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Dividend Tax in Poland

Dividend Tax in Poland

The dividend tax in Poland

Polish dividends are incomes generateed by shares and types of income from other corporate rights that participate in profits, such as income from remitting shares. In addition, the value of the assets received upon liquidation of the company and income of the company allocated for the increase of the share capital are also dividends. If shareholders receive payment in cash upon merger, acquisition or division of the company, the amount is a dividend, and is subject to taxation in Poland like all other dividends. In the same category fits the undistributed profits in case of a transformation of a company into a partnership. However, the income generated from a debt-claim is not considered as dividends profit in Poland.

Regulations of taxation of dividends in Poland

Poland has specific regulations in regards to the payment and taxation of dividends, and Polish companies have a 19 percent taxation rate for the dividends paid. The rate applies to the gross dividend amount, meaning that costs cannot be deducted, and the payer of dividends withholds and remits the withholding tax to the tax office. Furthermore, Poland also applies the double tax treaties when it comes to provisions concerning nonresidents. In addition, the WHT rate can be reduced when dividends are paid to a foreign shareholder through a double tax treaty. Our Polish company formation specialists can provide assistance in regards to the taxation of dividends in Poland, as well as other information regarding the Polish tax system.

Double Taxation Treaties in Poland

If residents from countries such as Iceland, Liechtenstein, Norway and Switzerland, as well as all European Union countries receive dividends, they are exempt from withholding tax, only under certain conditions specified by the CIT law. One of the most important requirements refers to the foreign beneficiary that should hold at least 10 percent of the shares in the respective Polish company for an uninterrupted period of at least two years. However, dividends paid to a Polish company may be exempt, but the shareholding threshold is 25 percent. This condition is also available for income resulting from the redemption of shares or the liquidation of a Polish company

In order for the double taxation treaties in Poland to be valid, the dividends profit have to be received directly by the owner, without the involvement of an intermediary. If the receipt of dividends conducts the business in the country that generated the dividend through a permanent establishment, then the provisions of the DTT do not apply. It is also necessary that the shareholding to be connected to the personal establishment, and if so, the Polish dividends will be taxed as being part of the profits of the respective permanent establishment in Poland.

As double taxation treaties have specific requirements, they apply only if the recipient of Polish dividends confirms the tax residence with a certificate or with a fiscal residence. The tax authority issues this certificate and it states that the recipient is subject to unlimited tax liability in the relevant country. If the specified conditions are not fulfilled, then the dividends will be taxed at the normal 19 percent rate.

If you would like to receive more information on how the double tax treaties work or if you need other tax related services, such as VAT registration in Poland, do not hesitate to contact our team.