Client Overview
The client is a Polish branch of a foreign company operating in a trading and service model, which:
- operates in both domestic and international markets,
- makes numerous cross-border payments,
- engages in transactions such as import of services, intra-Community acquisitions (ICA), and royalty payments,
- maintains its own accounting in an internal financial system.
Our task was to provide ongoing withholding tax (WHT) analysis and support in corporate income tax (CIT) settlements.
What did the WHT verification involve?
The objective of the project was to implement a process enabling:
- systematic WHT analysis, including identification of transactions and WHT obligations,
- verification of obligations arising from Article 21 of the CIT Act,
- analysis of the possibility of applying exemptions or preferential rates,
- verification of due diligence documentation,
- preparation of periodic recommendations for the client,
- preparation of annual CIT-10Z returns and IFT information forms.
Step 1: Analysis of foreign payments
The first step involved a detailed review of foreign payments and accounting records.
What did we analyze?
- purchase invoices (import of services, ICA),
- payments to foreign contractors,
- accounting entries in the client’s financial and accounting system.
Objective: to identify transactions that may be subject to withholding tax (WHT).
Step 2: Identification of transactions subject to WHT
At this stage, we addressed the key question: When is a payment subject to withholding tax?
Selected transactions were analyzed in terms of:
- the catalogue of payments covered by WHT,
- provisions of Article 21 of the CIT Act,
- the nature of services and the obligations of the withholding agent.
Additionally, we collected:
- invoice scans,
- contractor data,
- business documentation.
Step 3: Analysis of regulations and double taxation treaties
The next step involved the proper WHT analysis.
This included:
- determining whether a given payment is subject to WHT,
- analyzing the relevant double taxation treaty (DTT),
- determining the applicable withholding tax rate,
- verifying the possibility of applying an exemption or reduced rate.
This is the key stage that determines whether withholding tax must actually be collected.
Step 4: Due diligence in WHT – a practical approach
One of the most important elements was verifying due diligence in WHT. We examined, among others:
- valid tax residency certificates of contractors,
- beneficial owner (BO) status,
- information on the actual nature and course of transactions,
- completeness of documentation.
Based on this, we assessed whether it is possible to apply a WHT exemption, a reduced rate under a DTT, and safely settle the withholding tax.
Step 5: Recommendations and settlement of withholding tax
At the final stage, the client received periodic reports including:
- a list of transactions subject to WHT,
- the appropriate method of taxation,
- risk assessment,
- recommended actions.
Additionally, we provided support in:
- preparing CIT-10Z returns,
- preparing IFT information for non-residents,
- ongoing settlement of withholding tax.
Results of implementing the WHT process
Thanks to systematic WHT analysis, the client:
- gained full control over foreign payments,
- correctly identifies tax obligations,
- reduced the risk of penalties,
- organized documentation,
- implemented an effective due diligence process,
- ensures timely fulfillment of reporting obligations (CIT-10Z, IFT),
- benefits from ongoing expert WHT support.
Ongoing verification of withholding tax (WHT) is a key element of safe operations for companies active in international markets. This approach not only ensures correct WHT settlement but also continuously reduces tax risks.
Conclusions: why ongoing WHT verification is crucial
This case study shows that, in practice, withholding tax requires continuous monitoring rather than a one-time review.
Regular WHT verification allows companies to:
- avoid costly errors,
- safely apply tax preferences,
- be prepared for potential audits.
