After several years' worth of work and the publication of two guidance proposals that came under criticism, on 9 Jul 2025 the Finance Ministry ("FM") published Guidance relating to the definition of a beneficial owner.
Unfortunately, despite such a significant delay and lengthy consultations with business and tax advisors, the Guidance is still far from ideal.
As defined in the law (Article 4a(29) of the CIT Act), the beneficial owner of a payment is an entity for which all of the following is true:
- receives the payment for its own benefit, and in particular decides independently on its use and incurs the economic risk of its total or partial loss,
- is not an intermediary, representative, trustee or any other entity required to transfer the payment to some other entity in whole or in part, and
- carries on genuine business activity in the country in which it is established, if the payment is received in connection with its business, and whether or not it carries on genuine business activity is to be determined with account taken of the nature and scale of its business in relation to the payment.
In accordance with the Guidance, the first two conditions should be considered together as a requirement for the payee to have economic control over the payment. The third condition is supposed to follow up on the first two and relate to the payee's characteristics, requiring it to have human, information and/or infrastructural resources that, given the type of its business, are sufficient to enable it to exercise such control.
When interpreting the term "beneficial owner" in the Guidance, FM obsessively invokes CJEU's Danish cases, taking them out of their context. FM fails to note that CJEU's ratio in these cases refers to factual configurations that were indicative of abuse. Polish law already does have dedicated anti-abuse regulations implementing the general rule that you may not rely on Union law in a context suggesting fraud or abuse.
In terms of holdings, while FM does note that they can use shared resources, it allows such shared resources to be taken into account for beneficial owner testing purposes only where the costs of the resources are located exclusively within the jurisdiction under which the given preferential tax treatment is sought.
On the other hand, FM should be praised for confirming in the Guidance that the beneficial owner status requirement does not apply to payments that are not passive income, e.g. payments for cross-border intangible (management etc.) services.
Yet FM wrongly maintains that the beneficial owner requirement applies to dividend payments exempt under PS Directive. FM cites no legal basis for its claim, which is hardly surprising because regardless of whether the underlying law is interpreted functionally, systemically or linguistically, the outcome of the interpretation is the same – both national law and EU law impose the beneficial ownership requirement only in the case of interest and royalty payments, not dividends. Importantly, in its Danish cases under PS Directive, CJEU refused to answer precisely those questions referred to it which concerned the definition of beneficial owner under PS Directive. Interestingly, the Supreme Administrative Court (NSA), following the issuance of the Guidelines issued another decision on August 13, 2025 (case no. II FSK 1510/22), in which it confirmed that the requirement of the status of a beneficial owner is not a condition for the exemption of dividends from taxation under PS Directive.
Furthermore, the Guidance adjusts the scope of due diligence required of Polish payers when verifying a payee's beneficial owner status, depending on whether the payment is made to a related party, to an unrelated party, or by a so-called technical payer (a financial intermediary, such as a bank). In the latter two cases the standard of diligence is lower, given that such entities lack access to information necessary to verify the payee's status.
On a positive note, the Guidance:
- allows the use of look-through approach to payments of the same kind (subject to conditions),
- introduces what is called "extended-scope beneficial owner test" in cases where it is not clear at the time of payment whether the payment will be transferred to beneficial owner,
- introduces a presumption that the BO test is satisfied under PS Directive in the case of dividends that are subject to taxation within EU at least once (use of this presumption requires tracking of the hypothetical dividend chain between subsidiaries and parents).
Use of the above solutions is not an obligation of the tax authorities but the right of the relevant party (mainly the payer/withholding agent).
To discuss all the requirements behind the various options or describe all the ins and outs of the Guidance would exceed the content restrictions of this newsletter.
The legal status of Guidance is similar to that of official private tax rulings, meaning it provides assurance if adhered to. But Guidance is not binding on the taxpayers and does not directly bind tax courts.
Proposed changes to CIT Act regarding corporation tax exemptions for foreign investment funds.
Work is underway to amend the CIT Act regarding tax exemptions for foreign investment funds.
The major changes involve:
- extending the exemptions (both income-based and entity-based) onto funds from third countries,
- varying the exemption conditions to take into account the existence of internally managed funds in other jurisdictions,
- introducing another exemption condition allowing the exemption to be used by foreign investment funds from countries with respect to which there is a legal basis for the Polish tax administration to be able to obtain information about Polish residents' accounts with collective investment institutions,
- extending the Polish anti-abuse regulations with respect to funds enjoying income-based exemptions (which effectively are all funds other than UCITS).
The condition mentioned under 3 above will also apply with respect to entity-based exemptions for foreign pension funds.
Re. 1
This change is made to comply with the guidelines contained in CJEU's judgment in case C-190/12 Emerging Markets and endorse the practice of Polish tax authorities and courts where exemption has been granted to third country funds comparable to domestic funds.
Re. 2
This change comes in the wake of CJEU's judgment of 27 February 2025 in case C-18/23.
The original wording of one of the conditions had been that, to qualify for the exemption, a fund must be managed by an entity authorised by the relevant financial supervision authority of its home country. This allowed Polish tax authorities to deny exemption to internally managed funds.
This provision is proposed to be changed so that the exemption will be granted to a fund managed in accordance with its domestic legal requirements by:
- an external entity authorised by the relevant financial supervision authority of its home country, or
- where the institution has not appointed an external management company, an internal executive board which is established in accordance with national law and whose professional fund management qualifications and powers are evidenced through authorisation from or registration by the relevant financial supervision authority of the institution's home country.
It seems the condition for internally managed funds is based on the facts of case C-18/23, which involved a Luxembourgian special investment fund (SIF) operating pursuant to the Luxembourg's Special Investment Funds Act of 13 Feb 2007. As such, the condition does not take into account all potential regulations applicable to funds of this kind. For example, under Article 29 of the UCITS Directive, an internally managed UCITS is required to communicate the names of investment company's directors to the competent supervision authority. There is no mention of any registration or any need to have their qualifications evidenced through an authorisation.
For those reasons, the above provisions of the proposed law are very likely to be amended.
Re. 3
Regarding the legal basis for Polish tax administration to be able to obtain information about Polish residents' accounts with collective investment institutions, this is provided by CRS-based AEOI agreements, MCAAs, and FATCA (for US).
Re. 4
This is a proposal to extend the Targeted Anti-Abuse Rule, or TAAR, in Article 22c of the CIT Act. Previously TAAR was used to deny preferences in cases indicating abuse of PS or IR Directive exemptions. Now TAAR is proposed to be used for income-based exemptions which are generally designed for foreign investment funds other than UCITS (closed-ended funds and special open-ended funds operating in accordance with rules and restrictions applicable to close-ended funds).
In accordance with TAAR, income-based exemptions cannot be used if their use is:
- contrary, in the circumstances, to the object or purpose of the regulations, and
- the principal purpose or one of the principal purposes of the transaction(s) or some other operation(s), and the arrangement is artificial.
By Article 22c(2) of the CIT Act, an arrangement is not artificial (is genuine) if it is appropriate to conclude in the circumstances that a person acting reasonably and for lawful purposes would apply this arrangement largely for valid commercial reasons. The reasons referred to in the first sentence do not include the intended use of an exemption that is contrary to the object or purpose of its underlying regulations.
It is currently difficult to predict how tax authorities will practically assess on a case-by-case basis whether TAAR applies in the case of any income-based exemption for foreign investment funds.
Note, however, that the lower tax court dealing with key WHT issues (Provincial Administrative Court in Lublin) currently applies TAAR with a great degree of insouciance. For example, it denies preferences where it finds the transaction artificial while omitting to make the other required statutory findings, being whether the main benefit test is met and whether use of the preferential treatment is contrary to the underlying regulations.
One can only hope that the practice of both Polish tax authorities and the Lublin tax court will change under the influence of the recent CJEU case C-228/24 (judgment of 3 April 2025).
The European court held in C-228/24 that for anti-abuse regulations to apply, all the conditions must be satisfied, including not just the non-genuineness condition but also the purposefulness condition (arrangement must be intended to bring a tax advantage that is contrary to object or purpose of the underlying regulations): "it is not sufficient to establish that the arrangement was not put into place for valid commercial reasons reflecting economic reality (...). It is also necessary (...) for the arrangement to have been put into place with the main purpose of obtaining a tax advantage that defeats the object or purpose of that directive."
As far as we know, the draft law is still open to changes, none of which have yet been published.
Recent judgments of Poland's top tax court on exemption for foreign investment funds
On 4 June 2025, the top Polish tax court Supreme Administrative Court (NSA) issued two important decisions regarding tax exemptions for foreign investment funds (cases no. II FSK 696/22 and no. II FSK 843/22).
The cases reached NSA on appeal from advance tax rulings under which a UK employee pension fund was denied a tax exemption on the ground that the fund made an investment in a company whose type corresponds to Polish sp. z o.o. company (limited liability company) and Polish law does not allow pension funds to invest in sp. z o.o. companies. According to the issuing authority, the scope of actual business pursued by the UK pension fund exceeds the scope of investment activities that may be pursued by Polish pension funds.
In effect, the authority ruled that the case fails one of the exemption requirements under Article 6(1)(11a)(e) of the CIT Act, being that the fund's business must "solely consist of collecting monies and investment them with the purpose of paying them out to the scheme participants when they reach pensionable age".
The UK fund applied for judicial review and the lower tax court granted its application in two judgments, confirming the fund meets the requirements under 6(1)(11a) of the CIT Act and investing in company shares etc. may not in and of itself be a reason for denying the exemption.
The lower court's verdict was upheld by NSA. Thus, at first glance, this case law is favourable for foreign pension funds.
However, even though it dismissed the Polish tax authorities' appeal, NSA made a major "revision" to the favourable position of the lower court, whose approach it considered to be "incomplete and as such incorrect".
According to NSA, the exemption under Article 6(1)(11a) of the CIT Act is of a hybrid nature (both an entity-based and an income-based exemption).
This means that the exemption is available to foreign pension funds with respect to income from activities identical to those conducted by Polish entities.
Accordingly, there may be foreign pension funds that are like Polish domestic entities and as such eligible for Article 6(1)(11a) exemption, but their Polish activities are wider than those of domestic entities.
Thus, if a foreign pension fund complies with Article 6(1)(11a) of the CIT Act, it qualifies for the exemption offered by that Article. But the exemption will not apply to the extent its Polish-source income is derived from investments otherwise prohibited to Polish pension funds.
Draft regulations to disapply the pay and refund mechanism for technical payers until 31 Dec 2026
On 11 August 2025, the Minister of Finance and Economy published proposals for regulations to amend the regulations disapplying the duty to withhold corporate or personal income tax. The proposed law would disapply the pay and refund mechanism for what are called "technical payers", i.e. institutions which operate securities accounts or omnibus accounts, until 31 Dec 2026.
Finance Ministry's ideas to fund the budget deficit at the expense of the banking sector
Since June the Finance Ministry has been sending signals that it wishes to impose an extra tax on banks.
First, the Finance Minister announced in June that the cabinet are working on a new tax designed to target banks. According to the press, this was not meant to be a windfall tax but tax on statutory reserves held by banks with the National Bank of Poland. The idea attracted heavy criticism from the banking sector as interest on reserves held with NBP is part of corporation tax calculations for banks so such a levy would mean double taxation.
Then, on 21 August, the Finance Ministry posted on its website that they are drafting a legislative proposal to amend the CIT Act to increase the corporation tax rate for banks and make changes to what is called "banking tax".
The Finance Ministry wants the target CIT rate for banks to be 23% instead of the current 19%, starting from 2028. In the meantime, the rate would be 30% in 2026 and 26% in 2027.
On the other hand, the banking tax rate would be gradually lowered by 10% in 2027 and by 20% as of 2028 (comparing to this year).
Other than those laconic announcements, no draft legislation has been published yet.
If you wish to discuss these topics, please contact: Magdalena Kostowska (Doradztwo Podatkowe WTS&SAJA Sp. z o. o.)
