The Ministry of Finance again postponed the effective date for a withholding tax collection mechanism applicable for both corporate income tax and individual (personal) income tax purposes. The new effective date is 30 June 2021. An explanatory memorandum accompanying the decrees announcing the suspension explains the postponement is in response to the coronavirus (COVID-19) pandemic.
The withholding tax collection mechanism was scheduled to be effective 1 January 2019, but was previously postponed, most recently to 31 December 2020. Read TaxNewsFlash
The withholding tax collection mechanism is to apply with regard to individual income and corporate income taxpayers that make cross-border payments for certain intangible services (e.g., advisory, legal, market research and advertising services), as well as fees for licenses, interest or dividends, when such payments exceed the threshold of PLN 2 million annually. The mechanism requires a payment of the withholding tax at the applicable rate (either 20% or 19%), and only after payment is made can any foreign taxpayers (or the remitter of the tax) file a claim for refund of any overpayment (a “pay and refund” system).
The postponement applies only to the mechanism of withholding tax collection. Other measures under the rules—such as requiring tax remitters to exercise due diligence when verifying the conditions of applying withholding tax exemptions or lower withholding tax rates, to determine the recipients are the beneficial owners and to verify whether they conduct actual business activity in their country of residence—still apply and are currently effective.
Amended provisions have been released for consultation to the business community. Possible amendments could concern subjective and objective scopes regarding the procedure for mandatory collection of withholding tax with a right to apply for a refund of all or part of the tax. The Ministry of Finance announced that work on the new regulations is expected to be completed by 30 June 2021.
Read a January 2021 report prepared by the KPMG member firm in Poland
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