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New Polish-American double taxation treaty

2013-02-04

The new convention between Poland and the USA was signed on the 13th February 2013. The treaty will be effective after finishing the ratification proceeding. The new convention provides numerous significant changes compared to the current binding convention of 1974.

The new convention provides for the withholding tax on interest at the rate of 5% of the gross amount of the interest and – at the same time – regulates several exceptions from the principle of the withholding tax, e.g. for the interest due to banks and other financial institutes determined in the treaty. The rate of the withholding tax on royalties defined in the treaty will be 5%. At present this rate amounts to 10% of the gross amount of the royalty. The withholding tax rates on dividends will be, like in the present treaty, 5% and 15%.

In the signed convention there is a provision about taxation in Poland of the alienation of shares in companies deriving more than 50% of their value directly or indirectly from the real estate situated in Poland.

The convention stipulates very complex conditions to be met in order to take in account the benefits resulting thereof.

With respect to the elimination of the double taxation the principal method will be the exemption with progression which is generally more favourable for the taxpayers. However, the method of the proportional tax credit will be will be applied to dividends, interest, capital gains and other not separately regulated income.