Polish Supreme Administrative Court: No need to verify beneficial owner for dividend withholding tax exemption

What was the case about?

The case concerned a Polish company paying dividends to its shareholder based in Germany. The Polish tax authority argued that, following changes in the law, it was also necessary to verify whether the dividend recipient was the beneficial owner of the income. However, this view was first challenged by the Regional Administrative Court in Łódź, and the case was subsequently brought before the Supreme Administrative Court.

Court decision

The Supreme Administrative Court ruled that, when paying dividends, the payer (the company distributing the dividends) is only required to verify those conditions that are explicitly stated in the relevant provisions of the law. The court emphasized that the law does not impose an obligation to determine whether the company receiving the dividends is their beneficial owner.

Who is a beneficial owner?

According to the law, a beneficial owner is a person who actually benefits from the income (not acting as an intermediary), can decide on its use, and bears the associated economic risk. If the income is related to business activities, the recipient must carry out genuine business activity in the country of its residence.

This decision of the Supreme Administrative Court means that, when paying dividends within Poland, the EU, or the EEA, companies do not have to additionally prove that the recipient is the beneficial owner. It is sufficient to meet the conditions explicitly stated in the law. The written reasoning of the judgment is still awaited.