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New Polish British Tax Treaty - effective from 1 January 2007. |
There are changes for investors in Poland. The new Polish-British
convention concerning double taxation avoidance not only introduces
positive changes in the methods concerned, which are met
enthusiastically by Poles working in Great Britain, but important
changes will also affect British real estate investors in Poland and
lenders financing Polish companies.
 Olga Leska and Grant Thornton explain.
On 20 July 2006, a new Polish British treaty on the avoidance of double
taxation was signed. It will supercede the existing document that was
signed in 1976. All indications suggest that the new regulations will
be effective from 1 January 2007.
The treaty is not just for the benefit of Polish employees in Great
Britain. It is important to remember that the 1976 treaty was signed
under completely different internal and international circumstances. In
the new conditions since 1989, and following Poland’s EU accession, it
transpiresthat tax treaties dating back to the seventies are inadequate
in modern Poland. The new convention reflects the economic realities of
the modern European Union much better.
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Planners of investment in real estate in Poland should be aware that
according to new regulations, capital proceeds realised by British
entities obtained on sales of shares in Polish real estate companies in
Poland can now be taxed in this country. The hitherto binding treaty
did not contain such a provision.
An important change for lenders is expected. When Polish residents pay
out interest to British lenders, an obligation to pay withholding tax
of 5 per cent may arise. The previous Polish-British treaty provided
that taxation of interest could be only effected in the payee’s country
of residence.
The new provision, which will undoubtedly be enthusiastically met by
British investors, concerns a decrease in royalties and tax on
dividends. The new convention reduces the maximum rate of withholding
tax on royalties due from 10 per cent to 5 per cent, whereas taxes on
dividends are cut from 15 to 10 per cent and from 5 per cent to zero
respectively.
In the light of the above, potential investors in Poland should start taking those changes into account now. |
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