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The protocol amending the double taxation agreement between
Cyprus and Poland has been signed on behalf of both countries. The
protocol makes a number of changes to the existing agreement, which
dates back to 1992. The principal changes are outlined below.
Reduction of withholding tax on dividends
The maximum rate of withholding tax on dividends will be reduced
from 10% to zero if the owner is a company (other than a
partnership) resident in the other contracting state which has
directly held at least 10% of the capital of the company paying the
dividends for an uninterrupted period of twenty four months, and to
5% otherwise.
Reduction of withholding tax on interest
The maximum rate of withholding tax on interest will be reduced
from 10% to 5%.
Beneficial ownership and withholding tax
In line with the latest OECD Model Convention the concept of
beneficial ownership has been introduced in the articles relating
to withholding tax on dividends, interest and royalties.
Directors' fees
Under the 1992 agreement directors' fees may be taxed in the
state in which the director is resident and in the state of
residence of the company. Once the protocol takes effect
directors' fees will be taxable only in the state in which the
director is resident.
Elimination of double taxation
The amount allowed as a deduction from tax on income or capital
gains in Poland will be based on the tax paid in Cyprus, limited to
the amount attributable to such income or capital gains derived
from Cyprus. The protocol explicitly includes tax on capital gains,
which was not included in the 1992 agreement. The "tax
sparing" provisions of paragraph 3 of article 24 of the 1992
agreement will be abolished.
Exchange of information
The protocol replaces article 27 of the 1992 agreement with a
new article, which reproduces the information exchange article of
the OECD Model Convention verbatim and supplements it with details
of the information to be supplied by a state when making a request
for information to demonstrate the foreseeable relevance of the
information to the request. This prevents tax authorities embarking
on speculative enquiries and safeguards the interests of
taxpayers.
Entry into force and effective date
The protocol will enter into force when both states have
exchanged notifications that the necessary ratification procedures
have been completed and the changes it introduces will have effect
from the beginning of the following calendar year.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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