Entry into force of the new withholding tax regulations postponed until 2020

On the last working day preceding the entry into force of revolutionary solutions in withholding tax, the Minister of Finance once again decided to postpone them. This time, the Ministry of Finance decided that the new regulations on the obligation to withhold tax at domestic rates shall enter into force as of 1 January 2020.

Following the amendment of the Regulation on the exclusion or limitation of Article 26 par. 2e of the Corporate Income Tax Act, only as of 1 January 2020 the payment of dividend or remuneration for intangible services to a foreign entity in the amount exceeding PLN 2 million annually shall mean that tax must be withheld in Poland at statutory tax rates.

As a result of amendments to income tax acts adopted already in October 2018, Polish companies making payments to non-resident entities, among others for dividends, interest, copyright, know-how as well as advisory, legal, advertising, management and control, data processing, warranty and similar services, in the amount exceeding PLN 2 million annually to a single contractor, were to be absolutely obliged to withhold tax at statutory rates (from 19% to 20%), without any resort to double taxation treaties or EU directives. The option of applying a reduced tax rate or exemption was supposed to involve some additional obligations.

Due to the revolutionary nature of these changes, on 31 December 2018, i.e. on the day preceding the entry into force of the new regulations, the Minister of Finance decided to suspend their entry into effect until 30 June 2019 (in certain cases, the application of the new regulations has been excluded for an indefinite period).

On Friday, 28 June 2019, i.e. on the last working day before the expiry of the deferred period, the Ministry of Finance decided to postpone the date of entry into force of the amended regulations once again. However, the new date pertains only and exclusively to payments made to non-resident CIT taxpayers.

As a result, the obligation to withhold tax on payments to one non-resident in the total amount exceeding PLN 2 million within a period of 12 months shall arise not earlier than as of 1 January 2020. What has not changed is the indefinite exclusion of the application of new regulations to certain types of payments subject to withholding tax.

We hope that the next postponement, if considered at all, will be announced before champagne bottles pop their corks on the New Year’s Eve.

Should you have any questions or need to discuss the topic, we encourage you to contact out expert,  Daniel WIĘCKOWSKI:

e-mail: ekspert@rsmpoland.pl

tel. +48 61 8515 766

fax +48 61 8515 786