2003/49/EC of 3 June 2003 on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States (hereinafter: ‘IR Directive’)) and the PS Directive (Directive of the Council of the European Union No 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States, subsequently amended by Directive of the Council of the European Union No 2003/123/EC of 22 December 2003 and replaced by Directive of the Council of the European Union of 30 November 2011 No 2011/96/EU (hereinafter: the ‘PS Directive’)). According to the regulations, one of the prerequisites for the application of the exemption is the requirement that the company receiving the payment must be subject to income tax ‘in a European Union Member State other than the Republic of Poland, or in another country belonging to the European Economic Area to income tax on its entire income regardless of the place where it is earned.’

According to the standpoint of the Polish Ministry of Finance, the necessity of issuing general tax rulings in Poland, resulted from interpretational doubts caused, inter alia, by the divergent position of the Provincial Administrative Court in Lublin in the judgments concerning the cases in question.

According to some judgments of the Provincial Administrative Court in Lublin, the analysed premise should be deemed not fulfilled in a situation where the taxpayer benefits from a subjective exemption in the country of residence or the non-payment of income tax by a foreign taxpayer, for example, because of incurring a tax loss.

Explanations for dividends

According to the Polish general tax ruling on dividends of November 15, 2024 (No. DD9.8202.1.2024), the premise of taxability will be met if the recipient of the dividend from another EU or EEA Member State benefits from a tax exemption of an objective nature in relation to the dividend received or the taxpayer’s non-payment of income tax in a given tax year is due to its individual situation (e.g. settlement of a tax loss from previous years or earning only income from dividends).

Furthermore, as indicated in the Polish general tax instruction, if a taxpayer benefits from a subject exemption or does not pay corporate income tax in a given year, the tax authority has the right to verify that the application of the exemption was not contrary to the purpose of the provision and if the tax advantage was not one of the main reasons for the transaction and the very nature of the transaction can be qualified as artificial.

On the other hand, if the taxpayer is subjectively exempt from income tax, the premise of taxability will not be met.

Royalties and interest

According to the Polish general tax ruling on interest and royalties of November 27, 2024 (No. DD9.8202.2.2024), the premise of taxability will be met if the recipient of the interest or receivable from another EU or EEA Member State does not benefit from a tax exemption of a subject or object nature in relation to the payment received, and the taxpayer’s failure to pay income tax in a given tax year is due to its individual situation (e.g. settlement of a tax loss from previous years).

As in the case of the dividend exemption, it has been indicated that in the event that a taxpayer does not pay corporate income tax in a given year, the tax authority has the right to verify that the application of the exemption was not contrary to the purpose of the provision and that the tax advantage was not one of the main reasons for the transaction and that the very nature of the transaction can be considered artificial.

The importance of the issued general tax rulings

The issuance of Polish general rulings on issues raising tax uncertainties should be viewed positively. From the taxpayers’ perspective, the general ruling on dividends is favorable, as it clarifies that the failure to meet the condition applies only to situations where the taxpayer benefits from a subjective exemption. Conversely, the general ruling on interest and royalties is significantly less favorable for taxpayers. In this case, the failure to meet the condition encompasses both situations related to the use of an objective exemption and a subjective exemption.

Accace support

If you are interested in discussing the implications of the aforementioned general rulings for your business activities, we encourage you to contact our experts.

Patrycja Luzak

Tax Consultant | Accace Poland

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Anna Kołakowska

Tax Supervisor | Accace Poland

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