An increasing number of individual rulings and administrative court judgements point to a clearly more restrictive approach to withholding tax (WHT) on payments for cloud services and certain software licences. In practice, this means that payments which for years were regarded as neutral from a WHT perspective may now be classified as taxable amounts.
Particular controversy surrounds the classification of fees for ‘cloud computing’ services as remuneration for the use of so-called industrial equipment. Tax authorities are increasingly taking the view that making computing power or storage space available to a client constitutes the provision of technical infrastructure for use, which may result in an obligation to withhold WHT. This position is also reflected in some of the most recent case law, including the judgment of the Supreme Administrative Court of 7 March 2025 (II FSK 1598/24).
Similar doubts also arise in relation to software licences. In practice, the authorities are increasingly questioning whether certain tools used in business activities can be regarded as end-user licences, which, as a rule, fall outside the scope of withholding tax.
For businesses, however, it is the practical implications of this approach that matter most. In many cases, foreign suppliers apply gross-up clauses under which they expect to receive full payment regardless of tax obligations in Poland. This means that, should the tax authorities challenge the tax returns, the economic burden of the tax may be shifted onto the Polish purchaser, including in respect of payments made in previous years.
Consequently, businesses using foreign cloud services or purchasing software from foreign suppliers should verify the nature of the payments made, analyse the contracts entered into, gather the relevant documentation (in particular certificates of residence) and assess whether the WHT procedures applied are in line with the current practice of the tax authorities.
If your organisation uses foreign cloud services or purchases software licences, we invite you to contact us to carry out an analysis of your withholding tax obligations.