WHT taxation in the case of a loan from a foreign entity

From this article, you will learn:

• What is the basic withholding tax rate in the case of payment of interest on loans?
• When the withholding tax should be paid?
• Which tax office is responsible for settling withholding tax in Poland?

One of the forms of debt financing for business activities conducted in Poland are cash loans from other entities conducting business activities. Debt financing does not necessarily have to be carried out using banking institutions. Polish enterprises that are part of international capital groups often use loans as a form of financing to finance their business activities. 

Withholding taxation – what do Polish regulations say?

In accordance with the current provisions of the Corporate Income Tax Act, if the lender is a foreign entity, the payment of interest on the loan is taxed at a flat tax rate of 20% of the income obtained.

Due to the fact that the taxpayer in this case will be the lender who does not have unlimited tax liability in Poland, the obligation to collect and remit the tax to the appropriate tax authority (taking the role of payer) rests with the Polish borrower. In accordance with the will of the legislator, the deadline for payment of withholding tax (WHT) expires on the seventh day of the month following the month in which the tax obligation arose. 

Tax liability is determined by the date of payment. Therefore, the date on which the borrower accrues interest will be irrelevant. In the case of WHT, the moment of payment of the receivable to the foreign entity is binding.

Withholding tax paid by CIT taxpayers is settled in Poland by a tax office specially designated for this task – the Lublin Tax Office in Lublin. Polish enterprises – in addition to meeting the statutory payment deadline – are also obliged to submit appropriate tax returns to the tax administration after the end of the tax year, disclosing those payments made that were subject to withholding tax in Poland.