Withholding tax on interest in Poland

Withholding tax on interest (podatek u źródła od odsetek) is a flat-rate income tax which a Polish withholding agent collects on interest paid to non-residents: on loans, credits, bonds, deposits, discounts and settlements in cash pooling structures. Under the CIT Act the rate is 20 percent (Article 21(1)(1) of the Corporate Income Tax Act of 15 February 1992, the CIT Act). Under the PIT Act two groups must be distinguished. Interest covered by Article 30a(1) of the Personal Income Tax Act of 26 July 1991 (the PIT Act), including interest on private loans, securities and accounts, is taxed at 19 percent. Other interest is subject to the 20 percent rate of Article 29(1)(1).

Double tax treaties reduce the rate usually to 5 or 10 percent, and many of them exempt interest on bank loans and government loans. Associated companies from the European Union and the European Economic Area are exempt where they hold at least 25 percent for 2 years and the recipient is the beneficial owner of the interest. It is intra-group financing, often routed through intermediate companies, that generates most disputes about that status.

Key points

• Interest within the meaning of the statute is any consideration for the use of another person’s capital: also discounts, capitalised interest, interest in cash pooling and charges for deferred payment. Capitalisation of interest is its payment and triggers withholding (Article 26(7) CIT Act).
• Treaties (Article 11 of the OECD Model Tax Convention) give Poland usually 5 or 10 percent; the treaties with the United States, France and Sweden exempt interest entirely, and the treaty with Germany exempts among others interest on bank loans. The condition is a certificate of residence and, where the treaty so provides, beneficial owner status.
• The exemption of Article 21(3) CIT Act requires an EU or EEA recipient taxed on its worldwide income, a capital link of at least 25 percent kept for 2 years (also through a common parent from the EU or the EEA, Article 21(3a)) and beneficial owner status (Article 21(3)(4)). Under the general ruling of 20 November 2024 the exemption is not available where the interest itself is covered by an income-specific exemption in the recipient’s state.
• The beneficial owner is the entity that receives the interest for its own benefit, decides on its use, bears the economic risk and is not obliged to pass it on (Article 4a(29) CIT Act). A conduit company may lose the exemption as an abusive structure, which the Court of Justice confirmed in its judgments of 26 February 2019 in the Danish cases.
• Pay and refund: payments to a related non-resident above PLN 2,000,000 a year, counted together with dividends and royalties, are subject to withholding on the excess at the rate applicable to the payment, which is 20 percent for interest (Article 26(2e) CIT Act), unless the agent filed a WH-OSC statement or holds an opinion on the application of preferences.
• Withholding tax is not the only tax cost of intra-group interest. Article 15c CIT Act limits the deduction of excess borrowing costs above the higher of PLN 3,000,000 or 30 percent of tax EBITDA, and shareholder loans are tested for arm’s length terms.

What counts as interest and at what rate

Double tax treaties define interest independently and usually exclude penalty charges for late payment. For a resident of a treaty state the treaty decides the classification. The same transfer may therefore be interest under the statute and something else under the treaty.

Capitalisation of interest, that is adding it to the loan principal, is treated as payment (Article 26(7) CIT Act). The withholding obligation arises on the day of capitalisation, although no money moves. This is one of the most common mistakes made by withholding agents.

Interest paid by a Polish permanent establishment of a foreign enterprise is subject to withholding in the same way as interest paid by a company. Interest paid to a Polish permanent establishment of a non-resident may be free of withholding, but only once the conditions of Article 26(1d) and (1e) are met. The establishment’s address alone is not enough; see our article on branches of foreign companies in Poland.

Beneficial owner of interest: conduit companies and cash pooling

Intra-group financing often flows through a finance company in Luxembourg, the Netherlands or Ireland which lends the Polish company funds obtained from a parent outside the EU. The exemption of Article 21(3) and treaty reliefs belong only to the beneficial owner. What decides is not whether the recipient passes the funds on, but whether it is legally or factually obliged to do so and whether it bears the risk and makes the decisions.

The Court of Justice in its judgments of 26 February 2019 in C-115/16, C-118/16, C-119/16 and C-299/16 (N Luxembourg 1) held that Directive 2003/49/EC does not protect conduit companies and that the EU prohibition of abuse allows the exemption to be refused even without a domestic clause. Abuse nevertheless requires an assessment of the specific structure, not a simple “pass-through equals refusal” test.

In its guidance of 3 July 2025 the Ministry of Finance set the standard of due diligence, higher towards related entities. It admitted the look-through approach under four conditions: the agent identifies the beneficial owner behind the intermediary, shows that it recognises the income in its state, the payments in the chain are of the same kind, and the beneficial owner meets the conditions of the chosen relief. For the dividend exemption the Supreme Administrative Court rejected look-through in 2026; for interest, where the statute expressly requires a beneficial owner, the reasoning is different and the dividend solutions should not be transferred automatically. Our article on the beneficial owner of interest and the preferential withholding tax rate discusses the consequences for interest. Without beneficial owner documentation the agent withholds at the statutory rate.

In cash pooling the authorities usually deny the pool leader beneficial owner status for the interest it distributes among the participants. The relief is then determined by the residence of the participants receiving the surpluses, and the agent must know the flows in the whole structure. Where the leader receives part of the interest on its own account, that part is assessed separately; the name of the function does not replace an examination of the specific payment.

The Article 21(3) exemption and pay and refund

The exemption implementing Directive 2003/49/EC requires cumulatively: a paying company that is a Polish CIT taxpayer, excluding limited partnerships and limited joint-stock partnerships (Article 21(9)), or a Polish permanent establishment of an EU company (Article 21(3)(1)(b)); a recipient that is an EU or EEA company taxed on its worldwide income; a direct holding of at least 25 percent kept for an uninterrupted 2 years in either direction, or held in both companies by the same EU or EEA company (Article 21(3) and (3a)); beneficial owner status (Article 21(3)(4)). The recipient may not benefit from an exemption of all its income (Article 21(3c)). The exemption applies accordingly to qualifying Swiss companies listed in Annex 5 (Article 21(8)) and only to the arm’s length amount of the payment (Article 21(6) and (7)).

In general ruling No. DD9.8202.2.2024 of 20 November 2024 the Minister of Finance took the position that the condition of Article 21(3c) is also not met where the interest itself is covered by an income-specific exemption or taxed under special rules in the recipient’s state. This distinguishes interest from dividends. The absence of actual tax resulting from the recipient’s individual situation, for example the use of a loss, does not in itself breach the condition.

The holding condition may be met after the payment (Article 21(4)). Where it is not met, the company that received the interest pays the tax with interest running from the day after the deadline for the agent’s remittance (Article 21(5)). The agent applies the exemption after receiving a certificate and the recipient’s written statement (Article 26(1c) and (1f)).

Pay and refund works as for dividends: the PLN 2,000,000 threshold is counted jointly for interest, dividends and royalties paid to the same related non-resident in the agent’s tax year. On the excess 20 percent is withheld (Article 26(2e)). The ways out are a WH-OSC statement (Article 26(7a)) or an opinion on the application of preferences (Article 26b); tax withheld is refunded where the conditions of the relief are met, in principle within 6 months of the application (Article 28b). Interest and discounts on bonds issued by the State Treasury and some other issuers are outside the mechanism under the exclusion regulation. The mechanics are described in the pillar entry on withholding tax in Poland, and the exemption conditions compared with dividends in the entry on the participation exemption.

Cost is a separate matter. Article 15c CIT Act limits the deduction of excess borrowing costs above the higher of PLN 3,000,000 or 30 percent of tax EBITDA, with statutory exceptions; the limit covers financing from all lenders, not only related ones. Interest on debt incurred to acquire shares in a company that later merges with the borrower is excluded under Article 16(1)(13e) to the extent it would reduce a base that includes revenue from that company’s business. Shareholder loans require arm’s length interest and transfer pricing documentation; see our article on the conversion of a shareholder loan into reserve capital and the entry on related parties and affiliated entities.

What to check before paying interest abroad

• The classification of the payment: interest, discount, commission, contractual penalty; the moment of withholding on capitalisation.
• The recipient’s status: company or individual; for an individual a rate of 19 or 20 percent depending on the type of interest.
• A certificate of residence covering the payment date, and the definition of interest and the beneficial owner clause in the treaty with the recipient’s state; treaty exemptions for banks and export credits.
• The financing chain: where the lender’s funds come from, whether it is obliged to pass the interest on, whether it has staff and decides on the capital; documentation under the guidance of 3 July 2025.
• The conditions of the Article 21(3) exemption: a 25 percent holding for 2 years, the statement, no exemption of the interest in the recipient’s state under the general ruling of 20 November 2024.
• The PLN 2,000,000 threshold to a related entity in the agent’s year; a WH-OSC statement or an opinion under Article 26b; a WH-WCP or WH-WCZ refund application after withholding.
• The Article 15c limit and transfer pricing documentation for the loan.
• Formalities under the CIT Act: withholding on the day of payment or capitalisation, remittance by the 7th day of the following month, IFT-2R also where the exemption applies; under the PIT Act: remittance by the 20th day of the following month, PIT-8AR and IFT-1R.

How it compares elsewhere

Germany does not withhold tax on ordinary loan interest, only on certain hybrid instruments and bank interest (PwC, Germany). Since 2021 the Netherlands has levied a conditional withholding tax, at the corporate rate, on interest paid to related entities in low-tax jurisdictions (PwC, Netherlands). The United States applies 30 percent with a broad portfolio interest exemption. Poland taxes at source all interest paid to non-residents and makes relief dependent on documentation held by the withholding agent.

Frequently asked questions

What withholding tax applies to interest paid abroad from Poland?

Under the CIT Act 20 percent (Article 21(1)(1)). Under the PIT Act 19 percent on interest covered by Article 30a(1), including interest on private loans and securities, and 20 percent on other interest (Article 29(1)(1)). A treaty reduces the rate usually to 5 or 10 percent or exempts the interest, and an associated EU or EEA company holding 25 percent for 2 years qualifies for the statutory exemption.

Is interest on a loan from a foreign shareholder exempt from withholding tax?

It may be, if the shareholder is an EU or EEA company or a qualifying Swiss company holding at least 25 percent for 2 years, is the beneficial owner of the interest, is taxed on its worldwide income, and the interest is not exempt in its state (Article 21(3) and (8) CIT Act). A shareholder from another state benefits only from the treaty rate.

When does the withholding obligation arise on capitalisation of interest?

On the day of capitalisation, because adding interest to the loan principal is treated as its payment (Article 26(7) CIT Act), although no money moves.

Can a finance company in Luxembourg benefit from the exemption?

Only if it is the beneficial owner of the interest: it receives it for its own benefit, is not obliged to pass it on and carries on genuine activity. The source state may refuse the exemption to a conduit company (CJEU judgments of 26 February 2019 in the Danish cases). The Ministry’s guidance admits look-through towards the entity behind it, on the conditions described above.

What about interest in cash pooling?

The pool leader is usually not the beneficial owner of the interest it distributes among the participants. The relief is determined by the residence of the participants receiving the surpluses, and the agent needs their certificates and information on the flows. Interest due to the leader on its own account is assessed separately.

Related entries

• Withholding tax in Poland
• Dividend withholding tax in Poland
• Withholding tax on royalties
• Participation exemption
• Tax residency certificate
• Related parties and affiliated entities
• Double taxation agreements
• Branch of a foreign company in Poland

A loan from a foreign shareholder is usually safe for tax purposes only once it is known, before the first interest payment, who the beneficial owner is and which relief applies. Skarbiec Law Firm examines intra-group financing structures, prepares due diligence documentation, WH-OSC statements and applications for opinions, and conducts refund proceedings; the scope is described on the page withholding tax, and written positions on the page tax opinions and analyses.

Legal status as of 2 November 2026.

Robert Nogacki

Robert Nogacki is a Polish attorney at law (radca prawny), the founder and managing partner of Kancelaria Prawna Skarbiec (Skarbiec Law Firm), which has operated continuously since 2006.

The law is equal for everyone, but the parties rarely are: on one side stands an organization with time, money, and lawyers, on the other a person with one business, one nest egg, and one life.

Clients rarely come to him with a legal problem. They come with a problem that also has a legal side: an audit that began with a single invoice, money entrusted to someone who has disappeared, a company that has to be passed on before it is too late. Most such matters are decided long before the first letter is written, in decisions made without asking and in deadlines nobody remembered. So he begins by asking how the client got here, not what the client should have done.

He advises entrepreneurs and families from more than a dozen countries, including those whose accounts the tax office has just seized and who do not know what to do tomorrow morning. He defends them in tax audits, customs and fiscal inspections, disputes with the tax authorities, and criminal tax proceedings. He represents victims of investment fraud and Ponzi schemes. He helps families set up family foundations and plan succession, so that a life’s work outlasts a single generation.

Not every case can be won. Every case can be run so that the client knows where they stand. Since 2006 he has represented the victims in the WGI case (Warszawska Grupa Inwestycyjna, the Warsaw Investment Group), one of the longest criminal cases in the history of the Polish financial market, because some things must not be left half finished, even when they take two decades. In the case of the collapsed cryptocurrency exchange Zonda (Zondacrypto, operated by BB Trade Estonia OÜ), he represents several hundred victims in the criminal investigation conducted by Poland’s National Prosecutor’s Office and in the Estonian bankruptcy proceedings.

Kancelaria Prawna Skarbiec is listed in the rankings of Poland’s largest tax advisory firms published by Dziennik Gazeta Prawna and Rzeczpospolita, and it is a four-time recipient (2015 to 2018) of the European Medal awarded by the Business Centre Club and the European Economic and Social Committee. Robert Nogacki publishes regularly, in the press and on the firm’s website, for people who have a problem rather than a law degree, because a legal opinion the client cannot understand protects only the lawyer.

He believes that the best legal advice is the kind that means the client never has to appear in court.