Poland: New withholding tax procedures for domestic securities

Following our Announcement A12079, dated 13 April 2012, we hereby provide information about the withholding tax procedures applicable for income (interest, dividends) and redemption from Polish domestic securities paid as of

15 May 2012

Background

Further to the implementation of the omnibus accounts in the local market, all Polish assets eligible in Clearstream Banking¹ (CBL) will be deposited on our new omnibus account with Bank Handlowy w Warszawie SA (Bank Handlowy), our depository in Poland. As a result, the nominee concept will be recognised within the new account structure. The possibility to apply tax relief will depend on the status and residency of the final beneficial owners of the securities.

Withholding tax rates to be applied

According to Polish legislation, the following maximum standard rates are applicable for Polish securities on undisclosed positions:

• Debt securities (including T-bills and zero coupon bonds) 20%
• Equities 19%

Eligibility for tax relief

Upon submission of the required documentation within the prescribed deadlines, the following categories of final beneficial owner can enjoy reduced rates of withholding tax for the indicated security types:

Debt securities:

• Beneficial owners qualifying for the benefit of a reduced rate of withholding tax in accordance with the Double Taxation Treaty (DTT) between their country of residence and Poland. The maximum rate of withholding tax is defined in the relevant DTT attached below.
• Banking entities: The DTTs signed by Poland with Austria, Belgium, Finland, Germany, Ireland, Netherlands, Norway, Qatar and United Kingdom grant tax exemption from withholding tax to banking entities that have their fiscal residency in those countries.
  Exception: DTT Belgium – Poland states that tax exemption cannot be applied to securities issued in bearer form.
• Eligible investment and pension funds residents of European Union (EU)/European Economic Area (EEA) countries: A tax exemption is available. The conditions to be met are explained below.
• Central Banks: A tax exemption is available if granted by the DTT signed between Poland and the Central Bank’s country of residence.
• Supranational/international organisations: There are no particular Polish regulations granting tax exemption for supranational/international organisations entities. However, agencies like UN, EBRD, NATO where Poland is a member are exempt from taxation in Poland.
• Beneficial owners that are legal entities resident in Poland for tax purposes are paid gross without any deduction of tax. Such beneficial owners are under the obligation to declare their income and pay their tax directly to the Polish Tax Authorities.
• Individual beneficial owners resident in Poland for tax purposes may obtain the 19% reduced tax rate.
• Individual beneficial owners not resident in Poland and not eligible to benefit from a DTT reduced tax rate, may also obtain the 19% reduced tax rate.

Note: Beneficial owners that are legal entities not resident in Poland and are not eligible to benefit from a DTT reduced tax rate, are taxed at the maximum tax rate of 20%.

Equities:

• Beneficial owners qualifying for the benefit of a reduced rate of withholding tax in accordance with the Double Taxation Treaty (DTT) between their country of residence and Poland. The maximum rate of withholding tax is defined in the relevant DTT attached below.
• Eligible investment and pension funds residents of EU/EEA countries: A tax exemption is available. The conditions to be met are explained below.
• Central Banks: A tax exemption is available if granted by the DTT signed between Poland and the Central Bank’s country of residence.
• Supranational/international organisations: There are no particular Polish regulations granting tax exemption for supranational/international organisations entities. However, agencies like UN, EBRD, NATO where Poland is a member, may be exempt from taxation in Poland.
• EU investors holding, for 24 months continuously², at least 10% of the share capital distributed by a Polish Issuer, may benefit from tax exemption on the respective dividends. This exemption is granted by the Polish Act of Corporate Income Tax and is related to implementation into Polish law of EU directive 2003/123/EC.
• Investment and pension funds resident in Poland for tax purposes: A tax exemption is available.

Eligibility criteria for EU/EEA Funds

According to the Polish domestic legislation, tax exemption is available if the following criteria are met:

EU/EEA Investment funds

• The investment fund is taxed in its home country on all income received.
• The investment fund is collectively investing (money collected) into securities, money market instruments and other property rights (by offering participation units) and it is the only business it does.
• The investment fund conducts its operation based on the permit received from the authorities relevant for its seat or based on a notification submitted to such authorities (in a case of specific kinds of closed-ended funds) and it is subject to the authorities’ supervision.
• The investment fund has an appointed custodian bank safekeeping its securities.
• The investment fund is managed by entities which run their activity based on the authorisation from the competent financial supervision authority over the financial market in the country of their registered office.

EU/EEA Pension funds

• The pension fund is taxed in its home country on all income received.
• The pension fund conducts its operation based on the permit received from the authorities relevant for its seat and it is subject to the authorities’ supervision.
• The pension fund has an appointed custodian bank running registrar of its assets.
• The only business the pension fund does is the collection of money and their investment.
• Distribution of funds for such pension fund participant is possible only when the pension age is reached.

Applicable withholding tax procedures

Relief of withholding tax is available to eligible beneficial owners through CBL by means of relief at source, quick refund (for interest and redemption only) or standard refund procedures, as described in the following sections.

Relief at source

In order to benefit from relief at source on income/redemption from Polish securities, customers will need to ensure that we receive the following documents (see attached versions below) by the following deadlines:

• Original certificates: at the latest four business days before the respective income/redemption record date by 10:00 CET
• List of beneficial owners: at the latest on the respective income/redemption record date by 10:00 CET.

Important Note: There is no consolidated record date in Poland. Record date may differ from one type of security to another and also from one income/redemption payment to another.

To obtain relief at source, the following documentation must be submitted by:

• All beneficial owners regardless their residency and status and applying for relief at source on all types of Polish securities:

One-Time Certificate for Polish Securities

The original, completed and duly signed by the customer and specifying, among other things, whether or not the customer is the sole beneficial owner of all the Polish securities held in the account, must be provided once before the first income/redemption payment; it remains valid until revoked. Any changes to any details must be communicated in a new One-Time Certificate (see attached at the end of this Announcement).

List of Beneficial Owners

The List of Beneficial Owners (see zip file attached at the bottom of this announcement) indicates complete data of each beneficial owner, the applicable withholding tax rate, the common code or ISIN, the nominal amount or number of securities and the tax rate to be applied; it must be provided before each interest payment.

Note: For beneficial owners that are Polish residents no further documentation is required in order to obtain a tax exemption (Polish legal entities on interest/redemption, Polish funds on equities) or 19% tax rate (Polish individuals on interest/redemption).

• In addition, by all non-resident beneficial owners applying for relief at source on all types of Polish securities (except for beneficial owners being supranational/international organisations):

Certificate of Residence

An original Certificate of Residence (see model attached at the end of this Announcement) must be issued by the beneficial owner’s local tax authorities in the year for which it is to be used. It must include the beneficial owner’s full name and address and it remains valid until the end of the respective calendar year.

• In addition, specific documentation must be submitted by the following final beneficial owners depending on their status and also on the type of security:

Beneficial owner being a banking entity resident of Austria, Belgium, Finland, Germany, Ireland, Netherlands, Norway, Qatar and United Kingdom qualifying for tax exemption on interest and redemption only

Specific Statement for banking entities

The forms are specific per each impacted country (see attached at the end of this Announcement). They must be provided once, duly notarised and apostiled in the beneficial owner’s country of residence.

Investment fund resident of EU/EEA country and qualifying for the benefit of tax exemption on interest, dividends and redemption

Investment Fund Statement

This specific form (see attached at the end of this Announcement) must be provided once, duly notarised and apostiled in the beneficial owner’s country of residence.

Pension fund resident of EU/EEA country and qualifying for the benefit of tax exemption on interest, dividends and redemption

Pension Fund Statement

This specific form (see attached at the end of this Announcement) must be provided once, duly notarised and apostiled in the beneficial owner’s country of residence.

EU investors qualifying for the benefit of tax exemption on dividends only

Self-Certification

The original, completed and duly signed by the beneficial owner and specifying, among other things, that it holds for minimum 24 months continuously at least 10 % of the share capital distributed by a Polish Issuer. Furthermore, the beneficial owner acknowledges and accepts the responsibility to pay the due tax amounts to the Polish Tax Authorities in case the equities are sold before the end of the mandatory holding period.

Additional documentation

In addition to above, further documentation may be required by the issuer to prove the eligibility for tax exemption granted by the Polish Act of Corporate Income Tax implementing the EU directive 2003/123/EC.

Supranational/international organisations qualifying for tax exemption on interest, dividends and redemption

SWIFT MT599 /CreationOnline free-format message

By the certification deadline indicated above, the customer must send us a SWIFT MT599 or CreationOnline free-format message indicating that tax exemption is required for a supranational/international organisation and specifying the name of the entity. Based on this information and as there is no exhaustive list of eligible institutions in Poland, applications are treated on a case-by-case basis. The confirmation of eligibility must be obtained once from our Polish depository and remains valid for all future payments. For each impacted payment, the customer should mention in the last column of the List of Beneficial Owner the supranational/international status of the respective entity.

Quick refund

A quick refund of withholding tax is available for interest and redemption only, for beneficial owners eligible for tax relief if the required certification has not been provided within the relief at source deadline.

The eligibility criteria and certification requirements are the same as for relief at source (see above).

Note: There is no quick refund offered for equities by the Polish market.

Deadline for quick refund

• Original certificates: at the latest four business days before the last business day of the month when the interest was paid by 10:00 CET
• List of beneficial owners: at the latest one business day before the last business day of the month when the interest was paid by 10:00 CET.

Receipt of refunded amounts

The estimated time for receiving a quick refund is the first week of the month following the month when the interest/redemption was paid.

However, as the quick refund procedure is based on market practice, we will assist customers with quick refund applications but we can only remit to customers' accounts the amounts that we receive.

Standard refund

A standard refund of withholding tax is available for beneficial owners that are eligible for tax relief and not resident in Poland for tax purposes, if the required certification has not been provided within the relief at source or quick refund deadlines.

In order to benefit from a standard refund of withholding tax on income/redemption from Polish securities, customers must ensure that we receive the following documents :

• Certificate of Residence

An original Certificate of Residence (see model attached at the end of this Announcement) must be issued by the beneficial owner’s local tax authorities including the beneficial owner’s full name and address. The Certificate of Residence must cover the relevant payment date.

• Declaration of not being engaged in a commercial activity in Poland

The Declaration of not being engaged in a commercial activity in Poland (see attached at the end of this announcement) must be provided duly notarised and apostiled in the beneficial owner’s country of residence. It must be submitted once and remains valid for the one or more years that are completed in the form.

• Power of Attorney from beneficial owner to Bank Handlowy w Warszawie SA

A Power of Attorney (see attached at the end of this announcement), completed and signed by the final beneficial owner and duly notarised and apostiled in the beneficial owner’s country of residence must be provided in order to authorise Clearstream Banking's depository to reclaim withholding tax on customer's behalf. It must be submitted once and remains valid until revoked.

• Credit Advice

Identifies income payment details including the security type, gross amount of payment, date of payment and amount of tax withheld. It is required from each intermediary financial institution between the beneficial owner and Clearstream Banking. For example, if the beneficial holder is the customer’s client, the Credit Advice (see model attached at the end of this announcement) from the customer to the beneficial owner must be provided along with the Credit Advice received by us. The Credit Advice must reconcile with the information in the Letter of Request for Reclaim.

• Letter of Request for Reclaim

The Letter of Request to Clearstream Banking for Reclaim of Polish Withholding Tax (see attached at the end of this announcement) authorises us to process the reclaim with the Polish Tax Authorities on the customer’s behalf. It must be provided to us, completed and duly signed by the customer, for each reclaim application.

In addition, depending on the status and residency of the final beneficial owner, one of the following documentation must be submitted:

• Specific Statement for banking entities

The forms are specific per each impacted country (see attached at the end of this Announcement). They must be provided once, duly notarised and apostiled in the beneficial owner’s country of residence.

• Investment Fund Statement

This specific form (see attached at the end of this Announcement) must be provided once, duly notarised and apostiled in the beneficial owner’s country of residence.

• Pension Fund Statement

This specific form (see attached at the end of this Announcement) must be provided once, duly notarised and apostiled in the beneficial owner’s country of residence.

• Additional documentation

For the purposes of the tax procedure described above, the tax authority or/and the Polish issuers may, at their own discretion, request additional documentation to prove that the beneficial owner is indeed the beneficial owner of the securities and is eligible to obtain tax relief.

Deadline for standard refund

For income/redemption paid as of 1 January 2009, the withholding tax reclaim must be filed with the Polish Tax Authorities no later than five years from the end of the calendar year in which the relevant withholding tax was paid.

The deadline by which we must receive the documentation for a standard refund application is at the latest two months before the statutory deadline. We will process all standard refund applications received after this deadline on a “best efforts” basis. However, in such a case, we will apply an extra charge and accept no responsibility for forms that have not reached the Polish Tax Authorities by the date considered to be the statute of limitations deadline.

With respect to tax reclaims in general, customers are reminded that we accept no responsibility for their acceptance or non-acceptance by the tax authorities of the respective country. It is the customer’s responsibility to determine any entitlement to a refund of tax withheld and to complete the forms required correctly and calculate the amount due.

Receipt of refunded amounts

The estimated time for receiving a standard refund is four months from the date on which the standard refund application was received by the Polish Tax Authorities, although this can vary depending on when the application was filed and the complexity of the information supplied in the reclaim form.

Translation of documentation

According to Polish legislation, all documentation must be officially translated into Polish. Furthermore, as for each relief at source, quick or standard refund application the original or notarised copy must be submitted to the Polish issuers or tax authorities, the copies of the certificates must be notarised in Poland. Our Polish depository will take care of the translation and notarisation and the fees will be deducted from your account as out-of-pocket charges.

Capital gains tax and stamp duty

Capital gains tax and stamp duty on Polish securities held in Clearstream Banking are not withheld through Clearstream Banking. Capital gains tax or stamp duty may however be payable on specific gains or transactions. It is the responsibility of the beneficial owners subject to capital gains tax or stamp duty to report and include their holdings and gains in their annual tax declaration. We do not assist in this regard and have no direct or indirect liability towards the Polish Tax Authorities in relation to such obligations. Please consult your tax advisor for further information.

Further information

For further information, please contact the Clearstream Banking Tax Help Desk on:

or Clearstream Banking Customer Service or your Relationship Officer.

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1. Clearstream Banking refers to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, Luxembourg and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).
2. The 24 months required holding period can be before the impacted dividend payment but also after it. If the investor received dividends gross but sells the equities before the end of the mandatory holding period, he is under the obligation to pay the tax amount to the Polish Tax Authorities.