New withholding tax collection mechanism, initially planned for 1 January 2019 has been postponed once again, to 31 December 2021. At the same time MoF announced that further amendments to the WHT provisions shall be enacted till the end of the year.
New mechanism for collecting withholding tax (WHT) covered by the amendments to the CIT Act and PIT Act, as a rule, obliges taxpayers to collect tax if the total amount of receivables paid in one taxable year to one taxpayer exceeds PLN 2 million. The Ministry plans to further amend this mechanism. It stated that the whole mechanism, after amendments, will be binding as of 1 January 2022. MoF promises sufficient vacatio legis for companies to prepare for the new system.
What does it mean to me?
Regulations for CIT and PIT regarding the postponement until December 31, 2021, of the withholding tax collection mechanism have already been published in the Journal of Laws of the Republic of Poland (Dziennik Ustaw).
However the draft amendment to the PIT and CIT Acts, which is expected to partly mitigate the burden connected with the new WHT mechanism, has not yet been published. The MoF assumes that such a comprehensive amendment will already be adopted by the end of 2021 when the new mechanism will become binding. Based on information from the press office of the Ministry of Finance, legislative works on the draft are now being finalized.
Even though entry of the new pay and refund mechanism has been further postponed, regulations obliging tax remiters to ensure required due diligence verifying the conditions to apply WHT exemption or preferential WHT rates are binding. Compliance in this area is often an area of tax audits. Both Polish tax remitters as well as foreign taxpayers should monitor the upcoming developments in the Polish WHT legislation as they will surely have an impact on tax treatment of income sourced from Poland.
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