Based on the overview of DTAs as available on the website of the Polish Ministry of Finance, the Protocol Between the Government of the Republic of Poland and the Government of the Republic of Korea Amending the Convention Between the Government of the Republic of Poland and the Government of the Republic of Korea for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, which was signed at Seoul on the 21st day of June 1991, is to enter into force on October 15, 2016.
Based on Article 13 of the Protocol, the fact that the Protocol is to enter into force on October 15, 2016 means that the provisions of the Protocol shall have effect:
a) in respect of taxes withheld at source, on amounts paid or credited on or after January 1, 2017;
b) in respect of other taxes, for taxation years beginning on or after January 1, 2017; and
c) in respect of Article 12 of this Protocol (Exchange of information), to request made on or after October 15, 2016 regarding information that relates to taxable periods beginning on or after January 1, 2014.
Below we will discuss a selection of provisions included in the Protocol of which we think they might interest our readers.
Taxes covered
Article 1 of the Protocol arranges that Paragraph 1 of Article 2 (Taxes Covered) of the Convention shall be deleted and replaced by the following paragraph:
"1. The taxes to which this Convention shall apply are:
a) In the case of Korea:
(i) the income tax
(ii) the corporation tax
(iii) the special tax for rural development, and
(iv) the local income tax (hereinafter referred to as "Korean tax");
b) In the case of Poland:
(i) the personal income tax, and
(ii) the corporate income tax (hereinafter referred to as "Polish tax")."
Associated enterprises
Article 4 of the Protocol arranges that Article 9 (“Associated enterprises”) of the DTA is deleted and replaced by a new Article 9 (“Associated enterprises”), which contains a so-called appropriate adjustment clause in Paragraph 2.
Royalties
Article 6 of the Protocol arranges that Article 12, Paragraph 2 of the DTA (“Royalties”) is deleted and replaced by a new Paragraph 2 that arranges that the withholding tax that a Source State is allowed to withhold over royalty payments is maximized to 5 per cent of the gross amount of the royalties if the recipient is the beneficial owner of the royalties and a resident of the other Contracting State (is 10% under the DTA).
Furthermore Article 6 of the Protocol arranges that Article 12, Paragraph 3 of the DTA is deleted and replaced by a new Article 12, Paragraph 3, which reads as follows:
“The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright including copyright of literary, artistic or scientific work (including cinematograph films, and films or tapes for radio or television broadcasting), patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use any industrial, commercial, or scientific equipment or for information concerning , industrial, commercial or scientific experience.”
Real estate companies
Article 7 of the Protocol arranges that a new Paragraph 4 is inserted into Article 13 of the DTA (“Capital Gains”) which arranges that gains derived by a resident of a Contracting State from the alienation of 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.
Limitation on Benefits
Article 10 arranges that a new Article 22A (“Limitation on Benefits”) is inserted into the DTA.
The new Article regarding Limitation on Benefits reads as follows:
1. In respect of Articles 10, 11, 12, 13, and 22, 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 or evasion of taxes.
Furthermore the Protocol arranges that the article on relief from double taxation is replaced by a new article on relief from double taxation. The Protocol also arranges that the article on exchange of information is replaced by a new article on exchange of information.
The Protocol is available in the Polish, the English and the Korean language.
Like with many other DTAs, the text of the Polish – Korean DTA can be very efficiently located via our section DTAs & TIEAs.
Copyright – internationaltaxplaza.info
Follow International Tax Plaza on Twitter (@IntTaxPlaza)
and
Follow International Tax Plaza on Facebook
