Changes to the double taxation agreement between Poland and the Netherlands

On 29 October, Polish Vice-Minister of Finance @Jan Sarnowski and Dutch Ambassador Daphne Bergsma signed the Protocol amending the Convention on the avoidance of double taxation with regard to taxes on income.

The changes take into account Poland’s tax policy and the solutions provided for in the OECD BEPS (Base Erosion and Profit Shifting) project in terms of sealing the international tax system and combating tax fraud.

The protocol is awaiting ratification, we do not yet know its content. As reported by the Ministry of Finance, the most important changes concern :

• the introduction of a transparent entity clause,

• the implementation of a principal purpose test clause (PPT),

• the introduction of an immovable property clause,

• new rules on permanent establishment,

• expanding the rules for determining the tax residence of persons other than natural persons with double tax residence.

What can this mean in practice? The principal purpose test clause allows the benefits of a double taxation convention not to be granted where obtaining them was one of the main objectives of the transaction.

The implementation of the immovable property clause may affect the taxation of capital gains of Dutch shareholders in Polish real estate companies.

When will the changes begin to apply? How will the Protocol affect taxation rules? We will find out the details soon.

Author:
Łukasz Dachowski, LL.M., attorney at law (PL)/tax advisor (PL) /Partner