Beneficial owner vs WHT - change of Supreme Administrative Court standpoint

The CIT Act regulates the conditions necessary for the application of the withholding tax (WHT) exemption for dividends paid to foreign shareholders. The requirements do not include an obligation for a Polish company to verify the status of the beneficial owner. Moreover, there has been a line of Polish court rulings so far that the payer did not have to examine the status of the receiving entity in terms of its actual owner in order to apply the dividend withholding tax exemption.

The Supreme Administrative Court presented a different approach in its judgment of 31 January 2023 (ref. II FSK 1588/20). The Supreme Administrative Court stated that a Polish company paying a dividend to another EU country must examine whether it will go to the real beneficial owner. If the recipient's status is not investigated, the Polish company should charge 19% tax.

In the aforementioned judgment, the court not only moved away from the literal interpretation of the provisions of the CIT Act, but also from the position it had presented in its ruling issued on 27 April 2021 (ref. II FSK 240/21).

Withholding tax, due to its intricate and unclear provisions, is problematic for payers and taxpayers. The judgment of 31 January 2023 certainly did not reduce the uncertainties related to this tax, but only highlighted the doubts.