On 24 August, the Minister of Finance announced the draft of new legislation amending the current CIT and PIT law, as well as the Tax Code.
The draft law is at least partially the result of implementing the ATA Directive, however there are other changes worth noting as these may significantly impact operations in Poland.
Changes sealing the tax system include, i.a.:
Changes in the principles of collecting withholding tax (WHT)
Proposed changes may fundamentally affect the mechanism for collecting WHT on so- -called passive income (dividends, interest, royalties) and payments for certain intangible services (e.g., advisory, market research, advertisement services etc.).
Under the draft law, the rule would be that in case of payments over PLN 2 m (approx. EUR 0.45 m) in a given year to a given tax payer, the tax remitter will be obliged to collect WHT on the surplus of over PLN 2 m under the domestic 19% / 20% rate.
For payments below PLN 2 m, there may be additional documentation / internal procedures needed to benefit from the exemption/lower WHT rates.
The tax payer / tax remitter (in certain cases) will be allowed to claim WHT overpayment. The refund procedure can take up to 6 months (no interest), and would require the tax payer providing substantial documentation (e.g., statements confirming its active business and beneficial owner status).
The draft law provides for two exceptions to the main rule: (i) the tax remitter’s board member represents, under the fiscal penal code, i.a., that the tax payer has an active business and is the beneficial owner of payment, and (ii) obtaining an opinion from the tax authority on the application of the WHT exemption (only for payments subject to EU Directives).
The proposed change is highly restrictive and – if it enters into force – may result in a significant increase in administrative burdens and cash flow traps.
