At the beginning of September, the Ministry of Finance held a pre-consultation meeting on the reform of the withholding tax (WHT) regulations, which - according to the recent regulation postponing the new mechanism of withholding tax - are to enter into force in January 2021.
Some of the suggestions presented by business representatives and tax advisors are included in the planned changes.
The key points of the planned reform
- amendment of the “Beneficial owner” definition - amendment the part of the definition stating that „beneficial owner is not an intermediary, representative, trustee or other entity legally or actually obliged to transfer all or part of the receivables to another entity” by deleting „legally or actually”,
- covering the passive payments (interest, royalties, dividends) above the limit of PLN 2 million per year to one taxpayer, paid between related entities, by the withholding tax refund procedure (the so-called "Pay and refund" mechanism). In other cases, it is expected that a due diligence verification of payment recipients will be sufficient to benefit from the preferential WHT regime,
- exclusion of dividends paid to Polish residents from WHT refund mechanism (so-called 'Pay and refund' mechanism),
- clarification of the meaning of due diligence verification of payment recipients - by imposing higher standards of due diligence verification for payments made to related entities, based on the assumption that it is easier to obtain information and documents from related entities,
- extension of the scope of the binding opinion for applying WHT exemption resulting from double taxation treaties,
- extension of the validity of the binding opinion for applying WHT exemption - the binding opinion for entities which have already received it from the tax authorities shall be valid for a 36-month period starting from January 1, 2021,
- changes regarding the WHT statement - the statement allowing for applying a WHT exemption in the case of payment exceeding PLN 2m (within self-certification process), may be signed in accordance with the rules of representation of the company (signature of all board members will not be required),
- changes in the WHT sanctions - unification the rules of liability for concealing the truth or providing a false statement in a declaration under the Penal Code with the general rules of the Fiscal Penal Code.
The draft of the new withholding tax regulation should be released for public consultation later this month. The Ministry of Finance has announced that the final version of the official WHT guidelines should be published in the first half of 2021.