Even though the Ministry of Finance postponed entry into force of the new withholding tax collection mechanism till the end of 2021, tax offices are already taking steps to warn entities making payments abroad about the need of exercising due diligence in verifying the conditions for the exemption or application of the preferential WHT rate.

Starting from January 1, 2021, all tasks related to the collection of withholding tax (WHT) by taxpayers were centralized at the Lublin Tax Office in Lublin. The concentration of tasks in the field of WHT within the Lublin Tax Office made it possible to specialize the staff, which in turn - as announced by the Ministry of Finance - is to translate into better control over withholding tax settlements, better identification of potential irregularities and, as a result, improvement in collection of WHT. 

Based on the information that we receive, we observe that entities making payments abroad receive information reminding them to exercise due diligence when verifying the conditions entitling them to apply an exemption or a preferential tax rate resulting from the double taxation agreement. The information sent underlines need to check such circumstances relating to recipient as his:

1. tax status,

2. tax residence, and 

3. actual business activity.

We expect that many companies may receive such "alerts" in the near term. Although the letter is informative, the fact that is was directed to a given company may mean that due to the significant size of foreign payments made and the scope of the applied reliefs / exemptions, the settlements of a given entity as a WHT payer are observed by the tax authority and possibly may be subject to further verification. 

If you also receive this type of letter, we encourage you to contact our specialists. In such a situation it may be justified to verify the correctness of the applied exemption or the preferential tax rate charged.