Withholding Tax – new obligations for tax remitters
Recent amendments to the tax legislation will also affect the obligations of withholding tax remitters. The new regulations, coming into force in 2019, will considerably extend the scope of obligations imposed on remitters, which in turn will result in an increased tax risk for domestic businesses.
Essentially, the additional requirements will apply after the PLN 2,000,000 threshold has been exceeded in a fiscal year of the aggregate amount of the remuneration paid that is subject to withholding tax, including interest on loans, certain intangible services or dividends.
Nonetheless, the situation of remitters making payments below the threshold will also be affected. One will still be in a position to apply a tax rate under a double taxation agreement or be exempt from the obligation to withhold tax at the source on condition of having a valid certificate of residence. However, a remitter will be under an additional obligation to verify, with due care, the eligibility for the lower rates.
Exceeding the PLN 2,000,000 threshold will entail that the tax on the excess of PLN 2,000,000 should be paid to the relevant tax authority at the tax rates under the PIT Act or CIT Act. As a result, one will be precluded from applying the tax rate under a double taxation agreement or an exemption.
However, the legislator has provided for several exceptions from the obligation to withhold the tax at the domestic rates, but this will entail further formal obligations on the part of the remitter. Before applying a tax rate under a double taxation agreement or an exemption from withholding tax, the tax remitter will be required to make, prior to making the payment, a statement attesting that:
1) It is in possession of all the documents required under tax law for the application of a lower rate,
or exemption or not withholding the tax, under specific regulations or double taxation agreements;
2) Upon verification of the conditions for a lower tax rate or exemption, or the conditions for not withholding the tax at all, under the applicable tax regulations, it has no reasonable suspicion that there could exist any circumstances precluding the application of a lower tax rate, or an exemption or not withholding the tax, under relevant specific regulations or double taxation agreements.
Such a statement must be made by the person managing the entity for the purposes of the Accounting Act. Filing a false statement will result in the relevant tax authority imposing on the taxpayer an additional tax liability of 10% of the tax base of the remuneration in relation to which the remitter applied a lower rate
or where a tax due was not withheld at all. Such rate can be raised to 20% where the determination base for of such an additional tax liability exceeds PLN 15,000,000 – regarding the excess over this amount and/or 10 years have not lapsed of the end of the calendar year in which the taxpayer or tax remitter was served with a final decision setting out the determination base for the additional tax liability and/or the party has failed to submit to the tax authority the tax documentation required. The 30% rate is applicable where the first and third conditions above have been met.
Another exception from withholding the tax at the rates set out in the PIT or CIT acts is where an opinion has been obtained from a relevant tax authority acknowledging that the remitter applies an exemption from withholding lump-sum income tax on remuneration paid to a taxpayer, i.e. the so-called opinion on exemption application. Such an opinion will be applicable to i.a. revenues from interest, copyright or related rights.
An application for an exemption application opinion will have to be filed electronically. An opinion will be issued for a fixed term of 36 months, and the issuing fee will be PLN 2,000.
The statute in question requires that tax remitters file IFT-1 (individuals) or IFT-2 (corporations) returns on the revenues obtained on the territory of Poland by a tax non-resident. Moreover, a tax remitter will be required to notify the relevant Head of the Tax Office of the value and type of payments, or monies or monetary benefits left available to the taxpayer, not exceeding an aggregate of PLN 2,000,000 in a given fiscal year. The notification must also contain the taxpayer’s identification data.
Where a remitter has paid the tax on the excess over the PLN 2,000,000 out of its own funds, thereby incurring its economic burden, then it may apply for a refund under the new regulations. The following documents must specifically be attached to an application:
1) The taxpayer’s certificate of residence;
2) The documentation relating to bank transfers, or other documents indicating the manner of settlement
or transfer of the revenues in respect of which a refund is being sought;
3) The documentation regarding the grounds for the payment of the revenue in question;
4) The documentation indicating the contractual arrangements based on which the tax remitter paid the tax out of its own funds and incurred its economic burden.
The right to seek a tax refund will also be vested in the taxpayer. Under the statute, a taxpayer must attach
to his application for a tax refund the documents set out in paragraphs 1, 2 and 3 above, and also:
1) The taxpayer’s declaration that he is under a tax obligation with respect to the transaction for which the refund is being sought, and also that the taxpayer or its foreign establishment is the actual owner of the revenues paid;
2) The taxpayer actually does business to which the revenues obtained are related in the state in which he
is based for tax purposes;
3) The applicant’s justification demonstrating that the conditions set out in the above mentioned statements are met.
The tax will be refunded without undue delay; not later, however, than within 6 months of the date the application is filed.
Magdalena Walczyńska, Tax Consultant, ATA Tax Sp. z o.o.
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