Withholding tax is a mechanism for taxing income at its source. It concerns both natural and legal persons. However, it applies only in specific circumstances. What exactly is withholding tax in Poland? Who is subject to the WHT tax in Poland? What are the withholding tax rates in Poland? What is the pay and refund mechanism for withholding tax in Poland? Find answers to these questions in the article.
What is the withholding tax in Poland?
Withholding tax (WHT) is a type of income tax applicable to both natural and legal persons. It is imposed on income such as:
- license fees,
- remuneration for artistic services.
This flat-rate form of income tax is collected by payers who have in the country where the income arises:
- place of residence,
- registered office,
- foreign establishment.
WHT tax is therefore collected by payers who have place of residence, registered office or foreign establishment in Poland. As a rule, it is also levied on certain types of income earned by non-residents.
Who is subject to withholding tax in Poland?
As indicated above, the WHT tax in Poland applies to both natural and legal persons receiving taxable income.
|Corporate income tax (CIT)
|Revenues obtained by non-residents, particularly from: interest, copyrights and related rights. Additionally, fees for services in the fields of performing arts, entertainment and sports. Furthermore: consulting and accounting services as well as certain fees for the export of cargo and passengers carried in Polish ports by foreign commercial maritime companies. Revenues resulting from dividends, earned both by residents and non-residents. Moreover, other gains resulting from participation in the profits of legal entities with headquarters or management in Poland.
|Personal income tax (PIT)
|Income obtained by non-residents from: maritime shipping, inland navigation and air transport. Dividends and other profits from participating in the gains of legal entities. Interest, license fees and income from professional activities. Moreover, director’s remuneration as well as income from artistic or sports activities. Income from old age pensions, annuities, and other allowances of similar nature.
Who is the payer of withholding tax in Poland?
The payer of WHT tax is the entity that transfers taxable income to the taxpayer. In practice, it is a company or institution paying dividends, interest, or other dues. The payer of withholding tax in Poland is responsible for its correct calculation. He is also accountable for its collection and remittance to the tax office.
What are the withholding tax rates in Poland?
Withholding tax rates in Poland vary due to:
- type of income,
- a double taxation avoidance agreement between Poland and the taxpayer’s country of residence.
|Covers revenues obtained from export fees for cargo and passengers accepted for carriage in Polish ports by foreign commercial shipping companies. Transit passengers and cargo obtained in Poland by foreign air transport companies are an exception. Applies also to revenues obtained by foreign air navigation companies. Revenues from scheduled passenger air transport, which require passengers to have an airline ticket are excluded.
|Covers revenue from dividends.
|Covers revenue from: interest, copyrights or related rights. Rights to inventive projects, trademarks and decorative patterns. Includes revenue from the sale of these rights and fees for disclosing the secret of a recipe or production process. The use or right to use industrial equipment including transportation, commercial or scientific devices. Also revenue from information related to acquired industrial, commercial, or scientific experience (know-how). Fees for services in the field of entertainment, recreational, or sports activities provided by foreign legal entities organized through individuals or legal entities conducting economic activity in artistic, entertainment, or sports events in Poland. Services such as consulting, accounting, market research, legal services, advertising, management and control, data processing, and recruitment services. Revenue from guarantees sureties, and other benefits of similar character.
What is the deadline for paying withholding tax?
The withholding tax in Poland must be remitted within deadline specified by tax regulations. The amount of tax is deposited by the payer to the tax office. Namely, the one that is adequate based on the place of residence or registered office of the taxpayer.
The deadline for payment is respectively:
- 7 days – in the case of payment of the corporate income tax amount;
- 20 days – in the case of payment of the personal income tax amount.
The specified deadlines apply to the month following the month of tax collection. What is important, they must be complied with, as delays may result in the default interest.
What is the pay and refund mechanism for withholding tax in Poland?
The essence of the pay and refund mechanism in withholding tax in Poland focuses on:
- the obligation of the WHT tax payer to remit the tax at the statutory rate (as indicated above),
- submitting a request for a refund of the overpayment.
What is important, the pay and refund mechanism applies to receivables exceeding 2 million PLN. It is relevant for the same taxpayer during the tax year.
Entrepreneurs, for whom the pay and refund mechanism is not convenient may seek different solutions. They may seek to obtain a preferential rate or tax exemption by:
- request for an opinion on the application of preferences,
- submitting a declaration.
How to apply for a withholding tax refund under the pay and refund mechanism?
According to regulations, the tax withholder or taxpayer is eligible for a WHT refund if they have paid the tax and borne its economic burden. The payer must exercise due diligence when verifying the right to apply a preferential rate or exemption.
The process of refunding withholding tax in Poland consists of four stages:
- Submitting the appropriate form to the tax office.
- Attaching relevant documentation justifying the refund to the application.
- Determining the amount of refund in the form of an administrative decision by the tax office.
- Refund of withholding tax in Poland. It occurs immediately, no later than 6 months from the date of receiving the application.
To seek a refund of withholding tax in Poland under the pay and refund mechanism, additional documents are needed. They include:
- tax residency certificate,
- bank transfers confirmation, or other proofs of settlement or transfer of liabilities,
- mandatory declaration confirming the accuracy of all facts presented in the application.
If dividends, interest, or licensing fees do not exceed 2 million PLN during the tax year, the pay and refund mechanism does not apply.
Withholding tax in Poland – summary
Withholding tax in Poland is a form of income taxation at the source. It applies to both natural persons and legal entities. It is levied on various incomes. They include dividends, interest, licensing fees, and compensation for artistic services. The WHT tax payers must have a presence in the country where the income is generated. This means that they must have residence, headquarters, or a foreign establishment there. Both the WHT tax rates in Poland and the deadlines for its remittance depend on the type of income.