Tax Explanations on the Beneficial Owner Clause – New Guidelines for Withholding Tax

On 3 July 2025, the Polish Ministry of Finance published tax explanations regarding the application of the beneficial owner clause in the context of withholding tax (WHT). This long-awaited document provides practical guidance on verifying beneficial owner status and may significantly impact the way tax obligations are settled in cross-border transactions.

Key Issues Addressed in the Explanations

The new guidelines focus on three fundamental criteria that an entity must meet to be recognized as the beneficial owner of a payment:

• The entity must receive the payment for its own benefit, meaning it independently decides on its use and bears the economic risk associated with it.
• The entity cannot be an intermediary obliged to transfer the payment to another party.
• The entity must conduct genuine business activity in its country of residence, with adequate economic and personal substance.

Particular emphasis is placed on the third criterion, which often proves most challenging in practice. The Ministry clarifies that the assessment of genuine business activity should take into account the nature and scale of operations in the context of the specific payment. Different requirements will thus apply to holding companies and to operational entities.

Practical Aspects of Verification

The explanations distinguish between payments made to related and unrelated parties. For related entities, a more in-depth analysis of documents and factual circumstances is required, while for unrelated entities, it may be sufficient to obtain a tax residence certificate and a beneficial owner statement.

The document also introduces the concept of shared economic and personal substance, allowing the use of resources from other group entities under certain conditions. This solution may be particularly helpful for international corporate structures that centralize specific functions.

New Opportunities: Look-Through Approach

One of the most notable novelties is the detailed discussion of the Look-Through Approach (LTA), which allows for the application of tax preferences even when the beneficial owner is not the direct recipient of the payment. This solution may be relevant in cases of payments made through intermediaries, provided certain conditions are met.

The explanations clarify that different rules apply to the LTA depending on the legal basis for the preference—distinct requirements exist for EU directives (such as the Parent-Subsidiary and Interest-Royalties Directives) and for double tax treaties. It is crucial to maintain the same nature of the payment throughout the chain and to fulfill all conditions required for the specific preference.

Presumptions and Special Cases

The explanations introduce a presumption of meeting the beneficial owner requirement under the Parent-Subsidiary Directive when the profit distribution is taxed at least once within the EU. This may simplify procedures for many intra-EU transactions.

The document also provides detailed regulations for collective management organizations (CMOs), which, due to their specific legal status, are treated as beneficial owners of received license fees.

Impact on Practice

The new explanations are not legally binding, but taxpayers may follow them to obtain the legal protection provided by the Tax Ordinance. At the same time, they are likely to influence the approach of tax authorities when interpreting WHT provisions.

Importantly, the explanations clarify the standard of due diligence required from remitters, linking its level to the nature and scale of activity as well as the relationship between the parties involved.

Practical Recommendations

Following the publication of these explanations, businesses should review their existing procedures for verifying beneficial owner status. It may be necessary to adjust internal processes and the documentation collected from foreign contractors.

Special attention should be paid to the possibility of using new solutions, such as the LTA or the presumption under the Parent-Subsidiary Directive, which may offer tax benefits for certain business structures.

The explanations represent an important step towards clarifying the application of WHT rules, although their non-binding nature means that interpretative discrepancies may still arise in practice.

Do You Require Support in Applying the New Regulations?

While the Ministry of Finance’s explanations are a valuable resource for practitioners, they do not resolve all uncertainties related to the practical implementation of the new rules. Each case requires an individual assessment regarding the fulfillment of beneficial owner conditions and the possibility of applying tax preferences.

We invite you to contact our tax practice. Our team has extensive experience in international tax planning and withholding tax matters. We offer comprehensive support, including:

• analysis of the impact of the new explanations on your business operations,
• adjustment of beneficial owner verification procedures to current requirements,
• optimization of tax structures in light of the latest legal opportunities,
• preparation of documentation necessary to apply tax preferences.

Please feel free to reach out for professional advice tailored to your business needs: Penteris Head of Tax Piotr Prokocki.