New Polish Deal Obligations to Come Into Force

From 1 January 2022, a new Polish deal will change the rules of collecting withholding tax (WHT). Some changes particularly affect the rules of collecting WHT in case the payments of proceeds are made through entities that maintain securities accounts.

New rules enforce a pay-and-refund instrument for passive income (interest, dividends) earned by related parties that exceed PLN 2m in a tax year.

The Importance of the New Polish Deal:

According to the CIT Act, the entity that holds the securities’ account is responsible for identification if such a relationship exists and the limit is exceeded.

The payer of the proceeds from securities through an entity that maintains the securities’ account or through an omnibus account is bound to inform that entity about any relationship between the issuer and the taxpayer (the recipient) out the PLN 2m limit being exceeded not later than 7 before or to the payment. The information of the new Polish deal must be up before or on the payment if the circumstances change.

These rules set an additional duty on issuers of securities, to inform the withholding tax agent about any relationship with the beneficiaries of proceeds from the securities, i.e. bondholders or shareholders.

Article 30.5b of the Tax Ordinance Act, issuers of securities may be exposed to the risk of liability for the tax not collected by a third party (the tax agent) if the new disclosure obligations are not fulfilled.

It’s worth noting that the negligence to fulfill the new obligation may constitute a fiscal criminal offense which may be fined by up to 720 daily rates.

The new obligation may raise questions for the:
Situations in which the obligation to disclose arises,
The scope and the content of the disclosure,
The communication between the issuer and the tax agent,
The way of management of the tax risk stems from the new Polish deal.

Since the rules were introduced on 1 January 2022, new obligations may already occur.