The starting date for full application of the new withholding tax (WHT) system in Poland has been postponed for a second time. The system was introduced by an Amendment Act of 23 October 2018 and was initially intended to apply in full as of 1 January 2019. Then its full entry into force was postponed until 1 July 2019 (and in some cases permanently excluded) by a regulation dated 31 December 2018. In the meantime, the Ministry of Finance continued its work on the Minister of Finance's clarifications to the new WHT system. However, the draft clarifications were only published on 19 June 2019 with public consultations lasting only until 30 June 2019. A final, binding version of the clarifications is not yet available.

Finally, on 27 June 2019, the Minister of Finance issued a new regulation, which once again delayed the effective date of the fully new WHT system, this time until 1 January 2020 (regulation published in the Official Journal of Laws, applicable as of 28 June 2019). As previously, the postponement applies to payments made to taxpayers having their registered office or management board in countries where there is a legal basis for sharing tax information. Work on the above-mentioned clarifications to the new WHT system should also be underway.

It is worth recalling that the new WHT system replaces the WHT system with a reduced rate or exemption based on a double taxation convention or regulations implementing EU directives, which had been previously in force for many years. Instead of these rules, in the case of payments to a single taxpayer exceeding PLN 2 million per annum, the obligation was to be introduced for the payer to withhold tax at the basic rate (20% or 19%). The excess tax payment would then be refunded upon application (subject to new documentation obligations and on condition that new criteria for an beneficial owner are met, tightened up as of 1 January 2019, including payments not exceeding PLN 2 million). Alternatively, the obligation to withhold tax at the standard rate could be waived if members of the taxpayer's management board make a statement accepting personal liability for the application of the correct WHT rate or exemption or, in the case of payments covered by EU directives, provided that the payer obtains an opinion from the head of the revenue office confirming the right to exempt certain payments from the WHT regime under the regulations implementing those directives.

From the taxpayers' perspective, the repeatedly postponed introduction of the new WHT regime means that at least until 31 December 2019, taxpayers will be able, and for payments in excess of the PLN 2 million threshold as well, to withhold tax under the old regime. That is to say, they will be able to apply a reduced rate or WHT exemption under a double taxation treaty or regulations implementing EU directives, if they meet certain formal requirements, subject to new, stricter criteria for the beneficial owner and the required due care in verifying the conditions for applying the reduced tax rate or tax exemption that have been in force since 1 January 2019 without modification.

The latest postponement gives taxpayers more time to prepare for the new tax withholding rules. However, it may impact many taxpayers who had already factored in the previously planned 1 July 2019 start date and had acted accordingly. Also of significance are the clarifications to the new WHT rules, which in their current version suggest the tax authorities will take a rather restrictive interpretation of the new regulations. Our experts will be on hand to help you with the numerous changes to WfHT.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.