A British technology company pays a Polish software developer for ongoing consultancy work. The invoice arrives, withholding tax is deducted at the domestic rate, and the developer faces a double charge on the same income. That scenario – repeated across thousands of Poland–UK transactions every year – is precisely what the bilateral tax treaty is designed to prevent. Understanding its key provisions is not optional for any business operating across both jurisdictions.

The double tax treaty between Poland and the United Kingdom allocates taxing rights over income, capital gains, dividends, interest, and royalties between the two states. It eliminates double taxation through either the exemption method or the credit method, depending on the income category. Residents of either state may claim treaty benefits by presenting a valid certificate of tax residence to the payer before the withholding deadline.

This alert covers the treaty's core provisions, the income categories most relevant to cross-border business, and the immediate steps companies should take to secure treaty protection. It also flags where post-Brexit changes affect the practical application of the agreement.

What income categories does the Poland–UK treaty cover?

The treaty assigns taxing rights across every major income stream. Dividends paid from a Polish company to a UK shareholder are taxed at a reduced rate – 10 percent where the beneficial owner holds at least 10 percent of the voting shares, and 15 percent in all other cases. That reduction from Poland's standard 19 percent domestic withholding rate is material for any holding structure. The Ministry of Finance administers treaty claims through the National Tax Administration (Krajowa Administracja Skarbowa, KAS).

Interest and royalties receive separate treatment. Under the treaty, interest may be taxed in the source state at a maximum of 5 percent. Royalties – including payments for software licences, patents, and know-how – are capped at 10 percent. Both caps apply only to the beneficial owner of the income, not to a conduit entity. Companies using IP Box structures in Poland should verify that royalty flows are correctly characterised before applying reduced rates, since KAS audit activity in this area has increased since 2024.

Business profits are taxable in the UK only if the Polish entity has a permanent establishment (PE) there. The treaty defines PE to include a fixed place of business, a construction site lasting more than 12 months, and a dependent agent. A UK-based sales representative with authority to conclude contracts on behalf of a Polish company can trigger PE status. That consequence is irreversible once the threshold is crossed – back taxes, interest, and penalties follow automatically.

  • Dividends: 10 percent (≥10% shareholding) or 15 percent (other cases)
  • Interest: maximum 5 percent at source
  • Royalties: maximum 10 percent at source
  • PE construction threshold: 12 months
  • Beneficial ownership test applies to all reduced rates

We obtained a full refund of excess withholding tax exceeding PLN 800,000 for a technology client in the Mazowieckie region whose UK parent had failed to submit a residence certificate before payment (autumn 2025). The refund procedure took six months and required a formal application to KAS – time and cost that proper upfront planning would have avoided entirely.

For businesses with significant intercompany transactions, the treaty's associated enterprises article mirrors the arm's-length standard. Polish transfer pricing safe harbours under Polish law can reduce documentation burdens, but they do not override the treaty's profit-allocation rules where the two conflict.

Who is affected and what are the immediate action items?

Post-Brexit, UK entities no longer benefit from EU Parent-Subsidiary Directive exemptions or the EU Interest and Royalties Directive. The treaty is now the sole legal basis for reduced withholding rates on Poland–UK flows. Any company that previously relied on directive-based zero rates must now apply treaty rates instead – and must hold a valid residence certificate at the time of payment, not after. Failure to hold that certificate when the payment is made forfeits the reduced rate and triggers the full domestic rate of 19 percent or 20 percent.

The Polish tax authority introduced a pay-and-refund mechanism for withholding tax on payments exceeding PLN 2 million per year to a single foreign recipient. Above that threshold, the payer must withhold at the domestic rate and the recipient must claim a refund – unless the payer obtains an opinion on the application of treaty preferences from KAS in advance. That opinion process takes up to six months. Companies approaching the PLN 2 million threshold should begin the application at least seven months before the threshold is reached.

Individual tax residents also need to act. A Polish tax advisor Warsaw-based can confirm whether a UK-source pension, rental income, or employment income is taxable in Poland under the treaty's tie-breaker rules. The treaty uses a four-step residence test: permanent home, centre of vital interests, habitual abode, and nationality. Misreading that sequence is a common source of double-filing errors.

We secured treaty-based protection for a family foundation established in 2024 that received UK-source dividends, preventing a second layer of Polish corporate income tax on distributions already taxed in the United Kingdom (spring 2025, Małopolska). The structure required careful coordination between the foundation's Polish tax filings and the UK payer's withholding obligations.

For investors choosing between Polish entity forms, the choice of vehicle affects treaty access. The sp. z o.o. vs SA decision matrix for United Kingdom investors sets out how dividend withholding and PE exposure differ between the two structures. That choice should be made before incorporation – reversing it later is costly and time-consuming.

What to prepare before your next cross-border payment

Acting before a payment is made is always cheaper than recovering overpaid tax afterwards. The checklist below covers the minimum steps for any Poland–UK transaction involving passive income or intercompany flows.

  • Obtain a valid UK or Polish certificate of tax residence, dated within 12 months of the payment
  • Confirm the beneficial owner of the income – not just the legal recipient
  • Check whether total annual payments to the recipient exceed PLN 2 million
  • Apply for a KAS opinion on treaty preferences if the threshold is at risk of being crossed

Companies with digital invoicing obligations should also note that KSeF Poland requirements affect how cross-border invoices are issued and archived. KSeF compliance does not alter withholding tax obligations, but invoice data submitted to the National e-Invoice System (Krajowy System e-Faktur, KSeF) is visible to KAS and can trigger scrutiny of related withholding positions. Aligning KSeF records with treaty filings is therefore a practical step worth taking now.

Transfer pricing documentation for Poland–UK intercompany transactions must reflect the treaty's profit-allocation rules. Where a Polish entity provides services to a UK affiliate, the arm's-length price determines both the Polish taxable base and the UK deduction. Misalignment between the two exposes both entities to adjustment – a risk that grows as KAS cross-references JPK_CIT data against withholding tax returns.

Specific situations require tailored advice. A Polish company receiving UK-source royalties for software it developed under an IP Box regime faces a layered analysis: the treaty rate, the IP Box deduction, and the KAS opinion requirement may all apply simultaneously. Getting one element wrong does not just cost tax – it can trigger interest at 8 percent per annum and a surcharge of up to 150 percent of the understated liability.

The treaty has been in force since 2006 and has not been renegotiated since Brexit. The UK's adoption of the OECD Multilateral Instrument (MLI) has modified certain provisions, including the PE definition and the principal purpose test. Polish tax law now requires payers to apply the MLI-modified treaty text, not the original 2006 version. Checking which MLI reservations each state has made is a necessary step before applying any treaty benefit.

Your specific cross-border structure may depend on provisions that interact in ways that are not immediately visible from the treaty text alone. Applying the wrong rate – even in good faith – does not protect against interest charges, and the pay-and-refund mechanism means the cash cost falls on the payer first.

To receive an expert assessment of your Poland–UK withholding tax position, contact info@kordeckipartners.com. If your company makes payments exceeding PLN 2 million annually to a UK recipient, we will review your residence certificate procedure, assess the KAS opinion timeline, and identify any MLI-modified provisions that apply to your structure.

Frequently asked questions

Q: Does the Poland–UK treaty still apply after Brexit?

A: Yes. The treaty is a bilateral agreement independent of EU membership. Brexit removed access to EU directives, which previously provided zero withholding rates on qualifying dividends, interest, and royalties. The treaty now serves as the sole basis for reduced rates, and its provisions apply in full to all Poland–UK income flows.

Q: How long does a KAS opinion on treaty preferences take, and what does it cost?

A: The formal procedure allows KAS up to six months to issue an opinion. The application fee is PLN 2,000 per recipient. Companies approaching the PLN 2 million annual payment threshold should apply at least seven months in advance to avoid the pay-and-refund mechanism triggering before the opinion is received.

Q: Is a certificate of tax residence required for every payment, or once per year?

A: Polish tax law requires the certificate to be valid at the time of payment. A certificate is generally accepted for 12 months from its issue date, provided the recipient's tax residence has not changed. Payers should collect a fresh certificate at the start of each calendar year and whenever the payment structure changes materially.

KORDECKI & Partners is a law firm based in Warsaw and Krakow, advising business clients across 30 jurisdictions. Our team combines expertise in Polish and international law with a practical approach to cross-border tax planning, withholding tax compliance, and treaty-based structuring. We work with Polish entrepreneurs, foreign investors, and in-house legal teams. To discuss your situation, contact info@kordeckipartners.com.

Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. KORDECKI & Partners assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@kordeckipartners.com.