Withholding tax on royalties in Poland

Withholding tax on royalties (podatek u źródła od licencji) is a flat-rate income tax of 20 percent which a Polish withholding agent collects on royalties paid to non-residents. The catalogue is set out in Article 21(1)(1) of the Corporate Income Tax Act of 15 February 1992 (the CIT Act) and in Article 29(1)(1) of the PIT Act. It covers payments for copyright and related rights, rights to inventions, trademarks and designs, including their sale, for making available a secret formula or process, for the use of industrial, commercial or scientific equipment, including means of transport, and for know-how.

Double tax treaties reduce the rate to 0, 5 or 10 percent. 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 payment. In practice most disputes concern software licences, equipment hire and cloud services, because the classification of the supply decides whether any tax arises at all.

Key points

• Classification runs on three levels: first the domestic catalogue of Article 21(1)(1), then the autonomous definition of royalties in Article 12 of the applicable treaty, and finally other bases of withholding, for example intangible services under Article 21(1)(2a). Not qualifying as a royalty does not always mean no tax.
• An end-user licence, that is the right to use a program for one’s own needs without the right to exploit it on the fields of copyright, is not a royalty and is not subject to withholding. Technical copying necessary for ordinary use does not change that. A fee for the right to exploit copyright, for example to sublicense or modify the code, is subject to withholding.
• Treaties usually give Poland 5 or 10 percent. Many Polish treaties include payments for the use of industrial equipment in the definition of royalties, which the OECD Model Tax Convention has not done since 1992.
• The exemption of Article 21(3) CIT Act requires a paying company that is a Polish taxpayer, an EU or EEA recipient taxed on its worldwide income, a holding of at least 25 percent for 2 years and beneficial owner status. Under the general ruling of 20 November 2024 the exemption is not available where the payment is covered by an income-specific exemption in the recipient’s state.
• Pay and refund: payments to a related non-resident above PLN 2,000,000 a year, counted together with dividends and interest, are subject to withholding of 20 percent on the excess (Article 26(2e)), unless the agent filed a WH-OSC statement or holds an opinion on the application of preferences. Payments for the use of equipment are outside the mechanism on the conditions of the exclusion regulation.
• The withholding agent is liable for tax not withheld with all its assets (Article 30 of the Tax Ordinance Act of 29 August 1997). In this area agent liability decisions most often arise from a challenged classification of the supply.

What is a royalty and what is not

The boundary is drawn by copyright law. Tax is charged on consideration for the use or acquisition of rights, not on the purchase of a product in which the rights are embodied. A company paying a foreign supplier for seat licences, office packages or access to a platform used by its employees therefore usually does not withhold. The Director of the National Tax Information confirms this in successive rulings, for example of 8 August 2025 (0114-KDIP2-1.4010.413.2025.2.PP), available in the Eureka system. Each of them, however, concerns a specific agreement and gives no guarantee for every product called “end user”.

Software in a wider tax context is discussed in the entry on the taxation of intangible services.

The second field of dispute is industrial equipment. The authorities treat any hired hardware as such, from excavators to servers. For years the courts were divided, but in 2026 the Supreme Administrative Court leaned towards a broad, functional reading: in II FSK 757/23 it treated the hire of development and test environments based on server infrastructure as the use of industrial equipment, and in II FSK 1098/25 it assessed the use of server parameters in the same way. Commentaries are available from TPA and getsix (in Polish). The absence of physical access to the hardware does not remove the risk. Cloud agreements must therefore be read separately: a SaaS application, hosting, server space, computing power and mixed agreements are different cases.

The dispute over equipment is not only about the rate. Whether a supply is the use of equipment decides whether it enters the catalogue of Article 21(1)(1) and how it is classified under the treaty. If the treaty with the recipient’s state lists industrial equipment, the dispute is about the rate; if it does not, there may be no tax at all.

Double tax treaties

Classification proceeds in two stages. The statute decides whether Polish tax arises at all. A treaty may limit or exclude the Polish right to tax, but it does not replace the domestic basis. Article 12 of Polish treaties defines royalties independently, and for a resident of a treaty state that definition decides the rate.

Most treaties give Poland 5 or 10 percent: the treaty with the United States 10 percent, with Germany 5 percent, with the Netherlands 5 percent, with Ireland 10 percent. The treaty with France provides 10 percent, but taxes royalties from literary, artistic or scientific copyright, excluding films, only in the recipient’s state (Article 12(3)), subject to the permanent establishment proviso (Article 12(5)). Texts and rates are collected in the Ministry of Finance treaty list.

Few treaties mention computer programs expressly. Under the others the classification of software fees depends on the scope of the rights acquired and the wording of the treaty. The use or omission of the words “computer program” does not replace the analysis; part of the case law held that without an express mention software fees are not royalties within the meaning of the treaty, while the authorities defend the opposite view.

A full acquisition of rights needs separate attention. The domestic catalogue covers the sale of rights, but under the OECD Commentary on Article 12 the transfer of full ownership of a right is not a royalty. The applicable treaty article must then be identified, usually business profits or capital gains, instead of applying Article 12 automatically.

The treaty rate requires a certificate of residence. Beneficial owner status is a condition where the treaty so provides; in its guidance of 3 July 2025 the Ministry of Finance requires it also under treaties without an express clause, which may be disputed. After the Multilateral Instrument the principal purpose test also applies. More in the entries on double taxation agreements and the tax residency certificate.

The exemption for associated companies and the beneficial owner

The exemption of Article 21(3) CIT Act implements Directive 2003/49/EC. It requires 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. The recipient must be an EU or EEA company taxed on its worldwide income, linked by a holding of at least 25 percent kept for an uninterrupted 2 years, also where the same EU or EEA company holds the shares in both companies (Article 21(3a)), and the beneficial owner of the payment (Article 21(3)(4)). 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)). The holding condition may be met after the payment (Article 21(4) and (5)).

The recipient may not benefit from an exemption of all its income (Article 21(3c)). In general ruling No. DD9.8202.2.2024 of 20 November 2024 the Minister of Finance took the position that the condition is also not met where the royalties themselves are covered by an income-specific exemption or taxed under special rules in the recipient’s state. The absence of actual tax because of the recipient’s loss does not in itself breach the condition. The agent applies the exemption after receiving a certificate and the recipient’s written statement (Article 26(1c) and (1f)).

The beneficial owner receives the payment for its own benefit, is not obliged to pass it on and carries on genuine activity (Article 4a(29) CIT Act). The Ministry of Finance guidance of 3 July 2025 sets the standard of care and admits the look-through approach, provided that the beneficial owner meets the conditions of the chosen relief. How the Supreme Administrative Court assesses an entity that only formally holds the rights is shown in its judgment II FSK 126/19 of 12 August 2021, discussed in our Polish article on the owner of royalties. The mechanics of the PLN 2,000,000 threshold, the WH-OSC statement and the Article 26b opinion are described in the pillar entry on withholding tax in Poland and in our article on withholding tax agent obligations.

What to check before paying for a licence abroad

• The scope of rights in the agreement: end user or the right to exploit copyright; the name of the supply does not matter, its content does.
• For hardware and cloud: whether the supply is the use of equipment or a service; whether the agreement is mixed; what the definition of royalties is in the treaty with the recipient’s state.
• Whether, if the payment is not a royalty, another basis of withholding applies, in particular intangible services under Article 21(1)(2a).
• A certificate of residence covering the payment date and the beneficial owner clause in the treaty.
• The conditions of the Article 21(3) exemption: a 25 percent holding for 2 years, the statement, no exemption of the payment 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, counted together with dividends and interest; the equipment exclusion under the regulation.
• A gross-up clause in the agreement and its effect: the base is the grossed-up amount.
• Formalities: withholding on the day of payment, remittance by the 7th day of the following month, IFT-2R also where the exemption applies.

How it compares elsewhere

Germany withholds 15 percent plus the solidarity surcharge on royalties, with relief granted on the basis of a certificate from the Federal Central Tax Office (PwC, Germany). The Netherlands has no general withholding tax on royalties and since 2021 levies a conditional tax on royalties paid to related entities in low-tax jurisdictions (PwC, Netherlands). The United States applies 30 percent reduced by treaties. The Polish rate of 20 percent is high, and the broad reading of industrial equipment and the software disputes shift the burden of analysis onto the buyer of technology.

Frequently asked questions

Must withholding tax be collected on a software licence?

No, if it is an end-user licence for own needs. Yes, if the fee covers the right to exploit copyright, for example to sublicense or modify the program; then 20 percent or the treaty rate applies. Distribution of copies and a full acquisition of rights require separate assessment.

What is the withholding tax rate on royalties?

By statute 20 percent (Article 21(1)(1) CIT Act). Treaties reduce it usually to 5 or 10 percent, and associated companies from the EU and the EEA and qualifying Swiss companies holding 25 percent for 2 years are exempt.

Is the hire of machinery or servers from a foreign company subject to withholding tax?

The authorities treat such fees as payments for the use of industrial equipment. In 2026 the Supreme Administrative Court confirmed this direction also for server space and cloud environments, although a contrary line exists. If the treaty with the recipient’s state lists industrial equipment, the dispute is about the rate; if it does not, it may be about whether any tax arises.

When are royalties exempt from withholding tax?

Where the recipient is an EU or EEA company or a qualifying Swiss company linked by a holding of at least 25 percent for 2 years, is the beneficial owner and is taxed on its worldwide income, and the payment is not exempt in its state (Article 21(3) and (8) CIT Act, general ruling of 20 November 2024).

What are the consequences of not withholding tax on royalties?

A decision on the agent’s liability for the tax not withheld, with interest (Article 30 Tax Ordinance), and fiscal penal liability under Article 78 of the Fiscal Penal Code. In practice most often after the classification of the supply as a service rather than a licence is challenged.

Related entries

• Withholding tax in Poland
• Taxation of intangible services
• Withholding tax on interest
• Dividend withholding tax in Poland
• Tax residency certificate
• Double taxation agreements
• Related parties and affiliated entities
• Individual tax rulings

In technology agreements withholding tax is settled at the drafting stage, not at the transfer. Skarbiec Law Firm classifies licence and cloud agreements for withholding tax, drafts provisions that limit the risk of withholding, prepares applications for individual rulings and opinions on the application of preferences, and conducts disputes over agent liability; the scope is described on the page withholding tax, and ruling applications in the entry on individual tax rulings.

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.