While amending Polish withholding tax regulations, attempts were made to use a back door to impose restrictions on the tax exemption for dividends paid to recipients from other EU countries. Such restrictions would not be allowed under SAC case law.

The CIT Act offers a WHT exemption for dividends paid to entities based in EU or EEA countries. This Polish regulation enforces Directive 2011/96/EU on the common system of taxation applicable in the case of parent companies and subsidiaries. Ever since the last large round of changes to WHT regulations in 2019, the Finance Ministry has been trying to limit this exemption. Tax rulings have been issued according to which use of the exemption is possible on condition the withholding agent proves that the recipient (payee) is the beneficial owner of the dividend. This approach practically precludes the exemption in the case of dividends paid within corporate groups with more complicated structures, including dividends paid to holding companies. By its nature, a holding company will obviously be hardly able to satisfy the beneficial owner test since its role is precisely to manage operating subsidiaries on behalf of the owner.


For the full text of the article by Tomasz Wilk, Sendero tax advisor, see Rzeczpospolita on-line.