As of January 2015 new rules apply to tax residency certificates which will affect many payments made from Poland to foreign recipients.
According to the amended law, a certificate is considered to be valid for 12 months from the date of its issuance, or from its date of validity if one is stated. Thus, the new rules require that the Polish payer must obtain a tax residency certificate from the recipient before the payment is made (the date of issuance of the tax certificate must be earlier than the date of payment).
Making a payment without having a certificate in hand makes the payer liable for withholding tax on the transfer – in general, equal to 20% of the amount paid, plus potential interest and penalties.
As the certificate validity is limited to 12 months, Polish companies must implement appropriate monitoring systems in case of long-term contractual arrangements with foreign parties.
The above rules apply to payments of, among others, the following:
- other revenues from a share in profits
- guarantees and sureties
- advisory services
- accounting services
- market research services
- legal services
- advertising services
- management services
- data processing services
- personnel recruitment services and services similar to those above
- copyright or related rights
- rights to inventive designs
- trademarks or ornamental designs and licenses related to such rights
- artistic, entertainment or sports-related activities of a non-Polish legal person provided by natural or legal persons in Poland
The certificate must state that the payee is a tax resident of the jurisdiction issuing the certificate. The certificate must be a document in the official form provided by the relevant authorities in the payee’s jurisdiction of tax residence. The document must be an original – a pdf, a copy or “one in the mail” is insufficient. It is not necessary to have the certificate translated into Polish, nor must it be apostilled.
Under the prior rules, it was acceptable for a certificate to be delivered after the payment was made and there were no limitations relating to the validity period of the document. From 2015, to avoid disputes with foreign contracting parties, any Polish payer making these types of payments should ensure in its contract that the payee will provide the certificate before payment is due and that failure to provide the certificate entitles the payer to withhold tax as required. In many but not all cases, receipt of the certificate will entitle the parties to benefit from a withholding tax exemption; however, in other cases it may only reduce the level of the withholding tax. This is dependent on applicable double tax treaties and the type of payment involved.
The new rules were promulgated by article 1 section 24 point b of the Act dated 29 August 2015 on amending the CIT Act, PIT Act and other acts, (Journal of Laws 2014.1328), effective 1 January 2015.