Poland
Is there withholding tax on interest payments under a loan?
In principle interest paid under a loan to an entity which is not resident in Poland is subject to withholding tax.
Payments of interest to entities resident in Poland (but not individuals) are not subject to withholding tax.
If so:
What is the rate of withholding?
The general withholding tax rate on interest paid to entities which are not resident in Poland is 20%.
What are the key exemptions?
Interest payments to entities not resident in Poland may be exempt from withholding tax under the EU Interest and Royalties Directive as implemented under Polish law, provided that certain conditions are met. The withholding tax rate may be also reduced or eliminated based on relevant double tax treaty (DTT) concluded between Poland and the recipient’s country of residence under certain conditions. Under most DTTs the withholding tax rate is limited to 10% or 5%. Some DTTs provide for a 0% withholding tax rate. Moreover, a number of DTTs provide for exemption applicable to interest payable to banks.
However, the Polish withholding tax (WHT) regime has been substantially amended with the 2019 corporate income tax reform. Under the new rules, WHT becomes obligatory for certain cross-border payments (including interest). Even when a lower rate or an exemption is available, for example under a bilateral tax treaty entered into by Poland, the WHT has to be withheld in full by the withholding agent based on Polish domestic law and remitted to the relevant tax authority. The tax authority may provide a refund after it has verified the right of the non-resident taxpayer to benefit from a reduced rate or an exemption. There are also alternative procedures which may allow to mitigate WHT (a description of these procedures can be found here).
In principle, the changes affect cross-border payments exceeding PLN2 million annually paid to a non-resident taxpayer.
Would the same analysis apply to interest payments under a debt security (eg a bond)?
Yes, the comments outlined above are applicable to interest payments under a debt security (like bond). However, with respect to new obligatory WHT, such WHT regime is excluded in case of receivables received by non-residents due to interest or discount on bonds issued by the State Treasury/BGK and offered on foreign markets
Mariusz Hyla
Partner
DLA Piper Giziński Kycia sp.k.
[email protected]
T +48 22 540 78 22
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