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Regulation on WHT adjournment

2019-02-18

The amended rules for collection and payment of the withholding tax (WHT) pose a considerable challenge to remitters of the tax, who had to prepare for the implementation of the new rules over a mere two months following their adoption.

In response to multiple requests from the business circles (primarily Polish remitter-companies, which often incur the economic burden of WHT payment), and perhaps also in order to ensure proper preparation of the revenue authorities, the Minister of Finance has decided to adjourn the implications of the new regulations coming into force.

Several hours before the amending statute came into force, a Minister of Finance regulation had been published on the exclusion or limited application of Art. 26(2e) of the Corporate Income Tax Act.  By way of reminder, the provision stipulates that where the total amount of specific payments due to non-residents, as well as paid dividends, exceeds the sum of PLN 2,000,000, the tax remitter is under an obligation to withhold the tax without an option of not withholding tax under a double-taxation treaty or other specific regulations.

Under the Regulation, the tax remitter’s obligations in that respect have been adjourned for an unspecified period of time, inter alia in case of payables due on account of use or right of use an industrial machine (including a means of transport), as well as trade or scientific equipment. Thus, the TSL industry will benefit mostly from the regulation as well as other companies that lease equipment from foreign companies.

On should bear in mind, however, that the exemption is safeguarded by certain conditions. The recipient of the payables must have its registered seat or management in a country which has signed a double taxation treaty with Poland and there are legal grounds for the exchange of fiscal information with that country.

Tax remitters making payments under other titles will not be obliged to apply Art. 26(2e) CIT Act until 30 June 2019. One should remember, however, that the Regulation also in this case makes the exercise of the privilege conditional on the country in question having signed a treaty or another agreement (e.g. on the governmental level) that enables the Polish tax authorities to obtain information from that country.

In either case, it should also be remembered that the Regulation will be applicable provided that all conditions are met for an exemption or a reduced tax rate under special provisions or a double taxation treaty.

Thus, where, for instance, a company’s fiscal year ends on 30 June 2019 and it pays on the same date a dividend in the amount of PLN 5,000,000 to its parent company based in Austria, it will be allowed to apply with respect of the entire amount, subject to the satisfaction of certain conditions, the exemption on the current terms under the CIT Act or withhold tax at a rate of 5% under the double taxation treaty between Poland and Austria.

 

Wojciech Jasiński, Tax Consultant, ATA Tax Sp. z o.o.

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