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A Polish taxpayer who collects a lower amount of tax from a foreign entity will be obligated to verify that its foreign counterparty is in fact the beneficial owner. This makes for a considerable impediment.

This new rule derives from the changes concerning taxation at source introduced in the most recent round of amendments to the Polish legislative Acts regarding, respectively, personal and corporate income tax. Tax experts are clear: these new rules will be very difficult – if not outright impossible – to apply in practice. A Polish 

company which hopes to avail itself of a double tax treaty in order to benefit from a lower tax rate or a tax exemption will need to proceed through several stages. As matters stand at the moment, preferential rates provided for in a DTT may be applied directly when remitting amounts due to a foreign business partner. Once the present amendments come into force, meanwhile, the Polish company will be obligated to first pay the tax at source (at the normal rate), and then to verify its business partner receiving the payment in question (e.g. royalties or interest); only once such verification has produced a positive outcome might there be talk of a possible refund pursuant to the DTT. As Dr Janusz Fiszer, partner in GESSEL, explains, the main problem will lie in the real-terms possibility of verification by a Polish taxpayer whether its foreign counterparty is the actual owner (i.e. the real beneficiary of the transborder payment) and whether it actually pursues business operations in the country of its registered seat. Clearly, a Polish taxpayer’s actual potential as regards establishing whether or not actual business activity is pursued by his foreign partner is slim – a Polish company endeavouring such an investigation on its own has precious little to work with apart from the publicly accessible company registers (...)

The entire article available in Dziennik Gazeta Prawna.