Applying the look-through approach when paying dividends to a holding company

The Director of the National Fiscal Information (so-called Director of KIS) issued an individual tax ruling with the reference no 0111-KDIB2-1.4010.128.2022.2.AR, confirming the possibility to apply the withholding tax exemption for dividends paid to a foreign holding company. According to the position of the Director of KIS, the look-through approach may be applied to verify the conditions set out in the EU Parent-Subsidiary Directive (EU Directive).


  • According to the CIT Act, when paying dividends to a foreign entity, Polish payers are required to withhold tax at the rate of 19%, or may apply the WHT exemption under EU Parent-Subsidiary Directive (implemented in the Article 22(4) of the CIT Act) or the WHT reduced rate provided for in Double Tax Treaties.
  • In particular, the application of the EU directive’s exemption requires due diligence in verifying that the conditions for the application of preferential taxation are met (including direct ownership of at least 10% of shares in a Polish company for at least two years).


  • According to the presented background, the Polish company intended to pay dividend to the holding company (the parent company), which would further transfer it to the grandmother company. The parent company had no business substance (i.e. employees, assets, no operating activity, etc.), while the grandmother company did.
  • In issued tax ruling, the tax authority indicated that the Polish company have to examine who is the beneficial owner of the dividend payment when applying the WHT exemption under EU Directive. This approach is in line with the previous negative line of interpretation.
  • However, interestingly, the tax authority confirmed the possibility of using a look-through approach when paying dividends to a foreign company. The tax office agreed that condition provided in the EU Directive (i.e. of holding at least 10% of shares (stocks) continuously for at least 2 years) will be met if the beneficial owner of the payment meets these conditions with respect to the intermediary company, and this entity with respect to the Polish company.


The tax ruling issued by the Director of KIS is a breakthrough for taxpayers, as it confirms the possibility of applying the look-through approach to dividend payments, which has so far only been confirmed for interest or royalty payments.

On the one hand, the presented tax ruling is in line with the negative approach of the tax authorities, according to which, in the case of dividend payments, the beneficial owner of the payment should be examined (please note that this position is different from that presented by the administrative courts).

On the other hand, the tax authority confirmed that in such a case it should be verified whether the beneficial owner of the payment (the grandmother company) meets the conditions for applying the WHT exemption in relation to the intermediary entity (the parent company), and this in relation to the Polish payer. However, it should be noted that this approach deviates from the literal wording of the implemented CIT regulations, according to which the company receiving the dividend should hold “directly” shares in the capital of the company paying the dividend.

The aforementioned approach of the Director of KIS may have important implications for Polish entities paying dividends to holding companies, which often, due to a lack of business substance, may not be considered the beneficial owner of the dividend and thus not meet the conditions for applying the WHT exemption. However this is the first such tax ruling with such a position presented in relation to dividend payments, therefore it is necessary to observe how the interpretation line will develop further.

If you have any questions about tax ruling or other withholding tax issues, feel free to contact our experts:

Łukasz Bączyk
Head of Tax

Marta Skrodzka
Tax Manager

Paulina Malendowicz
Senior Tax Consultant

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