Protocol amending the Polish-Dutch Double Tax Treaty – what has been agreed?

On 29 October a Protocol amending the Polish-Dutch Double Treaty was signed.

The Protocol introduces real estate clause. This means that Poland will also have the right to tax income from sale by Dutch shareholders of shares in a Polish real estate entity. So far this right was attributed solely to the Netherlands. Taxation in Poland may apply, provided that within the last 365 years prior to the transaction value of the shares stemmed at least in 75%, directly or indirectly, from real estate properties located in Poland. The definition of real estate entity encompasses not only companies but also partnerships and trusts.

Moreover, the Protocole introduces general anti-abusive regulations (Principle Purpose Test) according to which no benefit (e.g. reduced WHT rate, exemption from taxation etc.) will be granted under the DTT if achieving this benefit was one of the main goals of introducing a given structure or concluding a given transaction. This means that transactions, internal operations or restructuring having no actual business grounds may result in forfeiture of DTT preferences.

The changes will apply in practice as of 1 January of the year following the one in which the Protocole will enter into force. Having in mind that the Protocole is about to enter into force on the last day of the 3-month period following the month of receiving the last notification on ratification of the provisions by both countries, amendments will not apply in practice earlier than as of 1 January 2022.

If you have any questions, please do not hesitate to contact our experts:

Łukasz Bączyk
Head of Tax, Board Member

Paweł Jóźwik

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