September 9, 2020
Poland announces amendments to withholding tax reform
The final element of Poland’s new withholding tax (WHT) regime will be effective as of 1 January 2021. As reported in a prior EY Global Tax Alert, this last amendment will require that, in many cases, the Polish tax remitters, when making subject-to-WHT cross-border payments, collect WHT at the statutory rates of 19% or 20%, regardless of relief at source available under a tax treaty or domestic exemption based on the European Union (EU) directives (unless special procedures are followed).
On 4 September 2020, the Polish Ministry of Finance announced at a pre-consultation meeting the main assumptions of the draft amendments to the Corporate Income Tax (CIT) Act for 2021 with respect to the WHT regime, which provide further amendments to this new regime. The announced modifications address the following:
The exact wording of the announced amendments has not been released yet but based on the statement from officials of the Polish Ministry of Finance, it appears that these modifications will be enacted this year and become part of the new WHT package in force as of 2021.
The final months of this calendar year should be used to make certain that the groups are well prepared to operate under the new regime as of 2021 without additional tax leakage, especially taking into account the more stringent conditions for WHT relief in Poland and a new pay and refund mechanism. Alternatively, reductions in net distributions from Poland should be accounted for.
The proposed amendments may offer some additional clarifications and measures to formally secure the WHT position. Nevertheless, actions should be promptly taken given the significance and reach of the reform.
For additional information with respect to this Alert, please contact the following:
EY Doradztwo Podatkowe Krupa sp. k., Warsaw
EY Doradztwo Podatkowe Krupa sp.k., Wroclaw
Ernst & Young LLP (United States), Polish Tax Desk, New York