As the Ministry of Finance is working on relaxing the withholding regime introduced in January 2019, the draft decrees further postponing the effective implementation of the new rules until July 2020 are expected to be passed by the end of the year.
By that time, the law should be amended to limit the obligatory withholding on large payments (disregarding domestic or tax treaty relief at payment and further refunds of tax after verification of the relief by the authorities) to dividends, interest and royalties payable between affiliated companies only.
Specific withholding regime provisions
Following the amendments which entered into force on 1 January 2019, if during a single tax year of a tax remitter it pays a single taxpayer more than PLN 2 million in interest, dividends or other payments that, as a rule, are subject to withholding tax, the tax remitter is obliged to withhold tax at the basic domestic rate (19% or 20%) and disregard any domestic exemptions or exemptions/reduced rates as applicable under the relevant tax treaty.
However, the application of the above restriction was effectively suspended by the general exemption introduced by the Minister of Finance in a Regulation from 31 December 2018, which in terms of CIT will last until 31 December 2019 (the relevant suspension of PIT ceased on 30 June 2019).
According to the latest Regulation Drafts, the Minister of Finance plans to introduce a further suspension in terms of both PIT and CIT until 31 December 2020.
Remodelling of the withholding regime
According to representatives of the Ministry of Finance, the Polish government plans to amend the withholding regime in the first half of 2020. As the planned changes are intended to be beneficial for taxpayers, they may be introduced during the tax year.
According to the information available, the scope of changes should include:
- a limitation of the withholding tax refund mechanism to passive payments (interest, royalties, dividends) made between related entities only. The time to obtain a refund would be reduced to three months.
- a provision that any tax authority’s opinion on the eligibility of a payment recipient to benefit from the implemented Parent Subsidiary Directive and Interest Royalties Directive withholding tax reliefs will be extended to also cover tax treaty reliefs.
- mitigating the scope of fiscal penal liability related to a failure to remit or improper remittance of withholding tax.