A Mauritius Company and Polish Withholding Tax
Mauritius Taxation, WHT, and the Latent Trap of Article 26(1m) of the Polish CIT Act
Individual Tax Ruling of 20 February 2026 (0111-KDIB1-2.4010.678.2025.1.BD)
Robert Nogacki | Kancelaria Prawna Skarbiec
I. Share Redemption by a Mauritius Shareholder — Introduction
A voluntary share redemption for consideration is among the most elementary transactions in Polish corporate law. The mechanics are straightforward: a shareholder disposes of shares to the company for the purpose of their cancellation, and the company remits the agreed consideration. When, however, the sole shareholder is a Mauritius company—a jurisdiction appearing on Poland’s statutory tax haven list—the transaction enters the crossfire of two parallel withholding tax regimes whose interaction is neither obvious nor widely understood.
The individual tax ruling issued by the Director of National Tax Information on 20 February 2026 resolves the matter favourably for the taxpayer: no withholding tax obligation arises. Yet the analytical path to that conclusion is considerably more intricate than the result might suggest—and it exposes a regulatory trap that is, in practice, routinely overlooked in transactional due diligence.
II. A Polish Limited Liability Company with a Mauritius Shareholder — Facts
The applicant is a Polish limited liability company (spółka z ograniczoną odpowiedzialnością, hereafter “the Company”), established in 2006 and wholly owned by a Mauritius Ltd. The shareholder maintains no registered office, seat of management, permanent establishment, or direct business operations within the territory of Poland; it is subject exclusively to limited tax liability under Article 3(2) of the CIT Act.
Two transactional variants are under consideration: (i) a voluntary redemption of shares for cash consideration accompanied by a reduction in the Company’s share capital, and (ii) a voluntary redemption financed from retained earnings without any corresponding capital reduction. In both scenarios, the aggregate consideration exceeds PLN 2 million. The Company does not qualify as a “real estate company” within the meaning of Article 4a(35)(b) of the CIT Act.
A threshold observation of considerable practical significance: Poland and the Republic of Mauritius are not party to a bilateral double taxation convention (in contrast, for example, to the treaty network with Cyprus). The entire analysis therefore rests exclusively on domestic statutory provisions, unmediated by any treaty-based safety net. The absence of a treaty also precludes bilateral tax information exchange.
III. Taxation of Share Redemption — Income Characterisation and Withholding Tax
The dispositive question is one of income characterisation. The Polish CIT Act draws a distinction—subtle in form but decisive in consequence—between two categories of capital gains income that are, notwithstanding their apparent kinship, subject to materially different withholding tax regimes:
Article 7b(1)(1)(b)—income from the redemption of shares or from a reduction in their value. This provision captures what might be termed redemption sensu stricto: compulsory or automatic cancellation effected unilaterally by the company. Income falling within this category constitutes “income from participation in the profits of legal persons” and is accordingly subject to the 19% withholding tax on dividends and cognate distributions under Article 22(1).
Article 7b(1)(3)(a)—income from the disposal of shares, including a disposal effected for the purpose of their redemption. This provision captures voluntary redemption, which Polish tax law treats not as a corporate-law cancellation event but as a sale: the shareholder disposes of its interest to the company, which subsequently cancels the acquired shares as a distinct juridical act. Income so characterised falls outside the scope of both Article 21(1) and Article 22(1) of the CIT Act.
The distinction is outcome-determinative. If the income falls within Article 22(1), withholding tax of 19% applies. If it does not, Article 26(1)—which imposes the obligation to withhold exclusively in respect of payments enumerated in Articles 21(1) and 22(1)—has no purchase. The characterisation operates as a binary regulatory switch: one classification triggers a substantial tax liability; the other produces none.
IV. Mauritius as a Tax Haven and Article 26(1m) — The Hidden Trap
It is at this juncture that a provision which is, in the author’s experience, frequently absent from transactional analyses enters the frame. Article 26(1m) of the CIT Act, introduced by the amending act of 27 October 2017 (Journal of Laws, item 2175), provides:
“Where the entities referred to in subsection 1 make payments in respect of the categories enumerated in Article 7b(1)(3)–(6) to an entity having its registered office or seat of management in a territory or country specified in regulations issued pursuant to Article 11j(2), they shall be obligated to withhold flat-rate income tax at the rate of 19% of the amount paid.”
The provision thus establishes a second, parallel withholding tax regime operating alongside the standard framework of Article 26(1). The standard regime covers dividends, interest, and royalties. The extended regime of Article 26(1m) broadens the withholding obligation to capital transactions under Article 7b(1)(3)–(6)—including disposals of shares for the purpose of redemption—but only where the payee is domiciled in a designated tax haven. The problem extends beyond Mauritius to every jurisdiction on the list—analogously to offshore shell companies incorporated in the BVI or the Cayman Islands.
The legislative intent is unambiguous. The explanatory memorandum (Parliamentary Paper No. 1878) states that the provision “is intended to safeguard the interests of the State Treasury, given the practical impossibility of enforcing tax obligations against entities in such a state—in connection with the absence of tax information exchange with so-called tax havens.” Where the fisc cannot reach the taxpayer through conventional collection, it reaches the payment at source—through the Polish withholding agent.
Mauritius appears at position 15 of the schedule to the Regulation of the Minister of Finance of 18 December 2024 (Journal of Laws, item 1928). On a first reading, Article 26(1m) would appear to apply squarely—19% withholding tax on the entire disbursement.
V. Mauritius Taxation — Why No Withholding Tax Arises
The tax authority confirmed the applicant’s position: no withholding tax obligation arises. The analytical structure employs a prior question logic: before reaching the withholding provision, one must first establish whether the non-resident shareholder is subject to limited tax liability in Poland.
Article 3(3) of the CIT Act provides a catalogue of income deemed derived within Poland by non-residents. Consideration for a voluntary share redemption does not fall within subparagraphs (1) through (4a). Article 3(5) extends limited tax liability to “payments regulated by Polish entities” (subparagraph (5)), but only insofar as the income is enumerated in Articles 21(1) or 22(1)—and voluntary redemption proceeds are captured by neither.
The conclusion follows with syllogistic necessity: since no limited tax liability crystallises on the Mauritius shareholder, there is no juridical basis for Article 26(1m). The Polish company does not assume the function of a withholding agent. The result obtains identically irrespective of the redemption variant.
The ruling draws support from analogous interpretations of 20 June 2023 (ref. 0111-KDIB1-2.4010.123.2023.2.AW, Hong Kong) and 10 January 2025 (ref. 0111-KDIB1-2.4010.696.2024.1.MK)—both arriving at an identical conclusion.
VI. A Mauritius Company — The Tax Haven That No Longer Is
The ruling does not exist in a regulatory vacuum. To apprehend why a Mauritius company triggers tax risk in Poland, it is necessary to examine the jurisdiction in its proper historical and institutional context.
Four Decades of Offshore Transformation
Mauritius—an island state in the Indian Ocean, independent since 1968—has undergone one of the most dramatic economic transformations in sub-Saharan Africa (on the industrialisation model: Subramanian & Roy, 2003). From a sugar monoculture at independence, through an export processing zone strategy in the 1970s, to precursor banking legislation reforms in the late 1980s under Finance Minister Vishnu Lutchmeenaraidoo (in office 1983–1990)—enacted against World Bank and IMF counsel—though the full offshore statutory architecture was formalised only in 1992 (see Hearson, “The Political Economy of a Tax Haven,” 2022).
The MOBA (1992) and MOBAA created two licence categories: GBC1 (effective rate ~3%) and GBC2 (wholly exempt). According to academic estimates, offshore assets reached approximately USD 700 billion by the late 2010s (Hearson, 2022). The India DTAA (1983) was the strategic catalyst—after 1991 liberalisation, Mauritius became India’s principal FDI conduit.
Post-2016 Reforms — The End of the Old Offshore Model
The renegotiation of the India–Mauritius DTAA in 2016 terminated the capital gains exemption (on investment impact: Indo–Mauritian Investment Trends, SAGE 2025). The OECD/G20 BEPS initiative imposed substance requirements. From 1 January 2019, GBC1 became the Global Business Licence (GBL) with substance conditions; GBC2 was abolished. GBL effective rate: ~3% on qualifying foreign income (for fiscal impact analysis: Doorgakant, Tax Policy and FDI from Mauritius, 2020).
FATF, the EU, and the Polish Tax Haven List
In February 2020, FATF grey-listed Mauritius. The EU added it to the high-risk third countries list. Mauritius responded with unprecedented legislative speed (statutory review: Doorgakant, SLR 2023). FATF removed Mauritius in October 2021; the EU followed in February 2022 (Regulation 2022/229; on the exit process: Koenig-Archibugi, 2024).
As of early 2026, Mauritius is off the FATF grey list, off the EU AML/CTF list, and—based on publicly available information—off the EU non-cooperative tax jurisdictions list (though ECOFIN status warrants independent verification). It is an OECD/G20 Inclusive Framework member with some 45 bilateral tax treaties. Yet it remains on Poland’s statutory tax haven list.
The incongruity is striking. A jurisdiction meeting FATF, EU, and OECD standards is treated identically to Vanuatu. Consequences: preclusion of the holding exemption (Article 24m(1)(2)(e)), automatic CFC classification, and activation of the Article 26(1m) trap.
The Mauritian Tax System — Taxation of a Mauritius Company
Standard CIT: 15%. GBL effective rate: ~3% (80% partial income exemption). Since July 2025, QDMTT under OECD Pillar Two requires minimum 15% ETR for MNE groups above EUR 750m. No capital gains tax, no inheritance tax, no wealth tax. Some 45 bilateral tax treaties. Supervised by FSC Mauritius and Bank of Mauritius. Hybrid legal system (French civil law + English common law; Privy Council as final court).
VII. Jurisdictional Automatism — A Systemic Pattern in Polish Tax Law
The ruling forms part of a broader pattern of jurisdictional automatism—the mechanical application of statutory jurisdiction lists without regard to transaction substance. The same mechanism blocks the holding exemption (Article 24m(1)(2)(e)) and triggers CFC. A ruling of 5 January 2026 (listed joint-stock company) demonstrated that no publicly traded company with dispersed institutional ownership can satisfy the beneficial-owner condition—PE/VC funds operating through Cayman or Delaware structures automatically disqualify.
Similarly, a ruling of 26 November 2025 (BVI) showed that a Polish resident holding 1% in a BVI entity bears an effective tax burden of approximately 190% on attributed CFC income. The common denominator: Polish tax law employs jurisdictional lists as binary switches, whereas international tax planning reality is irreducibly multidimensional.
VIII. Withholding Tax on Share Redemption — Practical Implications
What the Ruling Establishes
First, voluntary redemption is correctly characterised as a disposal under Article 7b(1)(3)(a), consistent with the Commercial Companies Code. Second, the absence of limited tax liability precludes Article 26(1m). Third—the ruling confirms the dual WHT regime: standard (Article 26(1)) and extended (Article 26(1m)). Every cross-border payment requires dual analysis. Omitting Article 26(1m) from tax advisory due diligence is an error capable of producing a liability of 19% of the transaction value.
When the Outcome Would Differ
Had the Company been a real estate company or had >50% of its assets consisted of Polish real property, limited tax liability would have arisen and Article 26(1m) would have applied: 19% WHT with no treaty relief. Were Mauritius removed from the list—arguably a question of when, not whether—Article 26(1m) would cease to operate. Until then, the provision remains a trap for every Polish company with a Mauritian shareholder.
IX. Conclusions – A Mauritius Company and Polish Withholding Tax
The ruling of 20 February 2026 is favourable, but its real significance lies in exposing Article 26(1m)—a silent WHT extender activated by jurisdictional designation. Mauritius is an exemplary case study of jurisdictional automatism: a jurisdiction meeting FATF, OECD, and EU standards treated identically to a classical tax haven.
For enterprises with a Mauritius company or Mauritian shareholder, the message is unequivocal: every cross-border payment requires dual WHT analysis (Articles 26(1) and 26(1m)), and income characterisation may determine the difference between zero and 19% withholding tax. Analysis of any structure involving a Mauritian entity should encompass tax residency verification, income characterisation, and current tax haven designation status.
Robert Nogacki – licensed legal counsel (radca prawny, WA-9026), Founder of Kancelaria Prawna Skarbiec.
There are lawyers who practice law. And there are those who deal with problems for which the law has no ready answer. For over twenty years, Kancelaria Skarbiec has worked at the intersection of tax law, corporate structures, and the deeply human reluctance to give the state more than the state is owed. We advise entrepreneurs from over a dozen countries – from those on the Forbes list to those whose bank account was just seized by the tax authority and who do not know what to do tomorrow morning.
One of the most frequently cited experts on tax law in Polish media – he writes for Rzeczpospolita, Dziennik Gazeta Prawna, and Parkiet not because it looks good on a résumé, but because certain things cannot be explained in a court filing and someone needs to say them out loud. Author of AI Decoding Satoshi Nakamoto: Artificial Intelligence on the Trail of Bitcoin’s Creator. Co-author of the award-winning book Bezpieczeństwo współczesnej firmy (Security of a Modern Company).
Kancelaria Skarbiec holds top positions in the tax law firm rankings of Dziennik Gazeta Prawna. Four-time winner of the European Medal, recipient of the title International Tax Planning Law Firm of the Year in Poland.
He specializes in tax disputes with fiscal authorities, international tax planning, crypto-asset regulation, and asset protection. Since 2006, he has led the WGI case – one of the longest-running criminal proceedings in the history of the Polish financial market – because there are things you do not leave half-done, even if they take two decades. He believes the law is too serious to be treated only seriously – and that the best legal advice is the kind that ensures the client never has to stand before a court.
