The current relief-at-source mechanism entailing preferential taxation with withholding tax of revenues already at the time of payment by the tax remitter will be replaced on 1 January 2019 with an obligation for the tax remitter to collect the tax, which will be coupled with a tax refund procedure. Such refund will entail certain additional obligations to be met by businesses. It will be only be made after the eligibility for preferential taxation of the revenue has been verified.

Refund application

The tax authorities will refund the WHT collected under the new roles upon an application which can be filed either by the taxpayer (who is subject to a limited tax obligation, as a result of obtaining taxable revenue on account of having obtained the revenue from which the WHT was deducted) or the tax remitter, if he has paid the tax out of his own funds, hence incurring the economic burden of the tax. The amount of tax to be refunded will be determined on the grounds of exemptions or rates set out in specific regulations or double taxation agreements.

In practical terms, the greatest difficulty may prove to be the requirement to complete and attach the extensive documentation justifying the tax refund in the eyes of the tax authority. It will include among other things the taxpayer’s residence certificate, documentation relating to bank transfers and that regarding the grounds for the payment of the revenue in question.

Where an application is filed by the taxpayer, it will also be necessary to attach the taxpayer’s declaration that he is under a tax obligation with respect to the transaction for which the refund is being sought, and also that the company or foreign establishment is the actual owner of the revenue paid. A declaration will also be required stating that the taxpayer actually does business in the state in which he is based and to which the revenues obtained is related (if the revenues in question are actually obtained in relation to such business).
A further justification will be required demonstrating that the conditions set out in the above mentioned statements are met.

Where an application is filed by a tax remitter, there is a statutory obligation to prepare documentation indicating the contractual arrangements under which the remitter paid the WHT out of its own funds and incurred its economic burden.

As if all that were not sufficient, an application for a refund must contain an additional declaration of the truth and accuracy of the facts therein presented and a confirmation that the documents attached to the application are true copies of the relevant originals.  This obligation will also apply to any subsequently provided facts or supplementary documents.

Refund term

A relevant tax authority will issue a decision determining the amount of the refund, and if the application does not raise any doubts, it will refund the amount immediately, without issuing an additional decision. In other cases (perhaps in a majority of them) the refund will be made within 6 months of the application being filed. However, this term will not include the time allowed in relevant provisions for the performance of any specific actions. This will include the Polish tax authorities requesting from other states any information that may be necessary for the refund to be verified. Thus, in practice the term can be extended quite significantly.

Digitalisation of the process

An application for the refund of tax withheld at source must be filed in an electronic form. Any documentation attached to the application justifying the refund must be filed electronically as well. The Act introducing the new WHT settlement rules has obliged the Minister of Finance to issue a regulation specifying the manner in which tax refund applications should be filed by means of electronic communications. Although less than a month is left now before the amendments enter into force, no relevant regulation has been issued to date. This poses additional difficulty for taxpayers and tax remitters wishing to prepare to settle withholding tax in accordance with the new rules.

Wojciech Jasiński, Tax Consultant, ATA Tax Sp. z o.o.

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