The Anti-Money Laundering and Terrorist Financing Act of 1 March 2018 (AML Act) entered into force in Poland as of 13 July 2018, with some exceptions. One of them is the whole chapter regarding the Central Register of Beneficial Owners, which will not apply until 13 October 2019.
Beneficial owner under AML regulations
The AML Act states that the “beneficial owner” is the natural person who directly or indirectly controls a customer through entitlements, whether arising from factual or legal circumstances, which enable the person to exercise a dominant influence over the activities or conduct of the entity, or the natural person on whose behalf a business relationship is commenced or an ad hoc transaction is conducted.
For AML purposes, the term “beneficial owner” includes:
- in the case of a corporate entity other than a company listed on a regulated market:
- a natural person who owns more than 25% of the total number of shares in the corporate entity or owns more than 25% of the total number of votes in the decision-making body of the entity;
- a natural person who controls a company or companies which fulfil the above-mentioned condition;
- a natural person who controls the entity by being its parent entity as defined in the Accounting Act; or
- a natural person who holds the position of a senior managing official if it is verifiably impossible to identify any natural person mentioned above or if there is any doubt as to their identity;
- in the case of a trust: the settlor, the trustee, the protector, if any, the beneficiary, or any other person exercising control over the trust;
- in the case of a natural person in business, such natural person shall generally be deemed to be the beneficial owner.
Central Register of Beneficial Owners for AML purposes
The Central Register of Beneficial Owners will become operational as of 13 October 2019. This will be a public register with free-of-charge access. The following types of business will have to submit data to it:
- registered partnerships,
- limited partnerships,
- partnerships limited by shares,
- limited liability companies,
- joint-stock companies other than public companies.
Partnerships or companies formed on or after 13 October 2019 will have to submit data to the register within seven days of their registration. Existing entities will have to do so until 13 April 2020.
The following disclosures will be made in the register: identification information on the company/partnership (name, legal status, registered office, National Court Register number, tax ID) and on the beneficial owner and board member or partner with authority to represent the entity (first name, surname, citizenship, country of residence, PESEL code or, for those without PESEL, date of birth, size and nature of interest held, beneficial owner's rights).
Failure to submit data to the register on time will be punishable by a fine of up to PLN 1 million (roughly EUR 233,000). Fines will be imposed on the company. The submission must be made by an authorised representative of the company or partnership, and must also include a representation that the submitted data is true, failing which the person may be held criminally liable for perjury.
Important term also for MDR purposes
DAC6 has already been implemented in Poland. The MDR reporting obligation entered into force as of 1 January 2019.
The term "beneficial owner" as defined in the AML Act is used to identify reportable arrangements for MDR purposes. A reportable arrangement arises, in particular, whenever it involves a non-transparent legal or beneficial ownership chain with the use of legal persons or unincorporated organisational units, legal arrangements or structures, including where the beneficial owners, as defined in the AML Act, are made unidentifiable.
Different approach to CIT taxpayers
The beneficial ownership concept is also used for income tax purposes.
In general, revenues of non-residents are taxed at source under the CIT Act at 19% (dividends) or 20% (interest, royalties and remuneration for intangible services).
To ensure that the exemption or reduced rate under the CIT Act or relevant double tax treaty applies, by the end of 2018 the WHT agent was obliged to receive the following documents from the recipient:
- certificate of tax residence, and
- representation on beneficial ownership (for interest and royalties).
As of 1 January 2019, the WHT agent must also exercise and prove due diligence when verifying if conditions for a reduced rate or exemption are met, in particular by applying the extended definition of beneficial owner, i.e. entity which:
- receives the payment for their own benefit, and
- is not an intermediary, representative or trustee or otherwise required to forward the payment in whole or in part to any other entity, and
- carries out a genuine (substantive) business – in particular the entity has sufficient premises, qualified personnel and equipment; there is proportionality between the scope of activities and those resources; the entity does not constitute a structure that operates without economic reason, performs its basic business functions autonomously including the present managing persons and the agreements concluded are consistent with economic reality, economically justified and not manifestly contrary to the general economic interests of the entity.
For income tax purposes, no register of “beneficial owners” within the meaning of the CIT Act is currently planned. Nevertheless, taxpayers and WHT agents may find other requirements to be a challenge.
The law is silent on how to apply the beneficial owner test and the genuine business (substance) test to certain entities, e.g. partnerships. As the new rules on withholding tax also raise many other doubts, the Ministry of Finance is currently working on tax guidance.
Further amendments to the CIT Act are expected to enter into force on 1 January 2020. When the sum of payments subject to WHT made to a CIT taxpayer during one tax year exceeds PLN 2 million (roughly EUR 466,000), then even if a due diligence is carried out, the WHT agent is in principle obliged to withhold tax from the excess at the standard rate (19% or 20%). It may then be possible to apply for a WHT refund. The CIT Act provides for only two exceptions: a special representation of the Management Board and an exemption opinion.
Since 2019 is a year of fundamental change in the “beneficial ownership” concept and in the AML and tax compliance obligations, it is thus advisable to be up-to-date with the current legal framework and the position of the Polish authorities.
