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Specified payments, if made to a non-resident beneficiary, are subject to withholding tax (WHT). Such payments include dividends, royalties, interest and remuneration for intangible supplies.
The general withholding tax (WHT) rate for dividends is 19%. Some other types of income, such as income from investing in companies, including income from the redemption of shares and income resulting from the liquidation of a company, are taxed at the same 19% rate. The general withholding tax rate on interest and royalties paid to non-residents is 20%.
The above WHT rates may be reduced by Double Tax Treaties. Apart from the above, dividends, royalties and interest paid to numerous European countries receive special treatment based on the CIT provisions, which implement the relevant EU directives.
Dividends paid to corporate residents of EU countries as well as Iceland, Liechtenstein, Norway and Switzerland are exempt from withholding tax subject to certain conditions specified in the CIT Law. The basic requirement is that the foreign beneficiary should hold at least 15% of the shares in the Polish company for at least two years (with respect to the Swiss shareholders, the minimum shareholding is 25%). The described exemption also applies to income resulting from the redemption of shares or the liquidation of a company.
When joining the EU Poland was granted a transitional period for removing the withholding tax on interest and royalty payments paid by Polish corporate residents to associated EU companies. Currently, the withholding tax rate on these payments is 10%. From 1 July 2009, it will be reduced to 5%. Starting from 1 July 2013, the full exemption will apply. In general, the transitional rules, as well as the full exemption after 1 July 2013 only apply to interest and royalty payments between associated companies (parent-subsidiary relationships or sister-sister relationships) in which capital involvements are significant. In the absence of such relations the 20% WHT rate applies unless it is reduced by the applicable double tax treaty.
Payments made to non-residents as a consideration for intangible supplies (such as consulting services) are subject to 20% withholding tax. However, if a payment is made to a country which has a Double Tax Treaty with Poland, this tax can be avoided if certain minimal administrative formalities are completed.
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