Dividend payments and withholding tax in Poland

According to Article 22(1) of the CIT Act, dividends paid by Polish capital companies are, as a rule, subject to a flat-rate income tax of 19%. However, an exemption implementing the EU Parent-Subsidiary Directive (2011/96/EU) aims to eliminate double taxation of profits within corporate groups.

The exemption applies if:

• The dividend-paying company has its seat or management in Poland; 
• Both companies are subject to CIT on their worldwide income; 
• The recipient directly holds at least 10% of the payer’s capital for an uninterrupted period of two years; 
• The recipient is not exempt from taxation on its total income.

Meeting these conditions ensures tax neutrality within group relationships. In the case of payments to foreign entities, the applicable double taxation treaty may provide for a reduced rate – typically 5% if the shareholder holds at least 10% of the capital, or 15% otherwise.

To benefit from preferential treatment, the payer must obtain a valid tax residency certificate and confirm that the recipient is the beneficial owner of the income. According to the OECD Commentary, the beneficial owner is the entity that actually controls and enjoys the income, not a mere intermediary passing it on. Verifying this status is a key element of the payer’s due diligence.

Polish payers must exercise due diligence when applying exemptions or reduced rates, including verifying the residency certificate, the recipient’s CIT status, and whether it conducts genuine business activity. Once the total payments to a related entity exceed PLN 2 million per year, the payer must generally withhold tax at the domestic rate of 19%, unless an opinion on the application of preferences has been obtained, or a WH-OSC statement has been submitted (Article 26(2e) CIT Act).

The payer is also required to:

• File a CIT-10Z declaration by the end of the first month following the tax year in which the obligation arose (if tax was withheld); and 
• Submit an IFT-2R information form to the tax office and the dividend recipient by the end of the third month after the end of the tax year.

Proper application of exemptions or reduced rates requires not only knowledge of the law but also documentation confirming all conditions are met. Tax authorities increasingly verify whether the recipient company actually carries out business activities and whether the structure is not artificial.

Therefore, before making a dividend payment, it is advisable to conduct an internal audit of formal and substantive conditions, prepare up-to-date documentation, and maintain evidence of due diligence.

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Norbert Tulak is a tax advisor and lawyer, continuing his studies as a doctoral student and student of the Executive MBA programme conducted by the Warsaw School of Economics. He is the author of various publications on civil and tax law in academic journals and specialist presses, including the tax section of Forbes magazine.