Withholding tax to be eased

The new WHT withholding mechanism – pay & refund – has been in practice since 1 January 2022. According to the Ministry of Finance, it is necessary to repeal the obligations of broadly defined payers (i.e. both the issuer as a payer sensu stricto and the entity that is the so-called technical payer) with regard to the withholding taxation of interest and discount on treasury securities (i.e. treasury bills and bonds). The MF also wants to make the construction of the payer’s statement excluding the obligation to apply the pay & refund mechanism more flexible.

So what will change? The draft includes an extension of the subject-matter scope of the non-resident taxpayer exemption from income tax, which is contained in Article 17(1)(50) of the CIT Act and Article 21(1)(130) of the PIT Act, to include also treasury bonds offered on the domestic market and treasury bills, and a corresponding change in the subject-matter scope of the payer’s exemption from the obligation to collect tax, which is contained in Article 26(1aa) of the CIT Act and Article 41(24) of the PIT Act.

– As a result of these changes, payers will be exempt from the obligation to establish the existence of links between the issuer (payer sensu stricto) and the stakeholder (non-resident taxpayer) and exceeding the critical amount of PLN 2 million, which are an element of the pay & refund mechanism – assesses Marcin Socha, manager at Thedy & Partners.

The second modification proposed in the draft concerns making the time scope of the payer’s declaration under Article 26(7a) of the CIT Act and Article 41(15) of the PIT Act (i.e. the declaration allowing the application of tax preferences in WHT collection without the application of the pay & refund mechanism) more flexible by extending its operation to the end of the tax year (instead of only an additional two months). Consequently, the declaration would allow the pay & refund mechanism not to be applied until the end of the payer’s tax year.