Although the content of the provisions concerning withholding tax (WHT) has not been amended in recent years, significant changes have been observed in the practice of the tax authorities. Taxpayers are therefore facing a new challenge: the necessity to reassess the relevance of previously adopted approaches and adapt them to the evolving line of interpretation.
Below, we present the areas in which the change in the position of the authorities is clearly noticeable and which we would like to draw attention to in the context of the increasing number of audits related to withholding tax.
Departure from the “look-through approach” concept
An example of the change in the practice of tax authorities regarding WHT is the departure from the “look-through approach”, which is not explicitly provided for in the legislation but has previously been accepted by the tax administration.
Until now, it was permissible to settle payments as if they were made by the Polish entity directly to the beneficial owner of the receivables – see, for instance, the tax ruling of 11 April 2024, reference no. 0111-KDIB1-2.4010.80.2024.1.AK. Unfortunately, tax authorities are increasingly refusing to apply exemptions or reduced rates where the recipient of the payment is not the same entity as the beneficial owner/taxpayer.
Position of the tax authorities
Tax authorities currently present the position that in any case where the income recipient is not the “beneficial owner” within the meaning of the WHT regulations, preferential taxation rules or exemptions provided under a double taxation treaty or the Corporate Income Tax Act (CIT) cannot be applied to the payments made. This view is reflected, for example, in the tax rulings of 2 May 2024, ref. 0114-KDIP2-1.4010.104.2024.2.PP and 20 February 2025, ref. 0111-KDIB1-1.4010.721.2024.1.BS.
In the case of “tax transparent” entities (such as partnerships), this means that such entities cannot be safely treated as beneficial owners for WHT purposes, because it is the partners, and not the partnership itself, who are considered the beneficial owners of the received payments.
Even if such an entity provides a signed “beneficial owner” statement, this is not sufficient.
Important!
Attention should also be paid to the residency certificates of the aforementioned partnerships – these most often explicitly state that the entity itself is not a tax resident, but rather its partners are. Consequently, possessing such a set of documents does not meet the requirements for applying a WHT exemption or reduced rate. When making payments to such partnerships, the safe approach is to apply the full statutory WHT rate for the relevant type of payment (19% for dividends, 20% for interest, royalties, or intangible services).
Intermediary Services
Withholding tax covers broadly understood intangible services, the catalogue of which is indicated in Article 21(1)(2a) of the CIT Act. The obligation to withhold WHT arises in the case of advisory services, accounting services, market research, legal services, advertising services, management and control, data processing, employee recruitment and personnel acquisition, guarantees, and sureties. At the end of this closed list, there is a catch-all clause: “and services of a similar nature.” In practice, this means that the tax authorities, after conducting an analysis, assess whether a given service is similar to any of the services expressly listed in the provision.
Position of the tax authorities
The interpretative line of the tax authorities in this area has not been uniform. However, until recently, the dominant position of the National Tax Information (KIS) was that intermediary services are not subject to WHT (see, for example, the tax ruling of 1 March 2023, ref. 0114-KDIP2-1.4010.220.2022.2.OK).
However, recent rulings (e.g., tax ruling of 5 December 2023, ref. 0111-KDIB1-1.4010.544.2023.2.MF) have classified intermediary services as similar in nature to advisory, advertising, and market research services.
According to the Director of the KIS, the scope and nature of tasks performed by intermediaries, such as: presentation and promotion of products, price negotiation, organisation of orders and bookings, or post-sale services, justify their inclusion under Article 21(1)(2a) of the CIT Act. Such an interpretation gives rise to a taxpayer's obligation to assess whether WHT applies to payments for intermediary services.
The above examples illustrate the dynamic evolution in the approach of the tax authorities toward matters that have not been subject to statutory changes. There is a noticeable tendency toward pro-fiscal interpretation, which may adversely affect taxpayers.
Important!
In view of these changes, WHT safeguarding instruments previously used by taxpayers should be re-evaluated in terms of their current validity.
Individual rulings, protective opinions, or due diligence procedures obtained by entities subject to WHT regulations should be re-examined to safeguard your interests.
