Changes to withholding tax - the payer's new responsibilities from 2019

Following the entry into force of the Act to amend the Personal Income Tax Act, the Corporate Income Tax Act and other acts (OJ of 2018, Item 2159, hereinafter “The Amending Act”) On 1 January 2019 fundamental changes came into force in the field of withholding tax in Poland.

One of the most significant changes is replacement of the mechanism previously used for withholding tax “Relief at source” with the mechanism known as “Pay and tax refund demand” in relation to the payment of receivables subject to withholding tax in excess of PLN 2,000,000 in the fiscal year. Although this responsibility is postponed until 1 July 2019, it is advisable to get prepared without delay.

Apart from the change indicated above many other responsibilities have been imposed on payers in the field of withholding tax, including the obligation to maintain “due diligence” in the application of preferential withholding tax rules.

In many cases, the changes mean the withholding tax burden increases (e.g. due to the lack of an ability to apply the exemption from the so-called “Parent-Subsidiary Directive” and the “Interest Directive”). In all the cases – they mean the obligation to verify payments, verify counterparties and to increase the tax risk of payments to foreign recipients.

We hereby present to you the new obligations related to payments to foreign counterparties, recommendations in relation to measures undertaken to protect your tax position, as well as our proposal for our assistance in this regard.

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