This article summarizes the July 2025 official tax explanations regarding the application of the “beneficial owner” (BO) clause for Polish withholding tax (WHT) purposes. The guidance clarifies when preferential WHT rates, exemptions, or non-collection may be applied, focusing on due diligence obligations for payers, the definition of beneficial owner, and practical scenarios under Polish CIT, PIT, and international tax treaties.
Definition and importance of the Beneficial Owner Clause
The BO clause originates from OECD and EU frameworks to prevent tax avoidance and ensure that only the true economic recipient of income benefits from preferential WHT treatment.
Polish law defines a beneficial owner as an entity that:
- receives income for its own benefit and bears the economic risk,
- is not an intermediary, agent, or trustee,
- conducts genuine business activity in its country of residence (if income is business-related).
All three conditions must be met for BO status jointly.
Scope of payments requiring BO verification
The BO clause applies mainly to “passive payments” such as dividends, interest, and royalties. For other payments (e.g., service fees), BO verification is not required for WHT preferences. The payer must exercise due diligence, especially in related-party transactions, by reviewing not only statements and certificates but also financial and business documentation.
Practical application and due diligence
For related parties, payers must verify all circumstances indicating BO status, not just rely on declarations or statements.
For unrelated parties, a certificate of tax residence and a BO statement are generally sufficient, provided their authenticity and validity are checked.
Special rules apply to technical payers and collective rights management organizations (OZZ), with tailored documentation requirements.
Special mechanisms and scenarios
1. Look-Through Approach (LTA): allows WHT preferences to be applied to the ultimate beneficial owner, even if not the direct recipient, provided certain conditions are met (e.g., payment type consistency, proper documentation).
2. Extended Subject Scope: in some cases, preferences can be applied based on the characteristics of an entity other than the direct recipient, if specific criteria are fulfilled.
3. Presumption of BO Status: in certain intra-EU dividend chains, if at least one instance of taxation occurs within the EU, there is a presumption of BO status, simplifying compliance.
Implications for taxpayers and payers
Applying the official explanations ensures legal protection for taxpayers and payers under Polish tax law. Failure to properly verify BO status may result in the denial of WHT preferences and potential tax liability.
Summary
The July 2025 explanations provide comprehensive guidance on the BO clause in Polish WHT, aligning domestic practice with international standards. Though, they do not address all the problematic cases, nor answer all the questions. It is certain that taxpayers and tax remitters should review their documentation and verification procedures to ensure compliance and benefit from available WHT preferences.
This summary is based on the official tax explanations issued in July 2025 regarding the beneficial owner clause in the context of Polish withholding tax. You may find the official document HERE [in Polish only].
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