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24 October 2018

Poland’s lower house of Parliament passes 2019 tax reform proposal including strict withholding tax regime

On 23 October 2018, the lower house of the Polish Parliament (Sejm) passed the draft bill introducing far-reaching changes to the corporate income tax rules in Poland. The bill was passed without significant amendments as compared to the scope described in EY Global Tax Alert, Poland’s 2019 tax reform proposal includes strict withholding tax regime likely to impact international groups, dated 29 August 2018.

One of the most significant changes introduced by the bill is a complete revision of the rules regarding withholding taxes (WHT) on dividends, interest and royalty payments as well as for certain services paid to foreign recipients.

The bill proposes measures with no precedence in Poland, such as:

  • Replacement of the current direct application of WHT exemptions or treaty rates with a “pay and refund” system.
  • Application of statutory WHT rates (19% or 20%) instead of treaty rates or exemptions, unless additional measures are taken, such as:
    • Providing a statement filed by the tax remitter confirming application of lower WHT rates or exemptions
    • Applying for an opinion issued by the tax office confirming WHT exemptions (available only in certain cases)

In order for the new law to be in force as of January 2019, the legislative process must be finalized by the end of November 2018. Given there were no significant changes to the proposed bill and the pace of processing the bill by the Parliament has been a priority, it is likely that this deadline will be met.

Since the announced measures will significantly impact international groups operating in Poland, tax and finance teams should assess the impact and assess their next steps in view of the upcoming changes to mitigate a negative cash-flow impact and counteract a potential permanent leakage. As the changes are expected to be binding from 1 January 2019, the time to evaluate the impact and prepare is limited.

Future Alerts will report on developments in this area as well as other significant changes proposed in the 2019 tax reform.

For additional information with respect to this Alert, please contact the following:

EY Doradztwo Podatkowe Krupa sp.k., Warsaw
  • Andrzej Broda | andrzej.broda@pl.ey.com
  • Marcin Opilowski | marcin.opilowski@pl.ey.com
  • Michal Koper | michal.koper@pl.ey.com
  • Magdalena Piec | magdalena.piec@pl.ey.com
EY Doradztwo Podatkowe Krupa sp.k., Wroclaw
  • Sebastian Ickiewicz | sebastian.ickiewicz@pl.ey.com
Ernst & Young LLP, Polish Tax Desk, New York
  • Sylwia Migdal | sylwia.migdal1@ey.com
  • Joanna Pachnik | joanna.pachnik1@ey.com
Ernst & Young LLP, Polish Tax Desk, London
  • Marta Kedziorska | marta.kedziorska@uk.ey.com 

ATTACHMENT

Document ID: 2018-6233

 
 

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