Poland

Domestic provisions: General rules

The general domestic WHT rate for dividends is 19%. For the purpose of applying Polish WHT rules, the term ’dividends‘ should be understood as encompassing certain other revenues (incomes) from participation in profits of legal persons having their seat or management office within the territory of the Republic of Poland, including, among others, the income from liquidation of a company and the income from the redemption of shares (with the exception of gain from voluntary redemption, which is treated as a capital gain subject to the 19% CIT rate in Poland if the gain is realised by a taxpayer from a non-treaty country or the treaty includes a so-called 'real estate clause'). The WHT rate on the dividend might be reduced based on the applicable DTT provision or specific participation exemption rules.

The general domestic WHT rate on interest and royalties paid to non-residents is 20% (10% regarding services of sea or air transportation). These WHT rates may also be reduced by DTTs.

There is also a 20% WHT on payments made to non-residents for intangible services listed in the CIT Act (such as consulting or management services). However, if a payment is made to a country that has a DTT with Poland, then, as a rule, this payment may be exempt from WHT (under a business profits clause) provided certain administrative formalities and WHT due diligence are completed (see below). However, a few DTTs treat payments for technical services as royalties (e.g. India or Malta).

The 'beneficial owner' clause determines that in order to apply the exemption from WHT based on the Polish provisions implementing the Interest-Royalties Directive, the entities receiving royalties and interest must constitute their beneficial owners (i.e. they should be in possession of the right to use and enjoy the payment received, and this right cannot be constrained by a contractual or a legal obligation to pass the payment; in addition to the above, they should conduct actual business activity in the country of their registered office if the receivables are obtained in connection with the conducted business activity). The beneficial ownership requirement has also become one of the conditions to apply reduced tax rates or exemptions on interest and royalties by Polish remitters under applicable DTTs, despite the fact that not all Polish DTTs directly include such a clause. A similar approach has been presented by the tax authorities in Poland towards dividend payments. The verdicts issued by administrative courts mostly reject the view that a Polish company, as a payer of CIT on the dividend, is required to check whether the recipient of the dividend is its beneficial owner. Nevertheless, the opposite approach is presented as well.

As of 1 January 2019, a mechanism of settlement of WHT in relation to payments exceeding PLN 2 million per annum for each taxpayer has been introduced (the so-called 'pay and refund' mechanism). The application of this mechanism was suspended until the end of 2021. The package of changes introduced to the Polish tax law regulations starting from January 2022 (the so-called 'Polish Deal') has limited the original scope of the application of this mechanism. Under the rules applicable from January 2022, the conditional exemption from WHT or application of the reduced tax rate stipulated in the applicable DTT or local specific rules is restricted in terms of the passive payments (i.e. dividends, interest, license fees) in the amount exceeding PLN 2 million per annum made to each related entity. In such cases, the tax remitter is required to automatically collect the tax at the statutory domestic rate (19% or 20%), regardless of the fulfilment of the conditions allowing for the application of the exemption or the reduced rate on the basis of the local law or DTT.

Moreover, the tax remitter is required to collect the tax with regard to other payments if the total amount of payments in one tax year to one taxpayer exceeds 2 million PLN when transactions are not classified as passive payments without justified economic reasons (e.g. a payment is artificially classified as a service).

In compliance with the pay and refund mechanism, the taxpayer/remitter has the right to claim for a WHT refund.

The following payments subject to WHT do not fall within the scope of the pay and refund mechanism:

• Intangible services (unless classified as passive payments without justified economic reasons).
• Interest or royalties paid to unrelated parties.
• Passive payments to the benefit of related entities not exceeding PLN 2 million per annum for each taxpayer (though the tax remitter should demonstrate due diligence). 

• Dividends paid between Polish residents (regardless of their amount).

Regardless of the payment amount, the payer is required to undertake due diligence during the verification of the payment recipient in order to apply the preferential WHT rules (the level of verification shall be stronger for related entities).

The pay and refund mechanism allows the remitters not to withhold tax in relation to payments exceeding PLN 2 million per annum if the remitter submits a statement to the tax authorities confirming that:

• it possesses all documents necessary for applying reduced WHT rate or exemption from WHT, and
• it is not aware of any circumstances that speak against granting tax exemption.

The further amendment to the rules on submitting the remitter's declaration made it more flexible by extending the time scope. The submission of a declaration allows this mechanism not to apply until the end of the remitter's tax year, including the declarations submitted in 2022. Changes also included the exemption from the application of certain obligations of payers with respect to withholding taxation of interest and discount on certain securities.

In case of tax authorities challenging the amount of withheld tax in the course of the tax audit, the remitter may be held accountable for uncollected tax as to the completeness of the documents and correctness of the facts considered. In addition to the uncollected WHT, a penalty of 10% to 30% of the tax base may be imposed if the tax authorities question the due diligence or the certification process. Fines under the Fiscal-Penal Code may be imposed on the persons responsible for tax matters in a remitter’s organisation in case of misstatement.

Alternatively, the taxpayer or the remitter can apply to the tax authorities for a ruling (binding opinion) on the application of WHT reduced rates / exemptions. The opinion is valid for three years.

Special treatment: EU Directives

The CIT law provisions implementing EU Directives provide a special treatment for dividends, interest, and royalties paid to residents of EU or EEA member countries.

In general, the WHT exemption rules on interest and royalty payments paid by Polish corporate residents only apply to associated EU or EEA companies (parent-subsidiary relationships or sister-sister relationships) in which capital involvements are significant, i.e. the paying company owns (or is owned in a share of) at least 25% by the receiving company or the paying company and the receiving company are owned at least in the share of 25% by the same parent company. Shareholding should be kept for a minimum of two consecutive years.

Dividends paid to corporate residents of EU and EEA countries (or Switzerland) are exempt from WHT, subject to certain conditions specified in the CIT law. The basic requirement is that the foreign recipient directly holds at least 10% (or 25% in case of Switzerland) of the shares in the Polish company for a minimum of two consecutive years.

The condition regarding holding shares is also fulfilled if two years passes after the day of the dividend/interest/royalty payment. If the period is interrupted afterwards, the company is obligated to pay the tax at the standard rate with interest.

Note that several additional conditions have to be met in order to apply the exemption implemented upon the Directives (e.g. the company receiving the dividend/interest/royalty cannot be exempt from tax on all its income, regardless of its source; the recipient has to have ownership title to the shares in the Polish company; the recipient has to obtain a written statement confirming fulfilment of exemption conditions).

Additionally, the CIT law states that to enjoy the exemption from WHT based on the Directives’ provisions, the relevant DTT or other agreement concluded by Poland should allow for the exchange of tax information between the tax authorities of Poland and the country of the payment recipient. Given the fact that Poland did not conclude a DTT with Liechtenstein, payments made to tax residents of Liechtenstein should not benefit from the exemption.

It should be noted that the Polish WHT due diligence and pay and refund rules also apply to payments exempt under provisions implementing the EU Directive.

Treaty rates

If EU special rules do not apply, the domestic WHT rates can be decreased by a DTT concluded between Poland and the payment recipient’s country of residence if certain administrative conditions are met (i.e. the payer obtains a valid certificate of a fiscal residence of the payment recipient/beneficial owner).

The following table lists the WHT rates as provided in the treaties concluded by Poland. Notably, the following table shows only rates that result from general treaty provisions; the treaties themselves occasionally include special provisions (applicable in special circumstances or to special entities) that provide lower WHT rates than the ones listed.

Furthermore, if a treaty rate is higher than a domestic one, the latter should apply.

Notes

1. When the beneficial owner is a company that directly holds at least 25% of the capital of the company paying the dividends within the whole period of 365 days that includes the day of payment of dividends (for the purpose of calculating this period, no ownership changes directly resulting from reorganisations, such as a merger or division of a company that owns stock or shares of the company paying dividends, will be taken into account).
2. When interest is paid to the government, the central bank of the state, including local authorities or other government bodies.
3. When the beneficial owner is a company (other than a partnership) that directly holds at least 10% of the capital of the company paying the dividends.
4. When interest is paid to the government, a political subdivision, or a local authority in connection with:
   • a loan granted, insured, or guaranteed by a governmental institution for the purposes of promoting exports
   • a sale on credit of any industrial, commercial, or scientific equipment, or
   • any loan granted by a bank.
5. When the beneficial owner is a company that directly holds at least 10% of the capital of the company paying the dividends.
6. When the interest is paid:
   • to the Central Bank of Poland
   • to the Central Bank of Bangladesh
   • to the government of the Republic of Poland or the government of the Republic of Bangladesh, or
   • in respect of a loan made or guaranteed or insured by the government of the other state, or any agency including a financial institution owned or controlled by the government.
7. When the beneficial owner is a company (other than a partnership) that directly holds at least 30% of the capital of the company paying the dividends.

8. When the beneficial owner of the dividends is:

   • a company that is resident in the other contracting state and directly holds, for a continuous period of 24 months, at least 10% of the shares in the capital of the company paying dividends, or
   • a pension fund that is resident in the other contracting state, provided that such shares or other rights in respect of which dividends are paid are held for the purposes of activities referred to in Article 3(1)(i) of the Convention.
9. When interest is paid:
   • on a loan granted, guaranteed, or insured, or a credit granted, guaranteed, or insured, by a general system organised by the state, including political subdivisions or local authorities for purposes of promoting exports
   • on a loan of whatever kind, except in the form of bearer securities, granted by a banking company
   • to other states, including political subdivisions and local authorities, or
   •  to a pension fund where the debt-claim on which the interest is paid is held for the purposes of an activity referred to in Article 3(1)(i) of the Convention.
10. When interest is derived by the government of the other contracting state, a local authority, and the central bank thereof or any financial institution wholly owned by that government, or by any resident of that other contracting state with respect to debt-claims indirectly financed by the government of that other contracting state, a local authority, and the central bank thereof or any financial institution wholly owned by the government.
11. When interest is paid in respect of a loan made, guaranteed, or insured by the state or agreed public body or in connection with an indebtedness arising from the sale of any equipment, goods, or services, except where the sale or debt is between related parties, where the person entitled to interest is other than the seller or other than a person related to the seller.
12. Copyright royalties and other similar payments in respect of the production or reproduction of any literary, dramatic, musical, or artistic work (not including royalties in respect of motion picture films and works on film or videotape for use in connection with television), as well as royalties for the use of, or the right to use, any patent or professional experience in an industrial, commercial, or scientific field (not including license fees related to rent or franchise agreement).
13. When the beneficial owner is a company that directly controls 20% of the voting stock of the company paying the dividends.
14. For the use of, or the right to use, any industrial, commercial, or scientific equipment.
15. When interest is paid:
    • to the government, a local authority, and the central bank or any financial institution wholly owned by that government or
    • to the other resident of the other state with respect to debt-claims indirectly financed by the government of the other state, a local authority, and the central bank or any financial institution wholly owned by the government.
16. For the use of, or the right to use, any copyright of literary, artistic, or scientific work, including cinematographic films, and films or tapes for radio or television broadcasting, or any patent, know-how, trademark, design or model, plan, secret formula, or process.
17. The Protocol of 22 March 2012 has entered into force. The Protocol introduces a maximum 5% rate of WHT on dividends and exempts dividends paid to an immediate parent company (other than partnership) that owns at least 10% of the capital of the company paying the dividend.
18. When the beneficial owner is a company (other than a partnership) that directly holds at least 10% of the capital of the company paying the dividends in a period of 24 consecutive months.
19. When the beneficial owner is a company (other than a partnership) that directly holds at least 25% of the capital of the company paying the dividends, where such holding is being possessed for an uninterrupted period of no less than one year and the dividends are declared within that period.
20. When the beneficial owner is a pension fund or other similar institution providing pension schemes in which individuals may participate in order to secure retirement benefits, when such pension fund or other similar institution is established, recognised for tax purposes and controlled in accordance with the laws of the other state.
21. When interest is paid:
    • on a loan of whatever kind granted, insured, or guaranteed by a financial institution owned or controlled by the state
    • in connection with the sale on credit of any industrial, commercial, or scientific equipment
    • in respect of a bond, debenture, or other similar obligations of the government of the state, or of a political subdivision or local authority, or
    • to the other state, or to a political subdivision or local authority.
22. When interest is paid to the government of the other state, including local authorities and the central bank.
23. When the beneficial owner is a company (other than a partnership) that directly holds at least 25% of the capital of the company paying the dividends.
24. When interest is paid to the government of the other state, including political subdivisions and local authorities, the central bank, or any financial institution owned by the government or on loans guaranteed by the government.
25. From copyright of literary, artistic, or scientific work.
26. When the interest is derived and beneficially owned by the government of a contracting state, understood as the government or local authority thereof, the National Bank, or any other governmental agencies, political subdivisions, or institutions of contracting state, as may be specified and agreed to in an exchange of letters between the competent authorities of the contracting states.
27. When the interest, subject to certain exceptions related to silent shareholders, is paid:
    • to the government of Poland or Germany on a loan of whatever kind granted, insured, or guaranteed by a public institution for purposes of promoting exports
    • in connection with the sale on credit of any industrial, commercial, or scientific equipment
    • in connection with the sale on credit goods between companies, or
    • on any loan of whatever kind granted by a bank.
28. If the following conditions are met:
    • Interests paid to:
      • the government, a political sub-division, or a local authority of the other contracting state or
      • the central bank of other contracting state.
    • When the beneficial owner is a resident of the other contracting state and is derived in connection with a loan or credit extended or endorsed by:
      • Bank Handlowy (in scope of financing export and import) - for Poland
      • the Export-Import Bank of India (in scope of financing export and import) - for India
      • any institution in the other contracting state in charge of public financing of external trade, or
      • any other person, provided that the loan or credit is approved by the government of the first mentioned contracting state.
29. When the beneficial owner is the government, ministry, other governmental institution, municipality, central bank, or any other bank wholly owned by the government of the other contracting state.
30. When the beneficial owner is a resident of the other contracting state and directly holds at least 25% of the voting power of the company paying the dividends within the whole period of 365 days that includes the day of payment of dividends (for the purpose of calculating this period, no ownership changes directly resulting from reorganisations, such as a merger or division of a company that owns stock or shares of the company paying dividends, will be taken into account).
31. Interest paid in connection with:
    • the sale on credit of any industrial, commercial, or scientific equipment
    • the sale on credit of any merchandise by one enterprise to another, or
    • on any loan of whatever kind granted by the bank.
32. When the beneficial owner is a company that directly holds at least 15% of the capital of the company paying the dividends within the whole period of 365 days that includes the day of payment of dividends (for the purpose of calculating this period, no ownership changes directly resulting from reorganisations, such as a merger or division of a company that owns stock or shares of the company paying dividends, will be taken into account).
33. If the following conditions are met:
    • When the payer of interests is the government or contracting state or a local authority of thereof.
    • Interest is paid to the government of other contracting state or local authority thereof (including financing institutions) wholly owned by other contracting state or local authority thereof.
    • Interest is paid to any other entity, including financial institutions, in relation to loans made in application of an agreement concluded between governments of contracting states.
34. When beneficial owner is the government of other contracting state, including local authorities thereof, the central bank, any financial institutions controlled by that government or any resident of the other contracting state with respect to debt-claims, guaranteed or indirectly financed by institutions mentioned above.
35. For payments connected with copyrights, literary, artistic, and scientific activity, including payments connected with films for cinemas and films and tapes for TV.
36. When the beneficial owner is a company that directly or indirectly holds at least 20% of the capital of the company paying the dividends within the whole 365 day period that includes the day of the payment of the dividends (for the purpose of computing that period, no account shall be taken of changes of ownership that would directly result from a corporate reorganisation, such as a merger or divisive reorganisation, of the company that holds the shares or that pays the dividends).
37. When interest is paid to the government or local authorities.
38. Interest arising in a contracting state in respect of loans or credits made, insured, or guaranteed: 
    • in the case of Korea, by the Export-Import Bank of Korea, Korea Development Bank, Korea Finance Corporation (KoFC), Korea Trade Insurance Corporation (K-sure), Korea Investment Corporation, and any other financial institution, performing similar functions of a governmental nature, established and owned by the government of Korea, and
    • in the case of Poland, by the Korporacja Ubezpieczeń Kredytów Eksportowych S.A (KUKE S.A.), Bank Gospodarstwa Krajowego (BGK), and any other financial institution, performing similar functions of a governmental nature, established and owned by the government of Poland, and
    • paid to a resident of the other contracting state shall be taxable only in that other state.
39. If the recipient is the beneficial owner.
40. Interest paid to government or central bank.
41. When the beneficial owner is:
    • the government of the other contracting state, entity, or any governmental institution or
    • a company that is a resident of the other contracting state and at least 25% of its capital is directly or indirectly owned by the entities mentioned above.
42. If the following conditions are met:
    • When the beneficial owner is:
      • the government of the other contracting state, entity, or governmental institution or
      • a company that is a resident of the other contracting state and at least 25% of its capital is owned directly or indirectly by the entities mentioned above.
    • When interest is paid in connection with loans guaranteed by the entities mentioned above.
43. When interest is paid to the government, including the local authorities, to the central bank or any financial institution controlled by that government, or on loans guaranteed by that government.
44. If the following conditions are met:
    • When the beneficial owner is other contracting state (0%; 5%).
    • When interest is paid in connection with loans and credits granted by bank (0%).
45. If the dividends are paid to the beneficial owner being the resident of other contracting state.
46. Interest arising in a contracting state shall be exempt in that state if such interest is paid in respect of any loan or credit made by a resident of the other contracting state to the government of the first-mentioned state or apolitical subdivision or local authority or statutory body thereof. Interest arising in Poland shall be exempt from tax in Poland if it is paid to: (i) the government of Malaysia, (ii) the governments of the states, (iii) the local authorities, (iv) the statutory bodies, (v) the Bank Negara Malaysia (the Central Bank of Malaysia), and (vi) the Export-Import Bank of Malaysia Berhad (EXIM Bank). Interest arising in Malaysia shall be exempt from tax in Malaysia if it is paid to: (i) the government of Poland, (ii) any political subdivision or local authority of Poland, (iii) the statutory bodies, (iv) the National Bank of Poland, and (v) the Bank Gospodarstwa Krajowego in Poland (the Bank of National Economy of Poland).
47. (a revoked rule)
48. If the following conditions are met:
    • When the beneficial owner is:
      • a contracting state, a political subdivision, or a local authority, or The National Bank of Poland or Banco de Mexico or
      • a recognised pension or retirement fund provided that its income is generally exempt from tax in this state.
    • When interest:
      • is paid by any of entities mentioned above
      • arises in Poland and is paid in respect of a loan for a period not less than three years granted, guaranteed, or insured by Banco de Comercio Exterior, S.N.C., Nacional Financiera, S.N.C. or Banco National de Obras y Servicios Publicos S.N.C., or
      • arises in Mexico and is paid in respect of a loan for a period not less than three years granted, guaranteed, or insured by PKO S.A., Corporation of Credit Insurance, and Bank Handlowy in Warsaw.
49. If the following conditions are met:
    • When the beneficial owner is a bank or insurance company.
    • When interest is derived from bonds and securities that are regularly and substantially traded on a recognised securities market.
50. When dividends are paid to the company that directly holds at least 10% of the capital paying the dividends on the day they are paid and has done (or will do) so for an interrupted 24-month period from which that date falls.
51. When interest is paid:
    • by a resident of Pakistan to a Polish company or enterprise on loans approved by the Ministry of Finance of the government of Pakistan
    • to the State Bank of Pakistan from sources in Poland, or
    • to Bank Handlowy in Poland from the sources in Pakistan.
52. For payments of any kind received in consideration for the use of, or the right to use:
    • any copyright, patent, trademark, design or model, plan, secret formula, or process
    • an industrial, commercial, or scientific equipment, or
    • motion picture films and works on films and videotapes for use in connection with television.
53. For payments received in consideration of technical know-how concerning industrial, commercial, or scientific experience.
54. Interests paid in respect of:
    • a bond, debenture, or other similar obligations of the government, state, political subdivision, or local authority thereof or
    • a loan or credit extended, guaranteed, insured, or refinanced by:
      • Central Bank of Philippines - for Philippines
      • Central Bank of Poland - for Poland, or
      • other lending institutions as specified and agreed in letters of exchange between competent authorities of the contracting states.
55. When dividends are paid to the company that directly holds at least 25% of the capital stock of the company paying the dividends for an uninterrupted 24-month period prior to the payment.
56. If the following conditions are met:
    • When the debtor of such interests is the government, a political subdivision, or local authority.
    • When the interest is paid to the government of other contracting state, a political subdivision, or local authority thereof, or an institution or body in connection with any financing granted by them under an agreement between the governments of the contracting states.
    • Loans or credit made on central banks of contracting states and any other financial institution controlled by the state and financing external business that may be agreed upon between the competent authorities of the contracting states.
57. Interests paid to government, administrative, territorial, or the central bank.
58. Dividends paid by the company that is a resident of one contracting state to the benefit of the government of the other contracting state.
59. Interest paid to the government.
60. Interests paid to government, local authorities, or the central bank.
61. Interest arising in a contracting state and derived by the government of the other contracting state, including local authorities, a central bank, or any financial institution controlled by that government, shall be exempt from tax in the first contracting state.
62. When the recipient of a royalty that is a resident of a contracting state is a beneficial owner of the payment.
63. If the following conditions are met:
    • When recipient is a contracting state, or one of its local authorities, or the statutory body of either, including the central bank; or when interests are paid by a contracting state, or one of its local authorities, or the statutory body of either.
    • Such interest is paid in respect of any debt-claim or loan guaranteed, insured, or supported by a contracting state or another person acting on state’s behalf.
64. Payments payable to contracting state or a state-owned company in respect of tape or films.
65. Royalties made as consideration, for the alienation, or the use of, or the right to use, any copyright of literary, artistic, or scientific work, excluding cinematographic films or tapes for television or broadcasting.
66. When the beneficial owner is the government or a government institution of the other contracting state or a company that is a resident of the other contracting state and at least 25% of its capital is directly or indirectly owned by the government or a government institution.
67. When the beneficial owner of the dividends is a company that is a resident of the other contracting state and holds at least 10% of the capital of the company paying the dividends on the date the dividends are paid and has done so or will have done so for an uninterrupted 24-month period in which that date falls.
68. When interests are paid: 
    • to the government, territorial unit, local authority, or central bank, or any entity owned by the government
    • a loan granted, insured, or guaranteed by a governmental institution for the purposes of promoting exports
    • the sale on credit of any industrial, commercial, or scientific equipment, or
    • any loan granted by a bank.
69. When the beneficial owner is a company that directly holds at least 10% of the outstanding shares of the voting stock of the company paying the dividends.
70. When the beneficial owner is a company that directly holds at least 20% of the capital of the company paying the dividends.
71. When the beneficial owner is:
    • the government or a local authority or
    • the National Bank of Poland or the Central Bank of Uzbekistan Republic.
72. For payment of any kind, received in consideration, for the use of, or the right to use:
    • any patent, design or model, plan, secret formula, or process or
    • any information concerning industrial or scientific experience.
73. Treaty allows application of the domestic tax rate.
74. As long as Iceland does not levy tax at source of income, interest is taxable only in the contracting state of which the beneficial owner of the interest is a resident.
75. When interest is paid to the government, a political subdivision, or a local authority in connection with:
    • a loan granted, insured, or guaranteed by a governmental institution for the purposes of promoting exports
    • a sale on credit of any industrial, commercial, or scientific equipment
    • any loan granted by a bank
    • in respect of a bond, debenture, or other similar obligations of the government of a contracting state, or of a political subdivision or local authority thereof, or
    • to the other contracting state, or to a political subdivision or local authority thereof.
76. When the tax is charged by Poland.
77. When the dividends are paid by a company resident of Poland to a resident of Malta that directly holds at least 10% of the capital company paying the dividends on the date they are paid and has done so or will have done so for an uninterrupted 24-month period in which that date falls.
78. When the recipient is the beneficial owner.
79. According to the Protocol of 22 March 2012, which has entered into force, the maximum WHT rate on interest paid is 5%. However, when interest is paid to the government, including political sub-divisions and local authorities, the central bank, or any statutory body of the state with respect to loans or credits made or guaranteed by the government of the other state, including political sub-divisions and local authorities, the central bank, or any statutory body of the other state, it shall be exempt from tax in the first mentioned contracting state.
80. There is a WHT exemption on interest payable: (i) on any loan or credit granted by a bank; (ii) to the government of the other contracting state, including any political subdivision or local authority thereof, the central bank, or any financial institution owned or controlled by that government; or (iii) to a resident of the other state in connection with any loan or credit guaranteed by the government of the other state, including any political subdivision or local authority thereof, the central bank, or any financial institution owned or controlled by that government. The maximum rate of WHT on interest is 5%.
81. The maximum WHT rate on royalties is 10%.
82. The lower rate applies to fees for technical services.
83. When interest is paid: (i) by the government of a contracting state, administrative subdivision, or local authority thereof; (ii) to the government of the other contracting state, administrative subdivision, or a local authority thereof; or (iii) to the central bank of the other contracting state or a corporate body (including financial institution) controlled or owned by that state, a political or administrative subdivision, or local authority thereof.
84. If the recipient of the interest is the beneficial owner and interest is paid: (i) to the Republic of Poland or the State of Qatar; (ii) on a loan of whatever kind granted, insured, or guaranteed by a public institution for purposes of promoting exports; (iii) in connection with the sale on credit of any industrial, commercial, of scientific equipment; or (iv) on any loan of whatever kind granted by a bank.
85. If the beneficial owner of interest is either (i) a bank, (ii) an insurance company, (iii) an enterprise substantially deriving its gross income from the active and regular conduct of a lending or finance business involving transactions with unrelated persons, where the enterprise is unrelated to the payer of the interest (for the purpose of this clause, the term 'lending or finance business' includes the business of issuing letters of credit, providing guarantees, or providing credit card services), (iv) an enterprise that sold machinery or equipment, where the interest is paid with respect to indebtedness arising as part of the sale on credit of such machinery or equipment, or (v) any other enterprise, provided that in the three taxable years preceding the taxable year in which the interest is paid the enterprise derives more than 50% of its liabilities from the issuance of bonds in the financial markets or from taking deposits at interest and more than 50% of the assets of the enterprise consist of debt-claims against unrelated persons.
86. When the interest is derived from bonds or securities that are regularly and substantially traded on a recognised securities market.
87. The Protocol of 22 March 2012 has not changed the WHT rate in relation to royalties; however, the beneficial owner clause was introduced. Additionally, the new DTT amends the definition of ‘royalties’.
88. When the beneficial owner is a company (other than a partnership) that directly holds at least 10% of the capital of the company paying the dividends, where such holding is being possessed for an uninterrupted period of no less than two years and the dividends are declared within that period.
89. When royalties are paid for the use of, or right to use, industrial, commercial, or scientific equipment.
90. When the beneficial owner is a resident of the other contracting state and directly holds at least 10% of the capital of the company paying the dividends within the whole period of 365 days that includes the day of payment of dividends (for the purpose of calculating this period, no ownership changes directly resulting from reorganisations, such as a merger or division of a company that owns stock or shares of the company paying dividends, will be taken into account).
91. If the capital of the Polish company paying the dividend is at least ⅓ part owned by the Pakistan company receiving the dividend within the whole period of 365 days that includes the day of payment of dividends (for the purpose of calculating this period, no ownership changes directly resulting from reorganisations, such as a merger or division of a company that owns stock or shares of the company paying dividends, will be taken into account). The condition of length of ownership period applies to dividends starting from the beginning of 2022.
92. When interest is paid to the government, a political subdivision, or a local authority in connection with:
    • the recipient is state, its central bank, territorial unit, local authority, or statutory body
    • the interest was paid by the state of origin, its territorial unit, local authority, or statutory body
    • the recipient is an institution wholly or mainly owned by the contracting states, which will be periodically determined by the competent authority
    • the recipient is the Government of Singapore Investment Corporation Pte Ltd., or
    • the recipient is Bank Gospodarstwa Krajowego.
93. When the beneficial owner is a company that directly holds at least 25% of the capital of the company paying the dividends.
94. When the recipient of payment is the beneficial owner and is a related party of the paying company.
95. When interest is paid:
    • to the other territory, its territorial units, local authorities, the central bank, or any institution wholly owned or controlled by that other territory,
    • on a loan or a credit granted, guaranteed, or insured by a recognised bank for commercial cooperation of the other territory for purposes of promoting exports.
96. When the beneficial owner is a company (other than a partnership) that directly holds at least 25% of the capital of the company paying the dividends within the whole period of 365 days that includes the day of payment of dividends (for the purpose of calculating this period, no ownership changes directly resulting from reorganisations, such as a merger or division of a company that owns stock or shares of the company paying dividends, will be taken into account).
97. When the beneficial owner is a company (other than a partnership) that directly holds at least 10% of the capital of the company paying the dividends within the whole period of 365 days that includes the day of payment of dividends (for the purpose of calculating this period, no ownership changes directly resulting from reorganisations, such as a merger or division of a company that owns stock or shares of the company paying dividends, will be taken into account).
98. Based on the Protocol to the DTT applicable from 1 January 2023, dividends can be exempt from taxation when the beneficial owner is a recognised pension fund of the other contracting state that is generally exempt from tax in that other contracting state.