Corporate tax in Poland

Summary
Corporate Income Tax Rate (%) 19
Capital Gains Tax Rate (%) 19
Branch Tax Rate (%) 19
Withholding Tax (%)
Dividends
19 (a)(b)
Interest 20 (c)(d)
Royalties 20 (c)(d)
Services 20 (e)
Branch Remittance Tax 0
Net Operating Losses (Years)
Carryback 0
Carryforward 5 (f)

a) This tax is imposed on dividends paid to residents and nonresidents.

b) This rate may be reduced by a tax treaty, or under domestic law, if certain conditions are met (see Section B).

c) This rate applies only to interest and royalties paid to nonresidents.

d) The tax rate may be reduced by a tax treaty or under domestic law if certain conditions are met (see Section B).

e) This withholding tax applies only to service payments made to nonresidents. In general, a foreign-service provider based in a treaty country is typically exempt from this tax if it submits a certificate of residency to the service recipient.

f) No more than 50% of the original loss can be deducted in one year.

Taxes on corporate income and gains

Corporate income tax. Resident companies (including companies in the process of incorporating or registering) are subject to cor­porate tax on their worldwide income and capital gains. Non­resident companies are taxed only on income earned in Poland. A company is resident in Poland for tax purposes if it is incorporated in Poland or managed in Poland. For this purpose, the concept of management is broadly equivalent to the effective management test in many treaties and is typically deemed to be exercised where the board of directors (or equivalent) meets. A branch of a non­resident company is generally taxed according to the same rules as a Polish company, but only on its Polish-source income. Part­nerships (in Poland, they include civil law partnerships, limited partnerships and general partnerships) are tax transparent except for foreign partnerships that are treated in their countries as tax­payers subject to corporate income tax. Under an amending law passed in 2013, Polish limited joint-stock partnerships are treated as corporate income tax taxpayers. The new law entered into force on 1 January 2014 (or some later date for certain partnerships with a non-calendar accounting year).

Under most tax treaties, income from an overseas representative office or permanent establishment of a Polish resident company is exempt from tax. Alternatively, certain tax treaties grant a tax credit for the foreign tax imposed on foreign-source income.

Tax rates. The general corporate income tax rate is 19%.

Withholding tax is not imposed on transfers of profits from a branch to its head office because from a legal perspective, a branch is regarded as an organizational unit of the foreign enterprise.

Capital gains. Capital gains, including those derived from the sale of publicly traded shares and state bonds, are treated as part of a company’s profits and are taxed at the regular corporate tax rate. Capital losses are deductible from normal business income.

In general, capital gains are calculated by subtracting the cost of the asset (or its net value for tax purposes) and sales expenses from the sales proceeds. If the sales price differs substantially from market value, the tax office may apply an independent ex­pert valuation.

Capital gains derived by nonresidents from sales and other dispos­als of state bonds issued on foreign markets may be effectively exempt from tax in Poland under domestic regulations if certain conditions are satisfied.

Administration. The Polish tax year must last 12 consecutive months, and it is usually the calendar year. However, a company can choose a different period of 12 consecutive months as its tax year by notifying the relevant tax office by certain deadlines. The first tax year after a change must extend for at least 12 months, but no longer than 23 months. If a company incorporated in the first half of a calendar year chooses the calendar year as its tax year, its first tax year is shorter than 12 months. A company incor­porated in the second half of a calendar year may elect a period of up to 18 months for its first tax year (that is, a period covering the second half of the year of incorporation and the subsequent year). In the event of a liquidation, a merger or division of a com­pany, the tax year may be shorter than 12 months.

In general, companies must pay monthly advances based on pre­liminary income statements. Monthly declarations do not need to be filed. In certain circumstances, a company may benefit from a simplified advance tax payment procedure.

Companies must file an annual income tax return within three months after the end of the company’s tax year. They must pay any balance of tax due at that time.

An overpayment declared in an annual tax return is refunded within three months. However, before the overpayment is refund­ed, it is credited against any past and current tax liability of the company. If the company has no tax liability, it may request that the tax office credit the overpayment against future tax liabilities or re fund the overpayment in cash. Overpayments earn interest at the same rate that is charged on late payments. Under the tax code, the rate of penalty interest on unpaid taxes varies according to the fluctuation of the Lombard credit rate. The interest rate on tax arrears is 200% of the Lombard credit rate, plus 2%. It cannot be lower than 8%. The penalty interest rate was 8% on 11 December 2015.

Dividends. A 19% withholding tax is imposed on dividends and other profit distributions paid to residents and nonresidents. Res­ident recipients do not aggregate domestic dividends received with their taxable income subject to the regular rate. For non­resident recipients, the withholding tax is considered a final tax and, according ly, the recipient is not subject to any further tax on the dividend received. A treaty may reduce the tax rate for distri­butions to nonresidents if the recipient who is the beneficial owner of the dividend provides the required certificate indicating that the recipient’s tax residence is located in the other treaty country.

Polish companies (and joint-stock partnerships, effective from 1 January 2014), other European Economic Area (EEA; the EEA consists of the EU countries and Iceland, Liechtenstein and Nor­way) companies and Swiss companies are exempt from tax on dividends and other profit distributions re ceived from Polish sub­sidiaries if they satisfy all of the following conditions:

  • They are subject to income tax in Poland, an EU/EEA member state or Switzerland on their total income, regardless of the source of the income (the exemption applies also to dividends or other profit distributions paid to permanent establishments, located in EU/EEA member states or in Switzerland, of such companies).
  • They do not benefit from income tax exemption on their total in come (which should be documented with their written state­ment).
  • For at least two years, they hold directly at least 10% (25% for Swiss recipients) of the capital of the company paying the divi­dend. The two-year holding period can be met after payment is made. If the two-year holding period is eventually not met (for ex ample, the shareholder disposes of the shares before the two-year holding requirement is met), the shareholder must pay the withholding tax and penalty interest. Broadly, except for some specific cases, full ownership of the shares is required.
  • The Polish payer documents the tax residency of the recipient with a certificate of residency issued by the competent foreign tax authorities (if payments are received by a permanent estab­lishment, some other documents may be needed).
  • A legal basis exists for a tax authority to request information from the tax administration of the country where the taxpayer is established, under a double tax treaty or other ratified inter­national treaty to which Poland is a party.
  • The dividend payer is provided with a written statement con­firming that the recipient of the dividend does not benefit from exemption from income tax on its worldwide income, regardless of the source from which such income is derived.

The above exemption does not apply to revenues earned by a general partner from its share in the profits of a limited joint-stock partnership.

The amount of withholding tax on revenue earned by a general partner in a limited joint-stock partnership is reduced by the amount calculated by multiplying the percentage of the share in profits attributable to the general partner and the amount of the tax due on the total income of the limited joint-stock partnership.

Interest, royalties and service fees. Under the domestic tax law in Poland, a 20% withholding tax is imposed on interest, royalties and fees for certain services paid to nonresidents. This withhold­ing tax may be eliminated or reduced if the following conditions are satisfied:

  • The payer can document the tax residency of the recipient (ben­eficial owner) of the payment or the service provider with a certificate indicating that the recipient or service provider’s tax residence is in a country that has concluded a double tax treaty with Poland.
  • The relevant treaty allocates taxing rights to the country of the service provider or recipient, or provides a different rate.

Under most of Poland’s tax treaties, the withholding tax on fees for services may not be imposed in Poland.

Poland was granted a transitional period for the implementation of the EU Interest and Royalties Directive (2003/49/EC). Under the transitional rules, Poland was required to incorporate the directive provisions into its domestic law, but it was entitled to impose withholding tax at reduced rates until 30 June 2013. Effective from 1 July 2013, the full exemption applies to interest and royal­ties paid to qualifying entities if the following conditions are met:

  • The payer is a company that is a Polish corporate income tax­payer (the exemption does not apply to joint-stock partnerships) with a place of management or registered office in Poland (the exemption applies also to payments made by permanent estab­lishments located in Poland of entities subject to income tax in the EU on their total income, regardless of the source of the income, provided that such payments qualify as tax-deductible costs in computing the taxable income subject to tax in Poland).
  • The entity earning the income is a recipient of such income and is a company subject to income tax in an EU/EEA member state (other than Poland) on its total income, regardless of the source of the income (the exemption applies also to payments made to permanent establishments of such companies if the income earn ed as a result of such a payment is subject to income tax in the EU member state in which the permanent establishment is located). In addition, the company must not benefit from income tax exemption on its total income.
  • For at least two years, the recipient of the payments holds di­rectly at least 25% of the share capital of the payer or the payer holds directly at least 25% of the share capital of the recipient of the payments. This condition is also met if the same entity holds directly at least 25% of both the share capital of the payer and the share capital of the recipient of the payments and such entity is subject to income tax in an EU/EEA member state on its total income, regardless of the source of the income. The two-year holding period can be met after payment is made. If the two-year holding period is eventually not met (for example, the share­holder disposes of the shares before the two-year holding re­quirement is met), the shareholder must pay the withholding tax together with the penalty interest. Full ownership of the shares is required.
  • The Polish payer documents the tax residency of the recipients of the payments with a certificate of tax residency issued by the competent foreign tax authorities (if payments are received by a permanent establishment, some other documents may be needed).
  • A legal basis exists for a tax authority to request information from the tax administration of the country where the taxpayer is established, under a double tax treaty or other ratified interna­tional treaty to which Poland is a party.
  • The recipient of the payments provides a written statement con­firming that it does not benefit from exemption from income tax on its total income, regardless of the source of the income.

Certain types of income are excluded from the exemption.

Foreign tax relief. Under its tax treaties, Poland exempts foreign-source income from tax or grants a tax credit (usually with re­spect to dividends, interest and royalties). Broadly, foreign taxes are creditable against Polish tax only up to the amount of Polish tax attributable to the foreign income.

In addition to a credit for tax on dividends (that is, a deduction of withholding tax; direct tax credit), Polish companies (or Polish permanent establishments of EU/EEA resident companies) may also claim a credit for the tax on profits generated by their subsid­iaries in other treaty countries (indirect tax credit). A Polish com­pany receiving a dividend from a subsidiary that is not resident in the EU, EEA or Switzerland may deduct from its tax the amount of in come tax paid by the subsidiary on that part of the profit from which the dividend was paid if the Polish parent company has held directly at least 75% of the foreign subsidiary’s shares for an un­interrupted period of at least 2 years. The total deduction is lim­ited to the amount of Polish tax attributable to the foreign income.

Foreign-source dividends are added to other profits of a Polish taxpayer taxed at the standard 19% rate.

Dividends from companies resident in EU/EEA states or in Switzerland may be exempt in Poland if the Polish recipient holds directly at least 10% (25% in the case of Switzerland) of the share capital of the foreign subsidiary for an uninterrupted period of at least 2 years. The share hold ing period requirement does not have to be met as of the pay ment date. The exemption does not apply if the dividends (or dividend-like income) are deductible for tax purposes in any form.

The above exemption does not apply if income from the partici­pation, including redemption proceeds, is received as a result of the liquidation of the legal entity making the payments.

The domestic exemption or tax credit can be applied if a legal basis exists for a tax authority to request information from the tax administration of the country from which the income was derived, under a double tax treaty or other ratified international treaty to which Poland is a party.

Broadly, except for some specific cases, full ownership of the shares is required to claim the credits and exemptions discussed above.

Determination of trading income

General. Taxable income equals the difference between revenues subject to tax and tax-deductible expenses. Accounts prepared in accordance with Polish accounting standards are the basic source of information for determining taxable income. In practice, tax­able income is arrived at by adjusting accounting results for tax purposes. Taxpayers must maintain accounting records in a man­ner that allows the tax base and the amount of tax payable to be determined. Otherwise, taxable income may be assessed by the tax authorities.

In general, taxable revenues of corporate entities carrying out business activities are recognized on an accrual basis. Revenues are generally recognized on the date of disposal of goods or prop­erty rights or the date on which services are supplied (or supplied in part), but no later than the following:

  • Date of issuance of the invoice
  • Date of receipt of payment

If the parties agree that services of a continuous nature are ac counted for over more than one reporting period, revenue is recognized on the last day of the reporting period set out in the contract or on the invoice (however, not less frequently than once a year).

The definition of revenues includes free and partially free benefits.

Expenses are generally allowed as deductions if they relate to taxable revenues derived in Poland, but certain expenses are spe­cifically disallowed.

Branches and permanent establishments of foreign companies are taxed on income determined on the basis of the accounting records, which must be kept in Polish currency. However, regula­tions provide coefficients for specific revenue categories, which may be applied if the tax base for foreign companies cannot be determined from the accounting records.

Depreciation. For tax purposes, depreciation calculated in ac – cordance with the statutory rates is deductible. Depreciation is computed using the straight-line method. However, in certain circum stances, the reducing-balance method may be allowed. The following are some of the applicable annual straight-line rates.

Asset Rate (%)
Buildings 1.5 to 10*
Office equipment 14
Office furniture 20
Computers 30
Motor vehicles 20
Plant and machinery 4.5 to 20

* For used buildings, an individual depreciation rate may be applied (the mini­mum depreciation period is calculated as a difference between 40 years and the time of use of the building).

For certain types of assets, depreciation rates may be increased. Companies may also apply reduced depreciation rates.

Intangibles are amortized over a minimum period, which usu­ally ranges from 12 months (for example, development costs) to 60 months (for example, goodwill).

Relief for losses. Losses from one source of profits may offset in­come from other sources in the same tax year. Losses may be car ried forward to the following five tax years to offset profits from all sources that are derived in those years. Up to 50% of the orig inal loss may offset profits in any of the five tax years. Losses may not be carried back.

Groups of companies. Groups of related companies (limited-liability companies and joint-stock companies; the group rules do not apply to limited joint-stock partnerships) may report com­bined taxable income and pay one combined tax for all companies belonging to the group. To qualify as a tax group, related compa­nies must satisfy several conditions, including the following:

  • The average share capital per each company is not lower than PLN1 million.
  • The parent company in the tax group must directly own 95% of the shares of the subsidiary companies.
  • The agreement on setting up a tax group must be concluded for a period of at least three years. It must be concluded in front of a notary public and registered with the tax office.
  • The taxable income of the group companies in each tax year must amount to at least 3% of the gross taxable revenues of the group companies.
  • The members of the group may not benefit from any corporate income tax exemptions based on laws other than the Corporate Income Tax Law.

In practice, the applicability of the rules for tax groups is limited, primarily as a result of the profitability requirement and certain other restrictive conditions.

Value-added tax

Value-added tax (VAT) is imposed on goods sold and services rendered in Poland, exports, imports, and acquisitions and supplies of goods within the EU. Poland has adopted most of the EU VAT rules.

The standard rate of VAT is 23%. Lower rates may apply to specified goods and services. The 0% rate applies to exports and supplies of goods within the EU. Certain goods and services are exempt.

Miscellaneous matters

Foreign-exchange controls. Polish-based companies may open foreign-exchange accounts. All export proceeds received in con­vertible currencies and receipts from most foreign sources may be deposited in these accounts. Businesses may open foreign currency accounts abroad. However, restrictions apply to the open ing of ac counts in countries that are not members of the EU, EEA or the Organisation for Economic Co-operation and Develop­ment (OECD). No permit is required for most loans obtained by Polish-based companies from abroad, including loans from for­eign share holders. Reporting requirements are im posed for cer­tain loans and credits granted from abroad.

Anti-avoidance legislation. In applying the tax law, the tax author­ities refer to the substance of a transaction in addition to its form.

If under the name (legal form) of the transaction, the parties have hidden some other transaction, the tax authorities may disregard the name (legal form) used by the parties and determine the tax implications of the transaction on the basis of actual intent of the parties.

If the tax authorities have doubts about the existence or the sub­stance of the legal relationship between the parties, they refer the case to the common court to establish the type of the actual legal relationship.

Effective from 1 January 2016, new Polish anti-avoidance rules implementing EU Council Directive 2015/121 of 27 January 2015 enter into force. Under the new measures, the domestic tax exemption for inbound dividends and the exemption from with­holding tax on outbound dividends do not apply if the dividends are connected with an agreement, a transaction or a legal action or multiple-related actions that have as its main or one of its main purposes to benefit from the tax exemption and that do not reflect the economic reality.

Debt-to-equity rules. The Polish thin-capitalization rules are amend ed, effective from 1 January 2015. The new rules restrict deductibility of interest on a broader range of loans than the rules that were in force until the end of 2014. The old rules restricted the deductibility of interest only on loans from direct shareholders or direct sister companies. Effective from 1 January 2015, in gen­eral, interest on all intra-group loans (as well as those from indi­rectly related entities) may be subject to deductibility restriction. If the value of debt owed to specified related parties exceeds the equity of the borrower, part (calculated based on a proportion) of the interest paid on a loan from a related party is not deductible for tax purposes. For purposes of these rules, equity is determined on the last day of the month preceding the month of the interest payment without taking into account a revaluation reserve and subordinated loans. The value of equity is further decreased by the value of the share capital that was not actually transferred to this capital or was covered with shareholder’s loans, receivables and intangibles that are not subject to amortization. The definition of loan covers any form of debt financing, including the issuance of bonds, credits and bank and nonbank deposits. The definition does not cover derivatives. The thin-capitalization rules apply to interest on loans grant ed by Polish and foreign qualified entities. They cover the following loans:

  • Loans granted by an entity that holds directly or indirectly at least 25% of the voting rights in the borrower
  • Loans granted jointly by entities that jointly hold directly or indirectly at least 25% of the voting rights in the borrower
  • Loans granted by one company to another company if the same entity holds directly or indirectly at least 25% of the voting rights in both the lender and the borrower

For general partners in a limited joint-stock partnership, the con­ditions concerning the minimum share (voting rights) are ful­filled, regardless of the general partner’s share.

Effective from 1 January 2015, taxpayers also have the right to opt for an alternative thin-capitalization calculation method. The new method contains a general limitation applicable to all interest (including interest on third-party loans) based on a reference rate of the National Bank of Poland and a tax value of assets (exclud­ing intangible assets) capped at 50% of earnings before interest and taxes. Interest that is not deducted in a tax year can be de­ducted in the following consecutive five tax years. If a taxpayer decides to use this method, it must be used for at least three tax years.

Under the applicable grandfathering rules, if an intra-group loan is granted and actually transferred to a borrower before 2015, the interest on such loan is subject to the old thin-capitalization rules.

Controlled foreign companies. Effective from 1 January 2015, cer­tain income or gains derived by foreign subsidiaries of Polish tax payers that fulfill the definition of a controlled foreign com­pany (CFC) are subject to tax in Poland.

The following foreign companies are considered CFCs:

  • A foreign company that has its registered office or management in a blacklisted territory or state
  • A foreign company that has its registered office or management in a state with which Poland or the EU has not concluded an agreement containing an exchange-of-information clause
  • A foreign company that fulfils all of the following criteria:

— A Polish taxpayer holds for at least 30 days directly or indi­rectly at least 25% of the shares, voting rights or profit participation rights in this company.

— At least 50% of this company’s revenues is derived from dividends and other revenues from its share in the profits of legal persons, disposal of shares, receivables, interest and other loan proceeds, guarantees and warranty claims, copy­rights, industrial property rights and derivatives.

— At least one of the above types of revenues is not subject to tax, is exempt from tax or is subject to tax at rate that is at least 25% lower than the Polish statutory corporate income tax rate (the current corporate income tax rate is 19%; therefore, the local rate should not be equal or lower than 14.25%) in the foreign company’s country of residence, unless the tax exemption results from the application of the EU Parent-Subsidiary Directive.

A CFC’s income is subject to tax in Poland at 19% at the level of the Polish shareholder. The shareholder is taxed on the part of the profits of the CFC in which the shareholder participates after deducting dividends received from the CFC and gains on dis­posal of shares in the CFC (these amounts may be deducted in the following five tax years). The tax payable in Poland may be de­creased by relevant proportion of corporate income tax paid by the CFC.

Taxation under the CFC rules does not apply if any of the follow­ing circumstances exists:

  • The CFC is subject to tax on its worldwide income in an EU/ EEA member state and carries a “genuine business activity” in this state.
  • The CFC’s revenues do not exceed EUR250,000 in a given tax year.
  • The CFC carries on a “genuine business activity” in a state other than an EU/EEA member state and is subject to tax on its world­wide income in such state, its income does not exceed 10% of its revenues generated from the “genuine business activity” in this state, and Poland or the EU have concluded an agreement containing an exchange of information clause with this state.

The CFC rules also apply to taxpayers carrying on business activ­ity through a permanent establishment located outside of Poland, with certain exceptions.

Transfer pricing. The Polish tax law includes specific rules on transfer pricing. The fundamental rules, which are based on the OECD guidelines, are contained in the Corporate Income Tax Law and the Personal Income Tax Law.

Under the Corporate Income Tax Law, the following are related parties:

  • A domestic entity (a legal person, natural person or organiza­tional unit without legal form having its registered office [place of management] or residence in Poland) and a foreign entity (a legal or natural person having its registered office [place of management] or residence abroad), if any of the following cir­cumstances exist:

— The domestic entity participates, directly or indirectly, in the management, control or capital of the foreign entity.

— The foreign entity participates, directly or indirectly, in the management, control or capital of the domestic entity.

— The same legal person, natural person or organizational unit without legal form participates, directly or indirectly, in the management, control or capital of both the domestic entity and the foreign entity.

  • Two domestic entities, if the following circumstances exist:

— The domestic entity participates, directly or indirectly, in the management, control or capital of the other domestic entity.

— The same legal person, natural person or organizational unit without legal form participates, directly or indirectly, in the management, control or capital of the domestic entities.

— Family, capital, property or employment relations exist be­tween the entities or the management, supervision or con­trol personnel of the entities, or the same persons carry out management, supervision or control functions in the entities.

Polish tax law enumerates transfer-pricing methods that must be followed by the tax authorities in testing the prices applied in intercompany transactions (taxpayers do not have to apply these methods). The tax law provides for the following traditional transfer-pricing methods:

  • The comparable uncontrolled price method (preferable one)
  • The resale-price method
  • The cost-plus method

If the above methods are inapplicable, the transactional methods (profit-split method and transactional net margin method) can be considered.

Polish transfer-pricing regulations indicate that the tax authorities must examine the terms agreed to or imposed with respect to business restructuring projects between related parties for com­patibility with the terms that independent companies would have negotiated. They also cover the examination of the accuracy of the grounds for the right of related parties to receive a fee, and the amount of such fee, in business restructuring projects.

Under the tax law, on the request of the tax authorities, taxpayers conducting transactions with related parties exceeding certain statutory thresholds (of a relatively low value) must prepare spe­cific tax documentation regarding these transactions and present it to the tax authorities or tax inspection authorities within seven days after the date of the request. In addition, effective from 2015, tax documentation must be prepared with respect to an agreement to set up an entity without legal form, a joint venture agreement or a similar agreement. The documentation must be in Polish and must contain the following:

  • A description of the functions of the parties to the transaction (including assets engaged and risks assumed)
  • All expected costs of the transaction and the method and terms of payment
  • The method for calculating profits and a description of the transaction price
  • A description of the business strategy and any other related activity if this strategy affects the transaction value
  • An indication of any other factors that were taken into account in determining the transaction value (a description of rules for the share of profits or losses between partners must be provided with respect to an agreement to set up an entity without legal form, joint venture agreement or a similar agreement)
  • A description of the benefits that the entity required to prepare the documentation expects to obtain from the purchase of intan­gible assets or services, such as advisory or financial services, granting of licenses or purchase of intellectual property

Transfer-pricing regulations also define low value-added services and indicate the information to be verified by authorities while auditing these types of transactions. A transfer-pricing decree provides a list of shareholder costs that are not deductible for tax purposes in Poland.

The documentation requirements also apply to entities that enter into transactions involving payments to tax havens if the total value of the transactions exceeds EUR20,000 during the tax year.

If the tax authorities assess additional income to a taxpayer and if a taxpayer does not provide the transfer-pricing documentation required by the law, additional income that is assessed in connec­tion with intercompany transactions that are not covered with the documentation is taxed at a penalty tax rate of 50%.

The transfer-pricing documentation requirements applicable to Polish entities also apply to permanent establishments of foreign residents located in Poland and to permanent establishments of Polish entities. In addition, if income earned by the permanent establishment of a foreign resident is assessed in Poland and if no transfer-pricing documentation is submitted by the statutory dead­line, a corporate income tax rate of 50% can be applied to any excess over the fair market amount.

Taxpayers must report foreign related-party transactions if the total amount of the transactions exceeds EUR300,000 in a tax year. If the foreign entity has a representative office or a perma­nent establishment in Poland, the reporting obligation applies to single transactions exceeding EUR5,000.

The required information must be submitted to the tax office by the end of the third month following the end of the tax year.

The Advanced Pricing Agreement (APA) regulations entered into force on 1 January 2006. An APA concluded for a particular trans­action is binding on the tax authorities with respect to the method selected by the taxpayer. APAs may apply to transactions that have not yet been executed or transactions that are in progress when the taxpayer submits an application for an APA.

In June 2006, Poland ratified the EU convention on the elimina­tion of double taxation in connection with the adjustment of profits of associated enterprises (90/436/EEC).

Effective from 2015, it is possible to eliminate double taxation in domestic transactions.

Effective from 2016, domestic entities must file a Country-by-Country Report (according to the template provided by the Polish Ministry of Finance) within 12 months from the last day of their fiscal year if they meet all of the following conditions:

  • They are parent companies and are not subsidiaries.
  • They are consolidating their financial statements.
  • They have a foreign permanent establishment or foreign sub­sidiary.
  • Their previous fiscal year consolidated revenues in Poland and abroad exceeded EUR750 million.

The above measure applies to fiscal years beginning on or after 31 December 2015.

Effective from 2017, fundamental changes will be introduced re­garding the obligations and scope with respect to transfer-pricing documentation (new thresholds for transactions to be document­ed, extended scope of data to be presented in documentation and obligatory benchmarks reflecting the local market for certain type of entities). In addition, an obligation to supplement the annual corporate income tax return with a simplified report on transac­tions concluded with related parties for taxpayers with revenues or expenses exceeding EUR10 million will be introduced. Taxpayers will be also required to submit a signed declaration confirming that transfer-pricing documentation is in place (the declaration must be filed together with annual corporate income tax return). The capital relationship threshold will be increased from 5% to 25%, effective from 2017.

Treaty withholding tax rates

The standard withholding tax rates are 19% for dividends and 20% for interest and royalties. The rate may be reduced under a double tax treaty on presentation of a certificate of tax residence or, in some cases, under domestic regulations. The following table shows the withholding tax rates under Polish double tax treaties.

Dividends

%

Interest

%

Royalties

%

Albania 5/10 (d) 10 5
Algeria (gg) 5/15 (d) 0/10 (k) 10
Armenia 10 5 10
Australia 15 10 10
Austria 5/15 (a) 0/5 (k) 5
Azerbaijan 10 10 10
Bangladesh 10/15 (a) 0/10 (k) 10
Belarus 10/15 (e) 10 0
Belgium 5/15 (cc) 0/5 (k) 5
Bosnia and
Herzegovina (rr) 5/15 (r) 10 10
Bulgaria 10 0/10 (k) 5
Canada 5/15 (a) 0/10 (pp) 5/10 (qq)
Chile 5/15 (c) 15 (dd) 5/15 (h)(ee)
China 10 0/10 (k) 7/10 (h)
Croatia 5/15 (d) 0/10 (k) 10
Cyprus 0/5 (oo) 0/5 (k) 5
Czech Republic 5 0/5 (k) 10
Denmark 0/5/15 (s) 0/5 (k) 5
Egypt 12 0/12 (k) 12
Estonia 5/15 (d) 0/10 (k) 10
Finland 5/15 (y) 0/5 (k) 5
France 5/15 (a) 0 0/10 (p)
Georgia 10 0/8 (k) 8
Germany 5/15 (jj) 0/5 (k) 5
Greece 19 10 10
Hungary 10 0/10 (k) 10
Iceland 5/15 (y) 0/10 (k) 10
India 10 0/10 (k) 15
Indonesia 10/15 (c) 0/10 (k) 15
Iran 7 0/10 (k) 10
Ireland 0/15 (kk) 0/10 (k) 0/10 (v)
Israel 5/10 (b) 5 5/10 (h)
Italy 10 0/10 (k) 10
Japan 10 0/10 (k) 0/10 (i)
Jordan 10 0/10 (k) 10
Kazakhstan 10/15 (c) 0/10 (k) 10
Korea (South) 5/10 (a) 0/10 (k) 10
Kuwait 0/5 (z) 0/5 (k) 15
Kyrgyzstan 10 0/10 (k) 10
Latvia 5/15 (d) 0/10 (k) 10
Lebanon 5 0/5 (k) 10
Lithuania 5/15 (d) 0/10 (k) 10
Luxembourg 0/15 (oo) 0/5 (k) 5
Macedonia 5/15 (d) 0/10 (k) 10
Malaysia 0 15 15
Malta 0/10 (hh) 0/5 (k) 5
Mexico 5/15 (d) 0/10/15 (k)(aa) 10
Moldova 5/15 (d) 0/10 (k) 10
Mongolia 10 0/10 (k) 5
Morocco 7/15 (d) 10 10
Netherlands 5/15 (a) 0/5 (k) 5
New Zealand 15 10 10
Nigeria (gg) 10 0/10 (k) 10
Norway 0/15 (hh) 0/5 (k) 5

 

Pakistan 15 (j) 0/20 (k) 15/20 (n)
Philippines 10/15 (d) 0/10 (k) 15
Portugal 10/15 (o) 0/10 (k) 10
Qatar 5 0/5 (k) 5
Romania 5/15 (d) 0/10 (k) 10
Russian
Federation 10 0/10 (k) 10 (w)
Saudi Arabia 5 0/5 (k) 10
Singapore 0/5/10 (bb)(oo) 0/5 (k) 2/5 (h)
Slovak Republic 0/5 (oo) 0/5 (k) 5
Slovenia 5/15 (d) 0/10 (k) 10
South Africa 5/15 (d) 0/10 (k) 10
Spain 5/15 (d) 0 0/10 (f)
Sri Lanka 15 0/10 (k) 0/10 (l)
Sweden 5/15 (d) 0 5
Switzerland 0/15 (ll) 0/5/10 (mm) 0/5/10 (nn)
Syria 10 0/10 (k) 18
Tajikistan 5/15 (d) 10 10
Thailand 19 (t) 0/10/20 (k)(m) 5/15 (f)
Tunisia 5/10 (d) 12 12
Turkey 10/15 (d) 0/10 (k) 10
Ukraine 5/15 (d) 0/10 (k) 10
United Arab
Emirates 0/5 (z) 0/5 (k) 5
United Kingdom 0/10 (ff) 0/5 (k) 5
United States 5/15 (g) 0 10
Uruguay (gg) 15 0/15 (k) 15
Uzbekistan 5/15 (c) 0/10 (k) 10
Vietnam 10/15 (d) 10 10/15 (q)
Yugoslavia (u) 5/15 (y) 10 10
Zimbabwe 10/15 (d) 10 10
Non-treaty countries 19 20 20 (x)

a) The lower rate applies if the recipient of the dividends is a company that owns at least 10% of the payer.

b) The lower rate applies if the recipient of the dividends is a company that owns at least 15% of the payer.

c) The lower rate applies if the recipient of the dividends is a company that owns at least 20% of the payer.

d) The lower rate applies if the recipient of the dividends is a company that owns at least 25% of the payer.

e) The lower rate applies if the recipient of the dividends is a company that owns more than 30% of the payer.

f) The lower rate applies to royalties paid for copyrights, among other items; the higher rate applies to royalties for patents, trademarks and industrial, com­mercial or scientific equipment or information.

g) The lower rate applies if the recipient of the dividends is a company that owns at least 10% of the voting shares of the payer.

h) The lower rate applies to royalties paid for the use of, or the right to use, industrial, commercial or scientific equipment.

i) The lower rate applies to cultural royalties.

j) This rate applies if the recipient of the dividends is a company that owns at least one-third of the payer.

k) The 0% rate applies to among other items, interest paid to government units, local authorities and central banks. In the case of certain countries, the rate also applies to banks (the list of exempt or preferred recipients varies by country). The relevant treaty should be consulted in all cases.

l) The 0% rate applies to royalties paid for, among other items, copyrights. The 10% rate applies to royalties paid for patents, trademarks and for industrial, commercial or scientific equipment or information.

m) The 20% rate applies if the recipient of the interest is not a financial or insurance institution or government unit.

n) The lower rate applies to know-how; the higher rate applies to copyrights, patents and trademarks.

o) The 10% rate applies if, on the date of the payment of dividends, the recipi­ent of the dividends has owned at least 25% of the share capital of the payer for an uninterrupted period of at least two years. The 15% rate applies to other dividends.

p) The lower rate applies to royalties paid for the following:

  • Copyrights
  • The use of or the right to use industrial, commercial and scientific equip­ment
  • Services comprising scientific or technical studies
  • Research and advisory, super visory or management services The treaty should be checked in all cases.

q) The lower rate applies to know-how, patents and trademarks.

r) The 5% rate applies if the recipient is a company (other than a partnership) that holds directly at least 25% of the capital of the company paying the dividends.

s) The 0% rate applies if the beneficial owner of the dividends is a company that holds directly at least 25% of the capital of the payer of the dividends for at least one year and if the dividends are declared within such holding period. The 5% rate applies to dividends paid to pension funds or other similar institutions operating in the field of pension systems. The 15% rate applies to other dividends.

t) Because the rate under the domestic law of Poland is 19%, the treaty rate of 20% does not apply.

u) The treaty with the former Federal Republic of Yugoslavia that applied to the Union of Serbia and Montenegro should apply to the Republics of Montenegro and Serbia.

v) The lower rate applies to fees for technical services.

w) The 10% rate also applies to fees for technical services.

x) The 20% rate also applies to certain services (for example advisory, accounting, market research, legal assistance, advertising, management and control, data processing, search and selection services, guarantees and pledges and similar services).

y) The lower rate applies if the beneficial owner is a company (other than a partnership) that controls directly at least 25% of the capital of the company paying the dividends.

z) The lower rate applies if the owner of the dividends is the government or a government institution.

(aa) The 10% rate applies to interest paid to banks and insurance companies and to interest on bonds that are regularly and substantially traded.

(bb) The 0% rate applies to certain dividends paid to government units or com­panies.

(cc) The lower rate applies if the recipient of the dividends is a company that owns either of the following:

  • At least 25% of the payer
  • At least 10% of the payer, provided the value of the investment amounts to at least EUR500,000 or its equivalent

(dd) The treaty rate is 15% for all types of interest. However, under a most-favored-nation clause in a protocol to the treaty, the 15% rate is replaced by any more beneficial rate agreed to by Chile in a treaty entered into with another jurisdiction. For example, under Chile’s tax treaty with Spain, a 5% rate applies to certain types of interest payments, including interest paid to banks or insurance companies or interest derived from bonds or securities that are regularly and substantially traded on a recognized securities market.

(ee) The general treaty rate for royalties is 15%. However, under a most-favored-nation clause in a protocol to the treaty, the 15% rate is replaced by any more beneficial rate agreed to by Chile in a treaty entered into with another jurisdiction. For example, under Chile’s tax treaty with Spain, the general withholding tax rate for royalties is 10%.

(ff) The 0% rate applies if the beneficial owner of the dividends is a company that holds at least 10% of the share capital of the payer of the dividends for an uninterrupted period of at least two years.

(gg) The treaty has not yet entered into force.

(hh) The 0% rate applies if the beneficial owner of the dividends is a company that holds directly at least 10% of the capital of the company paying the dividends on the date on which the dividends are paid and has held the capital or will hold the capital for an uninterrupted 24-month period that includes the date of payment of the dividends.

(ii)      The rate is 10% if Switzerland imposes a withholding tax on royalties paid to nonresidents.

(jj)      The lower rate applies if the recipient of the dividends is a company (other than a partnership) that owns directly at least 10% of the payer. Certain limitations to the application of the preferential rates may apply.

(kk) The lower rate applies if the beneficial owner of the dividends is a com­pany that holds directly at least 25% of the voting power of the payer. Under the Ireland treaty, if Ireland levies tax at source on dividends, the 0% rate is replaced by a rate of 5%.

(ll)      The 0% rate applies to dividends paid to a company (other than a partner­ship) that holds directly at least 10% of the capital of the company paying the dividends on the date the dividends are paid and has done so or will have done so for an uninterrupted 24-month period in which that date falls. The 0% rate may also apply to dividends paid to certain pension funds.

(mm) The 10% rate applies to interest paid before 1 July 2013. For interest paid on or after 1 July 2013, the 5% rate applies unless an exemption applies. The 0% rate applies to such interest if any of the following conditions is satisfied:

  • The beneficial owner of the interest is a company (other than a partner­ship) that holds directly at least 25% of the share capital of the payer of the interest.
  • The payer of the interest holds directly at least 25% of the share capital of the beneficial owner of the interest.
  • An EU/EEA company holds directly at least 25% of the share capital of both the beneficial owner of the interest and the payer of the interest. (nn) For royalties paid before 1 July 2013, the 10% rate applies if Switzerland imposes in its local provisions a withholding tax on royalties paid to non­residents. Otherwise, a 0% rate applies. For royalties paid on or after 1 July 2013, a 5% rate applies unless an exemption applies. The 0% rate applies to such royalties if any of the following conditions is satisfied:
  • The beneficial owner of the royalties is a company (other than a partner­ship) that holds directly at least 25% of the share capital of the payer of the royalties.
  • The payer of the royalties holds directly at least 25% of the share capital of the beneficial owner of the royalties.
  • An EU/EEA company holds directly at least 25% of the share capital of both the beneficial owner of the royalties and the payer of the royalties. Furthermore, If Poland enters into an agreement with an EU or EEA coun­try that allows it to apply a rate that is lower than 5%, such lower rate will also apply to royalties paid between Poland and Switzerland.

(oo) The lower rate (5% rate under the Singapore treaty) applies if the beneficial owner is a company (other than a partnership) that holds directly at least 10% of the capital of the company paying the dividends for an uninter­rupted period of 24 months.

(pp) The 0% rate applies to the following:

  • Interest arising in Poland and paid to a resident of Canada with respect to a loan made, guaranteed or insured by Export Development Canada or to a credit extended, guaranteed or insured by Export Development Canada
  • Interest arising in Canada and paid to a resident of Poland with respect to a loan made, guaranteed or insured by an export financing organiza­tion that is wholly owned by the state of Poland or to a credit extended, guaranteed or insured by an export financing organization that is wholly owned by the state of Poland
  • Interest arising in Poland or Canada and paid to a resident of the other

contracting state with respect to indebtedness arising as a result of the sale by a resident of the other contracting state of equipment, merchan­dise or services (unless the sale or indebtedness is between related per­sons or unless the beneficial owner of the interest is a person other than the vendor or a person related to the vendor)

(qq) The lower rate applies to copyright royalties and similar payments with re­spect to the production or reproduction of literary, dramatic, musical or artistic works and royalties for the use of, or the right to use, patents or in­formation concerning industrial, commercial or scientific experience (with some exceptions).

(rr) The agreement with the Socialist Federal Republic of Yugoslavia should apply to Bosnia and Herzegovina.