One of the most important recent changes to the withholding tax (WHT) legislation is the introduction of a specific procedure for the collection and refund of this tax (the so-called ‘pay and refund’ mechanism). This mechanism consists in the necessity to collect tax if the total amount of dues paid to the same taxpayer, by virtue of interest, royalties and dividends, exceeds PLN 2 million in the tax year, and the remitter does not have the opinion on the application of tax preferences or the remitter’s representatives have not submitted a statement on meeting the conditions for the application of the exemption.
In addition, for some time now, withholding tax remitters have been obliged to exercise due diligence when applying an exemption or reduced rate of this tax. In the absence of a definition of the term “due diligence” in the provisions of the income tax acts, compliance can cause WHT remitters (i.e., entities making specified payments) many interpretive and practical difficulties.
A number of doubts are also raised by the current form of the definition of a beneficial owner. The regulations in this respect require WHT remitters to investigate the economic situation of the counterparty or shareholder, including the fact whether the counterparty or shareholder is actually doing business in its country of residence.
Our experts are ready to support you in fulfilling the new obligations at every stage of WHT accounting.
As part of our services, we offer:
- Preparing tax opinions and analyses, in particular on the applicability of WHT exemptions and preferential rates.
- Preparing and requesting, on your behalf, an opinion on the application of a preference permitting exemption from the “pay and refund” mechanism.
- Verifying payments subject to WHT and making recommendations on the applicability of eligible exemptions or reduced WHT rates.
- Conducting a WHT audit including:
– Verification of your previous and planned payments to foreign entities in terms of WHT obligations,
– Verification of the documentation you have in your possession in terms of the correct application of the reduced rate/exemption from the withholding tax. - Preparing guidelines for documentation necessary for due diligence and verifying the documents collected by the WHT remitter,
- Support in drafting documentation on the applicability of the reduced rate/exemption from WHT (so-called WHT defense file).
- Support in fulfilling record-keeping obligations related to WHT (e.g., preparation of IFT-2R, PIT-8AR returns).
- Developing an internal due diligence procedure to properly manage the processes and obligations of the WHT remitter (including the proper application of reduced rates/exemptions from WHT and collection of relevant documents) and to effectively verify payments subject to WHT.
- Preparing and filing a WHT refund claim and representing the client during the proceedings
- Training your employees in respect of withholding tax obligations.
