Pursuant to the most recent announcements the Ministry of Finance on 10 December 2018 published the draft of implementing regulations to PL CIT and PIT acts, postponing the effective introduction of restrictive WHT reconciliations’ regime on 1 January 2019. Just to briefly remind[1], according to the new rules, payers would be obliged to as a rule[2] withhold tax at statutory rates (20% or 19%). in relation to the amount of subject-to-WHT payments exceeding PLN 2 million annually. Only after the formal tax proceedings it would be possible to receive overpayment of tax basing on regulations of double tax treaties or Parent-Subsidiary/Interest-Royalties Directives.
Due to published regulations, it is proposed the following postponement
1. up to 31 December 2019 in case of payments for:
- the use or the right to use an industrial equipment, including means of transport, commercial or scientific equipment
- Ii respect of outstanding fees for the freight and passengers transport accepted for carriage in Polish ports by foreign enterprises of commercial shipping, with the exception of transit transports
- obtained on the territory of the Republic of Poland by foreign air navigation enterprises, excluding revenues from scheduled passenger transports, the use of which requires the acquisition of a plane ticket.
2. up to 30 June 2019 in case of payments from other titles, including in particular
- interest payments
- payment for copyrights or related rights
- consulting, accounting services, market research , legal,advertising, management and control, data processing, recruitment services as well as guarantees and other similar agreements
- dividends and other revenues from the participation in the profit
The above means that in the mentioned terms the payers will be still entitled to carry on WHT reconciliations pursuant to the currently effective regulations, irrespective of the total amount of payments made. Please note that in case of payments to which the postponement term was set at 30 June 2019, the amount of payment made in the first half of 2019 will be included in the assessment of obligations to be fulfilled in the second half of 2019. For instance, if the total payment for management fees were PLN 5M and 3M were paid in the first half of 2019, all the payment made in the second part of the year (PLN 2M) would be subject to the new restrictive regulations.
Please note that the possibility to take advantage of regulations proposed by the Ministry of Finance we write about is dependent on whether the requirements for beneficial tax rates/exemptions will be actually met by payers and recipients of payments, whereas this assessment will be made basing on other WHT regulations implemented via the discussed amendment (i.e. it means that payers will be obliged to more detailed scrutiny of whether formal requirements are met as well as the amended anti-abusive clause indicated in article 22c of CIT will have to be taken into consideration).
The proposed term of introductions the above described implementing regulations is 1 January 2019.
Beyond any doubt drafts of implementing regulations were prepared as a consequence of wide-ranged comments of Polish business who during public consultations plainly indicated the difficulties of implementing new WHT reconciliations’ regime resulting from amendment act dated 23 October 2018. It is worthwhile to use this moment of respite to prepare for the upcoming changes in WHT reconciliations, in particular to safeguard proper cash flow in case of payments subject to Parents-Subsidiary/Interest-Royalties Directive via obtaining a formal consent from the authorities to apply the exemption on the as hitherto applicable and more friendly rules.
[1] More thorough information you will find in the article of Anna Maksymiuk published a few weeks ago, see: https://blog-tpa.pl/2018/09/27/new-method-of-settling-withholding-tax/.
[2] Please note that MF envisaged the possibility to apply yet applicable regulations, but it would require either presenting the official statement to the MoF (under pain of penal responsibility and 10% additional tax if it proves not in line with facts, benefits from both DTTs and Directives) or obtaining a formal consent to take advantage of exemptions regulated in Directives.
