Most taxes operate on simple logic: you earn, you pay. Withholding tax in Poland reverses the principle. You pay a foreign entity—but you must deduct the tax and remit it to the Polish treasury. You pay for someone who may not even know they are being taxed in Poland. This can happen with dividends, royalties, interest.
The construction makes sense from the state’s perspective: easier to collect tax from a Polish company than to chase a foreign service provider. But from the entrepreneur’s perspective, WHT in Poland is a trap with a delayed trigger. An error made today—failing to withhold, withholding the wrong amount, lacking proper documentation—will surface years later, during an audit, with interest and penalties attached.
Why Withholding Tax in Poland Is So Complicated
WHT sounds simple: you pay abroad, you withhold tax. But the devil lurks in every element of that sentence.
What does “pay abroad” mean? Is a service provided by a Polish subsidiary of a foreign corporation a foreign payment? Is a software license purchased online from a Delaware company subject to Polish withholding tax? What about interest paid to a bank headquartered in Luxembourg but operating through a Polish branch? Each of these questions has a different answer.
What rate applies? It depends on the type of payment. Dividends carry a different rate than interest. Interest differs from royalties. Royalties differ from advisory services. And IT services? That depends on whether you are purchasing a technical service, a license, or perhaps exercising copyright. The boundaries between these categories are blurred; the consequences of misclassification are sharp.
Can you pay less? Often, yes—Poland’s double taxation treaties provide for reduced rates or complete exemptions. But to benefit from them, you must meet conditions. Have the counterparty’s certificate of residence (certyfikat rezydencji). Verify that they are the beneficial owner of the payment. Exercise due diligence (należyta staranność). Each of these requirements has its own definition, its own documentation, its own pitfalls.
Withholding Tax in Poland — Beneficial Owner
For several years now, Polish tax law has operated with the concept of the “beneficial owner” (rzeczywisty właściciel) of payments. It is not enough that your counterparty is resident in a country with a favorable tax treaty. You must establish whether they are the true beneficiary of the payment—or merely an intermediary through which money flows onward.
This requirement has transformed withholding tax compliance in Poland. You cannot simply look at an invoice and a certificate of residence. You must analyze the counterparty’s business substance: Do they have employees? Do they have an office? Do they perform genuine economic functions, or are they a shell through which payments transit to another jurisdiction?
In practice, this means gathering documentation that goes far beyond what was required a decade ago. Questionnaires for counterparties. Analysis of corporate structures. Verification of economic substance. The burden falls entirely on the Polish payer—and so does the risk if the analysis proves insufficient.
Polish WHT — What’s in the Crosshairs
The Polish Ministry of Finance makes no secret of where it is looking. Warnings published by the ministry point directly to:
Payments to countries with “harmful tax policies” — the list is long and changes periodically.
Payments to low-tax jurisdictions — Cyprus, Malta, the United Arab Emirates, the Marshall Islands, but not only these. Any jurisdiction where the effective rate is markedly lower than Poland’s 19% CIT.
Complex international structures — the more levels, the more countries, the greater the risk of attracting the Polish tax authority’s interest.
Payments to related parties — intragroup transactions are always under scrutiny for withholding tax in Poland.
Changes in ownership — if shares in a company have recently passed to a resident of a “favorable” jurisdiction, an audit is almost certain.
These are not theoretical threats. This is the list of audit priorities for Polish withholding tax.
WHT in Poland — Pay-and-Refund Mechanism
Since 2019, Poland has operated a controversial “pay-and-refund” mechanism for certain WHT payments exceeding PLN 2 million annually to a single counterparty.
Under this regime, you must withhold tax at the full statutory rate (19% or 20%, depending on payment type)—even if a treaty provides for a lower rate or exemption. Then you apply for a refund of the excess. The refund process can take months.
The mechanism can be avoided by obtaining an opinion on the application of preferences (opinia o stosowaniu preferencji) from the tax authority—but the application process is cumbersome and the waiting time unpredictable.
For companies with significant cross-border payments, this creates a cash flow burden and administrative complexity that did not exist before. Withholding tax in Poland has become not just a compliance issue but a treasury management challenge.
Withholding Tax in Poland — What We Do
WHT audit — review of foreign payments, identification of those subject to Polish withholding tax, verification of the correctness of past filings.
Classification — analysis of specific payments and determination of the proper rate, taking into account Poland’s double taxation treaties and preference conditions.
Beneficial owner analysis — verification of counterparties’ substance, preparation of documentation supporting beneficial ownership claims.
WHT procedures — implementation of processes for verifying counterparties, gathering certificates of residence, exercising due diligence.
Contract review — analysis and negotiation of agreements with foreign counterparties to optimize WHT classification under Polish law.
Opinion applications — preparation of applications for opinions on the application of preferences to avoid the pay-and-refund mechanism.
Dispute representation — defense in audits and proceedings concerning withholding tax in Poland.
The Price of Error
WHT in Poland is an area where mistakes are expensive. Tax not withheld—you pay from your own pocket, because you will not recover it from the foreign counterparty. Wrong rate applied—you pay the difference with interest. Missing documentation—you lose the right to a treaty preference, even if you were materially entitled to it.
And then there is personal liability. Board members are responsible for a company’s tax obligations when enforcement against the company’s assets proves ineffective (Article 116 of the Tax Ordinance). In the case of withholding tax, this liability is not theoretical—it is a real risk that grows with every unverified payment.
The system is constructed such that it is safer to pay more and seek a refund than to pay less and risk an assessment with penalties. This is absurd—but it is the reality in which Polish companies conducting international business operate.
In Closing
Withholding tax in Poland has evolved from a straightforward compliance matter into one of the most complex areas of Polish tax law. The beneficial owner requirement, the pay-and-refund mechanism, the heightened scrutiny of cross-border payments—all of these have raised the stakes.
The margin for error has shrunk. The cost of error has grown. And the only defense is knowledge, documentation, and the discipline to treat every foreign payment as a potential audit trigger.
