Poland: New draft explanation on withholding tax

Comments due 10 October 2023

Comments due 10 October 2023

The Ministry of Finance on 28 September 2023 published a new draft tax explanation on withholding tax to clarify the interpretation and application of selected provisions of the Polish corporate income tax law and the Polish individual (personal) income tax law concerning withholding tax.


Regulations were introduced in January 2019 regarding the so-called “pay&refund procedure,” which effective 1 January 2022 introduced the obligation to withhold tax at the base rate stipulated in Polish corporate income tax and individual (personal) income tax laws on dividend, interest, and royalty payments to the same related taxpayer that exceed the PLN 2 million threshold, with the right to a refund of all or part of the withheld tax.

The first draft explanation of the new obligation was published in June 2019 but was never finalized.

Scope of the new draft explanation

The new draft explanation provides limited clarification of the withholding tax provisions, focusing primarily on the concept of beneficial owner.

The new draft explanation includes the following:

  • Clarification of the interpretation and application of the provisions of the corporate income tax and individual income tax laws, as effective from 1 January 2022, relating to the tax remitter's withholding tax collection obligations
  • An interpretation of the concept of beneficial owner
  • Due diligence framework of the payer examining the beneficial owner criterion
  • Indication that the preferences from the income tax treaty and the directives should not be given to entities that do not carry out actual economic activities
  • Clarification that for purposes of applying the reduced withholding tax rate provided for in a given double tax treaty, it is reasonable to apply the definition of the beneficial owner in force under the corporate income tax law
  • Catalogue of situations when it is possible to apply the look-through approach (according to which it is possible to apply preferential taxation resulting from an income tax treaty concluded between Poland and the country of residence of the beneficial owner of the payment, even in a situation when the payment is made through an intermediary—an entity not being the beneficial owner, located in a country other than the beneficial owner)

KPMG observation

The direction of the explanation may be seen as controversial and raises many questions. It indicates that tax remitters will have to pay even more attention when verifying the status of the foreign payment recipient, including situations where, at first sight, the regulation in question does not require an examination of the beneficial owner criterion.

Read a September 2023 report prepared by the KPMG member firm in Poland


The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.