Poland endorses look-through approach to withholding tax

Although Polish legislation provides a definition of “beneficial owner”, it is quite broad. To remedy this, the Ministry of Finance has released tax guidance that offers new insights.

New guidance

To qualify for preferential treatment, the beneficial owner must receive a given amount for its own benefit rather than merely passing it on to another entity. At the same time, Polish law does not specify whether the involvement of intermediaries would preclude such treatment.

In practice, a liberal interpretation known as the look-through approach had emerged, allowing tax preferences to apply even if the payment is funnelled through an intermediary before reaching the beneficial owner.

While the Polish Supreme Administrative Court had shown some support for this approach, tax authorities have frequently contested its applicability, arguing it had no basis in the literal wording of tax regulations.

However, in July 2025, the Ministry of Finance released tax guidance endorsing the look-through approach, which is expected to influence how tax authorities treat such situations in the future and tip the balance in favour of taxpayers.

Applicability

According to the Ministry of Finance, the following conditions must be met for the approach to apply:

1. The beneficial owner must recognise the income as taxable in its country of residence;
2. Payments made along the chain of entities must be of the same nature; and
3. All conditions specific to a given tax preference must be satisfied.

Special attention should be paid to the requirement for the identity of the transaction objects. For example, for the look-through approach to apply, if a payer pays interest to an intermediary, the beneficial owner must also receive the payment from the intermediary in the form of interest.

Notably, a difference in amounts does not preclude the applicability of this approach. For instance, a company might pay the intermediary a higher interest amount than what the intermediary subsequently transfers to the beneficial owner.

Practical implications

Following the Ministry’s endorsement of this approach, foreign entities are likely to benefit from withholding tax preferences more often. Transactions that meet the criteria outlined above will be tax-neutral from the perspective of withholding tax.

Additionally, the look-through approach does not require the intermediary to satisfy the problematic business substance requirement. From a practical perspective, the new guidance is expected to facilitate the distribution of profits from Polish companies.

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Piotr Prokocki specialises in comprehensive services for M&A, and develops effective structures for financing transactions, capital withdrawal, and profit distribution.

Konrad Gańczarczyk has experience in ongoing tax advisory services to companies operating in the real estate, construction, and IT sectors.