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The health emergency status announced subsequent to the outbreak of the COVID-19 pandemic was ended with effect from 1 July 2023. The change will impact remitters’ duties in respect of the requirement to hold tax residency certificates for WHT purposes.
Published in the Journal of Laws on 16 June 2023, the Minister of Health Regulation of 14 June 2023 ends the epidemic emergency (JL 2023, Item 1118).
The epidemic emergency status having been revoked, WHT remitters are again required to hold foreign taxpayers’ valid certificates of residence. The validity of earlier certificates was extended in June 2020 under Section 31ya of the Act of 2 March 2020 on special measures to prevent, counteract and curb COVID-19, other infectious diseases and the ensuing crises (consolidated text – JL 2021, Item 2095 with amendments; the “COVID-19 Act”) and continues throughout the epidemic and the epidemic emergency status and for two months after the epidemic/epidemic emergency is ended. With the regulation now in effect, 1 September 2023 is the last day when preferential treatment may be claimed for existing certificates of residence.
A WHT remitter’s duties
The CIT Act defines a certificate of residence as a “certificate of a taxpayer’s registered office/ establishment for tax purposes issued by a competent tax authority of the state where the taxpayer has their registered office”. As a rule, a Polish remitter may withhold tax at source at a reduced rate or may not withhold any tax at all as long as this option is available under a double taxation treaty or the CIT Act and the remitter is able to inter alia document the foreign taxpayer’s registered office using a certificate of residence (one of the prerequisites). Certificates of residence with no expiry date may be honoured for subsequent 12 months of the date they were issued.
The cited example ignores the option to waive the pay & refund mechanism.
Certificates covering 2019 and/or 2020 – throughout the epidemic and the epidemic emergency and over two months of the date they were ended (i.e. through 1 September 2023) a remitter is in a position to honour a taxpayer’s certificate of residence covering 2019 and/or 2020 if they hold the taxpayer’s statement that the data included in it remains unchanged. Please note that this preferential treatment does not apply for any certificates covering 2021 and 2022.
Example 1: A Polish company plans to transfer interest to its German shareholder in August 2023. The German company sent the original certificate of residence to the Polish transferor of the interest. The certificate covers 2019, so under general rules it would have been valid only for transfers made in 2019. However, with the COVID-19 Act the Polish remitter will be in a position to rely on the document through 1 September 2023 as long as they have the foreign shareholder’s statement that the data provided in the certificate is valid as at the date of a given transfer.
Example 2: A Polish company plans to pay interest to its German shareholder in August 2023. The German company sent the original certificate of residence to the Polish transferor of the interest. The certificate covers 2021, so it is valid only for transfers made in 2021 and the preferential treatment applicable for certificates of residence covering 2019 and/or 2020 may not be claimed in this case.
Copies of certificates of residence – under the COVID-19 Act, WHT remitters were allowed to rely on copies of certificates of residence for the purpose of withholding tax at source as long as there were no reasonable doubts that the data shown in the documents was true. Although this provision is designed to continue in effect during epidemics and epidemic emergencies and over two months from the date when they cease, Section 25(1n) of the CIT Act, effective from 1 January 2022, implements the same simplification which is, however, no longer affected by whether an epidemic emergency status continues.
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Summary
Key take-aways
The COVID-19 legislation offered WHT remitters preferential rules governing taxpayers’ valid certificates of residence to claim the WHT exemption or preferential WHT rates under the CIT Act or double taxation treaties. As the end of the epidemic emergency status has now been officially declared, we recommend finding out whether the certificates of residence held are complete and valid, and seek and obtain the certificates required for any transfers in the pipeline.
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