Amendments to the Double Taxation Treaty between Poland and Cyprus
On 16th March 2012 a protocol between the Government of the Republic of Poland and the Government of the Republic of Cyprus was signed. This amends the Agreement between the Government of the Republic of Poland and the Government of the Republic of Cyprus for the Avoidance of Double Taxation with Respect to Taxes on Income and on Capital of 4th June 1992 (hereinafter referred to as the ‘DTT’).
The amendments to the DTT will come into force from the beginning of the tax year following the ratification of the protocol by Poland and Cyprus. We expect that the amendments will come into force from 1st January 2013.
The main changes are as follows:
• Withholding tax on dividends will be reduced from 10% to 0% when a corporate shareholder for an uninterrupted period of twenty four months has owned at least 10% of the share capital of the company distributing the dividends and from 10% to 5% in all other cases
• Withholding tax on interest will be reduced from 10% to 5%
• Withholding tax on royalties remains unchanged at 5% but the definition of the term royalties has been redrafted to comply with the OECD Model Tax Convention
• Director fees earned by an individual will be taxable only in the country in which he/she is resident
• The Agreement has also been extended to encompass a tax information exchange clause based on the provision for the Article 26 of the OECD Model Tax Convention.
• The Protocol retains the provision whereby gains from the sale of shares will only be taxed in the state of residence of the seller of the shares, even in the case where the assets of the company constitute of real estate.