On 3 July 2025, the Ministry of Finance issued tax clarifications on applying the Beneficial Owner (BO) clause for withholding tax (WHT) purposes. This document is of crucial importance for entities paying dividends, interest or royalties to foreign recipients.

Definition of the beneficial owner

For clarity, under the Polish law a Beneficial Owner is an entity satisfying all of the following criteria:

1. It receives the payment for its own benefit — including having discretion over its use and bearing the economic risk of losing it (or part of it).
2. It does not act as an intermediary, agent, fiduciary, or any entity obligated to forward all or part of the payment to another entity.
3. If the payment is linked to a business activity, the entity must have a genuine establishment in its country of residence; the nature and scale of its activities must be considered in evaluating that establishment.

The Explanatory Notes indicate that criteria (1) and (2) should be treated functionally as a single combined test.

Key points of the Explanatory Memorandum

• It is indicated for which types of payments BO verification is necessary:
  • In the Ministry of Finance’s view, BO verification is required for passive payments — including dividends (note: the Supreme Administrative Court holds a divergent opinion).
  • BO verification is necessary both when applying statutory exemptions (for dividends, interest and royalties) and preferences under double tax treaties (DTAs, even if the DTA does not literally refer to the BO clause.
  • BO verification is not necessary for payments for intangible services.
• In terms of intermediary entities, it is indicated:
  • The beneficial owner must not be an entity substituted solely for the onward transfer of payments.
  • The BO should have full authority and control over the funds received.
  • Being an intermediary is not, in itself, an intermediary payment resulting from the systemic rules of the respective country for groups of companies (such as, for example, the profit transfer agreements in the German legal system).
• With respect to the requirement of genuine economic activity:
  • When assessing this requirement, one should examine the entity’s asset-personality substance (i.e. the company’s tangible and organizational setup).
  • The Explanations specify scenarios in which this requirement may fail — for example, when responsibilities or competencies are not allocated to individual members of management.
  • The test of genuine economic activity must be applied in the context of a specific payment. A relatively modest level of activity may qualify as genuine if it suffices for that payment — more is not always required.
  • The threshold for asset-personality substance is lower for so-called holding companies than for operating (active) companies.”
• The scope of activities required for so-called due diligence is described, including:
  • Different scopes apply for affiliated and non-affiliated entities.
  • In the case of related entities, it is not sufficient to obtain statements and certificates – it is necessary to verify other available documents that confirm that each element of the definition of beneficial owner is met.
  • For unrelated parties, it is only possible to obtain a certificate of residence and a declaration that the beneficial owner condition is met.
• If the direct recipient is not the BO, it is possible to use the look-through approach (LTA) concept – this concept is described extensively.
• The Explanatory Notes introduce the “Presumption of fulfilment of the BO condition under the PS Directive”. They indicate that it is not necessary to examine the BO condition in relation to a profit distribution payment that is subject to at least one taxation within the EU.

Our position and recommendations
These Explanations offer substantive guidance for analyzing specific structures and payments. Based on them, one can:

• evaluate the level of risk in a given scenario, and
• develop and implement risk-mitigation strategies.

This is especially relevant for holding company structures.

We concur with the Ministry of Finance’s view that one should scrutinize the actual flow of funds and the functions performed by entities. The introduced concept of a ‘presumption of BO status under the PS Directive’ is novel and may be advantageous to payers. Because it has not yet been tested in practice, it merits careful, case-specific examination.

We recommend reviewing your WHT-related documentation — in particular contracts, corporate functions within the group, and actual cash flows.

In ongoing audits or tax disputes, consider whether the new clarifications may support the taxpayer’s case — in certain respects they are more precise than earlier interpretations by authorities.

How can we help?
We can undertake a detailed analysis of the impact of the Clarifications on your payments subject to WHT. We prepare structure reviews, support you in WHT inspections and in disputes before the administrative courts. If you would like to discuss the impact of the new clarifications on your situation – please do not hesitate to contact us