Fiscal authorities say no to the look-through approach to the dividend exemption provided for in Article 22(4) of the CIT Act
If the actual beneficiary of a dividend holds only an indirect share in the company, it is not possible to use the look-through approach and apply the exemption provided for in Article 22(4) of the CIT Act, the Director of the KIS believes in interpretations issued recently.
– The interpretations were issued in May and it should be emphasised that they present a different position of the tax office than the one still in 2022 and it is, unfortunately, unfavourable for taxpayers – points out Aleksandra Kodłubaj, a consultant at Thedy & Partners.
The interpretations issued discussed situations of dividend payments in excess of PLN 2 million, made to foreign recipients based in the EU. The actual beneficiaries of the dividends paid in the cases presented were grandparent companies, being indirect owners of the paying entities and having shares in the parent companies. The taxpayers asked for confirmation of the possibility to use the look-through approach in such cases and apply the withholding tax exemption under Article 22(4) of the CIT Act to the indirect shareholder (the grandmother company). The head of the KIS did not agree.
– In the opinion of the head of the KIS, it is not possible to apply the exemption under Article 22(4) of the CIT Act to an indirect shareholder (the grandmother company), due to the fact that it does not meet one of the conditions to benefit from the exemption under the said provision. Indeed, it follows from the CIT regulations that the company receiving income (revenue) from dividends should directly hold no less than 10% of the shares in the capital of the company paying the dividend. If the company which is the actual beneficiary of the dividend holds only an indirect share, the condition of the act is not met – adds Aleksandra Kodłubaj.