Based on the table containing information with respect to DTAs concluded by Poland as available on the website of the Polish Ministry of Finance, the Convention between the Republic of Poland and Bosnia Herzegovina for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital as concluded on June 4, 2014 (Hereafter: the new DTA) entered into force on March 7, 2016. The new DTA will replace the Agreement between the Polish Peoples' Republic and Socialist Federal Republic of Yugoslavia for the avoidance of double taxation with respect to taxes on income and capital that was signed in Warsaw on January 10, 1985.
Based on Article 28, Paragraph 2 of the new DTA (“Entry into force”) the fact that the new DTA entered into force on March 7, 2016 means that its provisions shall have effect:
1) in respect of taxes withheld at source, on income derived or capital owned on or after January 1, 2017, and
2) in respect of other taxes, on income derived or capital owned in any tax year beginning on or after January 1, 2017.
With respect to the provisions of Articles 24 (“Mutual agreement procedure”) and 25 (“Exchange of information”) Article 28, Paragraph 3 subsequently arranges that they shall have effect from March 7, 2016, without regard to the taxable period to which the matter relates.
Below we will discuss some of the provisions of the DTA of which we think they might interest our readers.
Taxes covered
Based on Article 2, Paragraph 3 of the new DTA (“Taxes covered”), the existing taxes to which this Convention shall apply are in particular:
a) in the case of Bosnia and Herzegovina:
i) tax on income of individuals;
ii) tax on profit of enterprises
b) in the case of Poland:
i) personal income tax;
ii) corporate income tax.
Article 2, Paragraph 4 subsequently arranges that the new DTA shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of this new DTA in addition to, or in place of, the existing taxes.
Permanent establishment
Article 5, Paragraph 3 of the new DTA (“Permanent establishment”) determines that a building site, construction, assembly or installation project or supervisory activities in connection therewith, constitute a permanent establishment, but only if such site, project or activities continue for a period of more than twelve months.
Immovable property
Article 6, Paragraph 1 of the new DTA (“Income from immovable property”) arranges that income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.
Article 13, Paragraph 1 of the new DTA (“Capital Gains”) arranges that gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.
Article 13, Paragraph 4 subsequently arranges that gains derived by a resident ot a Contracting State trom the alienation ot shares deriving more than 50 per cent of their value directly or indirectly from immovable property situated in the other Contracting State may be taxed in that other State.
Appropriate adjustment clause
Article 9, Paragraph 2 of the new DTA (“Associated enterprises”) contains a so called appropriate adjustment clause.
Dividends
If the beneficial owner of the dividends is a resident of the other Contracting State, Article 10, Paragraph 2 of the new DTA (“Dividends”) maximizes the dividend withholding tax that the Source State is a allowed to withhold over dividends to:
a) 5 per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 25 per cent of the capital of the company paying the dividends;
b) 15 per cent of the grass amount of the dividends in all other cases.
Interest
Article 11, Paragraph 2 of the new DTA (“Interest”) maximizes the withholding tax that the Source State is a allowed to withhold over interest payments to 10 per cent of the gross amount of the interest if the beneficial owner of the interest is a resident of the other Contracting State.
Royalties
Article 12, Paragraph 2 of the new DTA (“Royalties”) maximizes the withholding tax that the Source State is a allowed to withhold over royalties to 10 per cent of the gross amount of the royalties if the beneficial owner of the royalties is a resident of the other Contracting State.
Limitation on benefits
Article 26 of the new DTA (“Limitation on benefits”) contains provision regarding limitation on benefits, which read as follows:
1. In respect of Articles 10, 11, 12 and 13 a resident of a Contracting State shall not be entitled to benefits otherwise accorded to residents of a Contracting State by this Convention, if the main purpose or one of the main purposes of any person concerned with the creation or assignment of a share, a debt-claim, or a right in respect of which the income is paid is to take advantage of these Articles by means of that creation or assignment.
2. Nothing in this Article shall be construed as restricting, in any manner, the application of any provisions of the law of a Contracting State which are designed to prevent the avoidance ar evasion of taxes.
Other
The new DTA also contains articles containing provisions regarding a Mutual Agreement Procedure (Article 24) as well as for the Exchange of Information (Article 25).
The Polish Ministry of Finance has made the new DTA available in several languages. By clicking on the language of your choice you will be forwarded to the version of the new DTA in that language as available on the website of the Polish Ministry of Finance.
· English
· Polish
· Bosnian
· Croatian
· Serbian
Are you looking for an other DTA? Then check our section DTAs & TIEAs, a very efficient way to locate numerous DTAs.
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