Poland: Clarified beneficial ownership rules and introduction of overseas investment fund exemptions

On July 9 2025, Poland’s Ministry of Finance published long-awaited Explanatory Notes on Withholding Tax, specifically focusing on the interpretation of the beneficial owner clause. These notes address several long-standing ambiguities and are expected to influence taxpayers’ compliance strategies and the tax authorities’ audit practices. While some questions remain unresolved, the guidance marks a notable shift towards greater legal certainty – especially for multinational groups operating within the EU.

This article summarises the most important developments for businesses paying interest, royalties, and dividends.

At the heart of the withholding tax (WHT) regime lies the concept of the beneficial owner – a condition for applying preferential WHT rates under tax treaties or EU directives. The Explanatory Notes on Withholding Tax affirm that the beneficial owner must not only be the legal recipient of income but also retain economic control over it. In other words, the income should be used for the entity’s own benefit and not be contractually or economically transferred to a third party.

A number of negative indicators are provided for identifying entities that do not qualify as beneficial owners:

• Minimal profit margin on the income received;

• Lack of tax revenue generated from the payment;

• Immediate re-transfer of funds;

• Absence of operational or financial substance; and

• Lack of risk-bearing capacity.

Such indicators are now likely to form part of standard due diligence procedures, particularly in related-party transactions.

The notes recognise that the level of required business substance may vary depending on the nature of the entity. For example, holding companies are not expected to meet the same operational thresholds as manufacturing firms. Nevertheless, the presence of tangible business infrastructure remains important.

The key substance criteria include:

• Use of owned or rented premises;

• Employment of staff;

• Autonomous business activity;

• Local governance with qualified directors; and

• Payment of local operating expenses.

These are to be assessed in the context of the specific payment, not at a general corporate level.

One of the most progressive aspects of the Explanatory Notes on Withholding Tax is the introduction of the ‘consolidated substrate’ principle. This allows entities to rely on group-level substance, if costs incurred at the level of the group are charged to the entity that receives passive payments from a Polish entity and provided that:

• The group members are located within the EU/European Economic Area (EEA) for the purposes of exemptions under the Parent-Subsidiary Directive or the Interest and Royalty Directive;

• The relevant entity is in the same country when applying tax treaty benefits.

This clarification is particularly relevant for centralised group structures, where key functions and resources are spread across affiliated entities.

Polish tax authorities now formally accept the so-called look-through approach; under which, tax remitters may ‘look through’ intermediary entities to identify the ultimate beneficial owner – if the payment type remains consistent throughout the chain (e.g., interest-interest or dividends-dividends).

Importantly, amounts may vary between links in the chain, but the legal character of the payments must remain unchanged. Tax remitters bear the burden of proof and must be prepared to justify the use of the look-through approach with appropriate documentation.

There are other options that can be used by some groups of investors, especially those based in the EU/EEA:

• Extended scope of the examination of the beneficial owner condition; and

• The presumption of fulfilment of the beneficial owner condition if all investors are individuals or corporations subject to tax in the EU/EEA.

The scope of required due diligence differs based on the relationship between the payer and recipient:

• For related entities, a full verification of beneficial ownership conditions is necessary, including analysis of substance, risks, and financial flows; or

• For unrelated entities, tax remitters may rely on a certificate of residence and a statement confirming beneficial owner status, subject to consistency checks with available records.

Moreover, technical remitters (e.g., Polish intermediaries facilitating cross-border payments) are also authorised to verify beneficial ownership, provided their assessment aligns with the recipient’s financial statements and registry filings.

The Explanatory Notes on Withholding Tax are expected to have broad implications for tax remitters, recipients, and advisers. Notably, they may:

• Improve legal certainty in ongoing tax audits;

• Facilitate faster tax refunds under the ‘pay-and-refund’ procedure; and

• Help businesses to prepare for future WHT scrutiny by aligning group structures and internal procedures with the new standards.

That said, the notes are not without shortcomings. Some key concerns raised by practitioners during public consultations remain unaddressed, and several provisions are still open to interpretation. Nevertheless, they offer a more coherent framework for applying WHT preferences.

The Polish Ministry of Finance has published a draft amendment to the Corporate Income Tax Act, responding to key judgments of the Court of Justice of the European Union on Polish tax treatment of investment funds. The amendment would introduce two fundamental changes:

• Opening up eligibility to third-country investment funds – entities domiciled outside the EU and EEA (e.g., in the US, the UK, Canada, or Australia) will become eligible for the exemption. The change will cover open-ended (UCITS-type) and closed-ended funds.

• Accepting self-management fund structures – the requirement to use an external fund manager will be abolished, and the exemption will also be available to investment funds that are self-managed by their own management board.

A key condition will be that the competence of an internal management body is formally confirmed, for example, through an entry in the relevant register in the fund’s country of domicile or by holding an authorisation.