On October 25, 2022, an Act amending the corporate income tax law and certain other acts was published in the Journal of Laws. This Act amends, among others, the regulations relating to WH-OSC statements.
These changes also provide for the repeal of the obligations of remitters (including issuers) with regard to withholding taxation of interest and discount on treasury securities (i.e. treasury bills and government bonds), as well as the introduction of full exemption on dividends paid within the Polish holding company regime
Description of introduces changes
1) WH-OSC Statement
In the current legal state, the content of Art. 26 sec. 7a-7j of the CIT Act raised doubts as to the frequency of submitting the WH-OSC statements within a calendar year in a situation where the tax remitter, after submitting the above-mentioned statement, made further payments from titles mentioned in Art. 21 sec. 1 point 1 and Art. 22 sec.1 of the CIT Act to the taxpayer covered by this statement.
Based on the literal interpretation of Art. 26 sec. 7c and 7g of the CIT Act, the regulations can be interpreted in a way that would indicate that the WH-OSC statement may be submitted only twice during a calendar year. With such an interpretation, submission of an initial statement(Article 26 sec. 7c of the CIT Act) is possible only once, until the date of tax payment for the month in which the amount of PLN 2 million was exceeded. Similarly, a follow-up statement may be submitted only once, in accordance with the deadline specified in the regulations, i.e. once the second month after the month in which the initial statement was submitted lapsed. In the justification to the amendments it was indicated that such an interpretation of the regulations provoked controversies as to the purpose of introducing a solution that allows for the exclusion of the WHT pay & refund mechanism by means of submitting statements only for a certain period of the tax year.
The amendment extends the validity of the initial WH-OSC statement from two months to the end of the fiscal year in which it was submitted. This means that submitting a statement to apply WHT preferences after exceeding the amount of PLN 2 million a year is exceeded, once allows not to apply the pay & refund mechanism until the end of the tax year of the payer.
At the same time, due to the above changes, the deadline for submitting a follow-up statement was postponed to the last day of the month following the end of the tax year of the tax remitter.
The deadline for submitting the initial statement was additionally modified and, in accordance with the amendments, the WH-OSC statement may be submitted no later than the last day of the second month following the month in which the threshold of PLN 2 million was exceeded. This means that tax remitters will have more time to fulfill the notification obligation in relation to the WHT pay & refund mechanism.
A similar modification has been introduced with regard to the WH-OSP statement submitted in the case of payments to natural persons (pursuant to Article 41 sec. 20-21 of the PIT Act).
2) Abolition for WH-OSC statements
It is worth mentioning that the amendment introduces a kind of amnesty with regard to the statements submitted in 2022. This remedial solution is aimed at mitigating the negative effects for tax remitters and taxpayers connected with not collecting WHT after the expiry of the validity period of the initial statements submitted during the current year.
As a consequence, the validity period of the initial WH-OSC statement has been extended with retroactive effect from January 1, 2022. Thus, tax remitters making payments to non-residents may continue to use the initial statement submitted in the course of 2022 (until the end of the tax year). The deadline for submitting a follow-up statement for 2022 is the end of the month following the end of this year.
3) WHT taxation of interest and discount on certain bonds - relaxation of the tax remitter’s obligations (cancellation of Article 26 sec. 1ab-1ac)
The amendment relaxes the rules for applying the WHT exemption rules for interest and discount on certain bonds. In accordance with the proposed changes, the issuer's obligation to inform taxpayers about the conditions of the exemption and to submit a statement of due diligence to the tax authority, which was obligatory for not collecting WHT, will be abolished.
Intertemporal rules
According to the interim provisions, the new wording of the regulations on the validity of WH-OSC statements are to be applied to payments of receivables and payments (benefits) of money and monetary values made available or paid after December 31, 2021. These provisions entered into force on the day following the date of announcement (i.e. October 26, 2022). In the remaining part (e.g. change of the date of submitting the initial statement), the act comes into force as of 1 January 2023.
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