A technology company headquartered in Warsaw was making regular royalty payments to its parent entity in the Netherlands. The payments had grown substantially over three years. No withholding tax (WHT) had been remitted to the Polish tax authorities – the company relied on an internal assumption that the double tax treaty automatically exempted the payments. That assumption proved costly.
Withholding tax on cross-border payments from Poland applies to dividends, interest, and royalties paid to non-resident recipients. Under Polish tax law, the paying entity acts as a remitter and bears personal liability for any shortfall. Where payments to a single recipient exceed PLN 2 million in a calendar year, the standard domestic rates – 19% on dividends and 20% on royalties and interest – apply by default unless the remitter completes a formal relief procedure in advance.
This case study examines how the company identified the exposure, what procedural steps restored compliance, and what transferable lessons apply to any Polish entity making cross-border payments. The matter involved the Polish tax administration (Krajowa Administracja Skarbowa, KAS), a formal opinion from the National Revenue Information Centre (Krajowa Informacja Skarbowa, KIS), and ultimately a successful reclaim of overpaid tax from the Tax Office (Urząd Skarbowy).
What was the background to the WHT exposure?
The Warsaw technology company paid royalties for software licences to its Dutch parent. The payments were treated as exempt under the Poland–Netherlands double tax treaty. No one had reviewed whether the PLN 2 million threshold had been crossed. It had – in each of the three preceding tax years.
Polish tax law introduced a pay-and-refund mechanism for payments exceeding that threshold. Once the limit is passed, the remitter must withhold at domestic rates and later apply for a refund, or alternatively obtain a WHT opinion (opinia o stosowaniu preferencji) from KIS before the payment date. The company had done neither. The gap between treaty rate (5% on royalties under the relevant treaty) and the default 20% domestic rate represented a significant underpayment across three years.
KAS opened a verification proceeding after identifying the discrepancy through JPK_VAT data cross-referenced with corporate income tax (CIT) filings. The company had 14 days to respond to the initial information request. Failure to respond within that window would have escalated the matter to a full tax audit – an outcome with far longer timelines and broader scope. Our team was engaged on day three of that window.
- Royalties paid: approximately PLN 4.8 million across three years
- WHT shortfall at domestic rates: approximately PLN 714,000
- Potential late-payment interest: accruing daily from each payment date
- Exposure to additional penalty surcharge of up to 150% on understated tax
How did the legal strategy address the exposure?
The core strategic question was whether to contest the WHT liability entirely or to accept it and pursue a structured refund. Contesting would have required demonstrating that the pay-and-refund mechanism did not apply – a difficult argument given the clear threshold breach. The refund route was faster and more predictable.
We secured a WHT opinion from KIS within 6 months – the statutory maximum processing period. The opinion confirmed that the Dutch parent satisfied the beneficial ownership requirement and met the conditions for the reduced treaty rate. That opinion, once issued, protects the remitter from liability on future payments for the opinion's validity period of 36 months. It does not, however, cure the past shortfall automatically.
For the historical underpayment, we filed a voluntary correction (czynny żal) alongside the refund application. The voluntary correction mechanism under Polish fiscal penal law eliminates criminal fiscal liability where the taxpayer discloses the irregularity before KAS formally initiates proceedings. Timing was decisive: the correction was filed on day eleven of the 14-day response window, before any formal audit decision was issued. We also negotiated a payment instalment arrangement for the principal WHT amount, limiting immediate cash impact.
We obtained interim confirmation that the Dutch parent held a valid certificate of tax residence for each relevant year. This documentation is mandatory. Without it, even a valid treaty cannot reduce the withholding obligation. For a related discussion of treaty mechanics, see our analysis of the double tax treaty between Poland and the Netherlands.
What did the process reveal about systemic WHT risks?
The refund application was processed within 60 days – the standard statutory period for WHT refunds under Polish tax law. KAS issued the refund in full, including a portion of the late-payment interest that had been incorrectly calculated by the company's finance team. The net recovery exceeded PLN 680,000. We secured the reversal of a WHT surcharge exposure exceeding PLN 700,000 for this Warsaw-based technology client in winter 2025.
The matter exposed three systemic gaps common across Polish subsidiaries of foreign groups. First, no one monitored the PLN 2 million threshold in real time. Payments were approved individually without a running annual total. Second, the beneficial ownership analysis had never been formally documented. The internal assumption – that a group parent automatically qualifies – is not sufficient under Polish tax law. KAS expects written substance analysis, not assertions. Third, transfer pricing documentation had been prepared for the royalty arrangement, but the WHT team and the transfer pricing team had never compared notes. The KSeF-related compliance framework now being introduced across the EU creates an additional data trail that KAS will use to cross-check WHT positions.
A second micro-case illustrates how early action changes outcomes. We advised a manufacturing client in Silesia (spring 2026) facing a comparable threshold breach on interest payments to a German lender. By filing a WHT opinion application before the calendar year closed, the client avoided the pay-and-refund mechanism entirely for the following year – saving approximately PLN 380,000 in cash-flow disruption.
What are the transferable lessons for compliance teams?
The Warsaw technology matter is not unusual. Polish subsidiaries of foreign groups routinely underestimate WHT exposure because the treaty-relief assumption is deeply embedded in treasury practice. Polish tax law has moved significantly away from self-assessment on this point. The PLN 2 million threshold is a hard trigger, not a guideline.
Three lessons transfer directly to any compliance programme. The pay-and-refund default is now the rule, not the exception, for large payment flows. Proactive WHT opinions are the only reliable shield for recurring payments above the threshold. And documentation – residence certificates, beneficial ownership analysis, substance evidence – must be assembled before the payment date, not after a KAS inquiry arrives. Employer obligations in related cross-border employment structures carry analogous documentation duties; see our note on employer duties under Polish law for context on how Polish law frames remitter responsibilities broadly.
What to prepare before making a cross-border payment above PLN 2 million:
- Current tax residence certificate from the recipient's home jurisdiction
- Written beneficial ownership analysis with substance evidence
- Running annual payment total per recipient, updated at each payment date
- WHT opinion from KIS or a formal due diligence file supporting treaty relief
- Internal sign-off record confirming the above items were reviewed
Compliance teams that build these checks into payment approval workflows – rather than treating WHT as an annual reconciliation item – avoid the scenario described in this case study. The 14-day response window KAS allows is genuinely short. Having documentation ready in advance is not optional.
Your company's specific payment structure determines which relief mechanism applies and what documentation KAS will expect. Errors in the WHT position are difficult to unwind after an audit formally opens – and the 150% penalty surcharge is irreversible once assessed.
To receive an expert assessment of your company's WHT exposure on cross-border payments, contact info@kordeckipartners.com.
Frequently asked questions
Q: Does the PLN 2 million threshold apply per payment or per calendar year?
A: The threshold is calculated per recipient per calendar year, aggregating all payments of the same category – dividends, interest, or royalties – made during that year. Once the threshold is crossed on any single payment, the pay-and-refund obligation applies to that payment and all subsequent ones in the same year. Remitters must therefore maintain a running total, not assess each payment in isolation.
Q: How long does a WHT opinion from KIS remain valid, and can it be revoked?
A: A WHT opinion issued by the National Revenue Information Centre is valid for 36 months from the date of issue. KIS may revoke the opinion if the facts on which it was based change materially – for example, if the recipient's substance or beneficial ownership position changes. Remitters should review the opinion's factual basis at least annually and notify KIS of any relevant changes.
Q: Is transfer pricing documentation relevant to a WHT audit?
A: Yes. KAS routinely cross-references transfer pricing files with WHT positions, particularly for royalty and service fee payments within corporate groups. A transfer pricing file that characterises a payment as an arm's length royalty implicitly supports the WHT analysis, but it does not substitute for a separate beneficial ownership assessment. Both analyses must be consistent and independently documented.
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 withholding tax compliance, cross-border payment structuring, and KAS audit defence. 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.