The WHT rules in Poland change regularly — and these changes directly affect companies working with foreign counterparties. Keeping up with the legislation is part of our daily work. That is why we have prepared this material: so that you are aware of where the risks may lie before they become a problem.
In practice, this tax is frequently underestimated or overlooked. Yet it is precisely the Polish legal entity or entrepreneur making the payment who bears responsibility for correctly determining the tax obligations and remitting the tax to the authorities.
What Withholding Tax Is
Withholding tax is a tax on income that is deducted at the moment of payment to a non-resident. It is not withheld by the recipient but by the paying party in Poland.
This means that the legal entity or entrepreneur making the payment is obliged to withhold a portion of the amount as tax and transfer it to the Polish tax authority. In practice, even a standard payment for services to a foreign counterparty may give rise to additional tax obligations.
Specifics of the Tax’s Application
The rules governing WHT depend on several key factors:
- the nature of the payment and the basis on which it is made,
- the country of the counterparty’s tax residence,
- the provisions of international double taxation treaties,
- the status of the income recipient and fulfilment of the formal conditions prescribed by law.
In certain cases, a reduced rate or an exemption may apply — however, this requires a thorough analysis of the specific situation, as the rules are complex and change regularly.
Errors in determining WHT obligations may result in the Polish payer being required to pay the tax out of its own funds, together with interest and penalties.
Typical Situations in Which WHT May Arise
In international business practice, the question of withholding tax most commonly arises in the following situations:
- payments for services rendered by foreign consultants or contractors,
- distribution of dividends to company owners who are non-residents of Poland,
- use of software, licences, or other intellectual property,
- payment of interest on financing received from foreign companies or investors,
- transactions within international groups of companies.
Practical Steps: What to Do Now
If your business involves cooperation with foreign counterparties, it is worth paying attention to several key aspects. In particular, it is advisable to:
- verify whether your company makes payments to non-residents of Poland,
- analyse the nature of such payments and the basis on which they are made,
- determine the counterparty’s country of tax residence and the potential applicability of international treaties,
- assess whether annual payments to a single non-resident exceed PLN 2 million — this is the threshold beyond which WHT procedures become considerably more complex,
- verify that a valid certificate of tax residence has been obtained from the counterparty — this is the key document for applying preferential rates.
In many cases, even a preliminary review of such transactions makes it possible to identify potential risks in a timely manner and avoid problems in the future. We will be dedicating a separate webinar to this topic — stay tuned for announcements.
Conclusions
Withholding tax is one of those issues that can arise in the ordinary course of business yet is frequently overlooked until real problems emerge. Correctly determining WHT obligations requires an analysis of the nature of the payments, the structure of the transaction, and the applicable international tax treaties — which is why, in most situations, it is advisable to engage specialists before making the payment, rather than after.
If your business involves or plans to involve payments to foreign counterparties — verify their tax implications in advance.
From the Author
The tax practice team at EUCONLAW Group has hands-on experience advising on international transactions and conducting WHT analysis for companies operating in the Polish and Ukrainian markets. Our clients frequently approach us to carry out a mini-audit and assess their situation with regard to the existence of such transactions, the associated tax risks, and their consequences.
Author: Inha Livandovska, Junior partner, tax advisor