New agreement between Poland and the Netherlands awaits ratification

Małgorzata Dankowska, Partner, Tax Advisor | 28 września 2021

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On the website of the Government Legislation Centre (RCL) there is a draft of act ratifying the protocol changing the content of the double taxation treaty between Poland and the Netherlands.

For the real estate market the most important provision concerns the introduction of the so-called real estate clause to the agreement. The clause provides for taxation of profits from alienation of shares of companies as well as property rights similar to shares in other entities, such as partnerships or trusts, when the value of assets of such entities derives predominantly from real estate. Currently such gains are taxed only in the country of tax residence of the transferor. After the changes, taxation will be possible in the place of location of the real estate. It will be possible if at any time during the 365-day period the value of shares or other similar rights in the subject entity was derived at least in 75% directly or indirectly from immovable property.

The Protocol will enter into force on the last day of the third month following the month in which the later of the notifications announcing the completion of the national procedures necessary for its entry into force is received. If the ratification of the Protocol and the necessary notifications by both parties are completed in September 2021, the new regulations will be in effect from 2022. However, if there is a delay in the notification procedure, the provisions of the Protocol will apply only for tax years beginning after the first day of January of the following calendar year (from 01.01.2023).

Ratification notes between countries have not been exchanged by the end of September 2021. Effectively, this means that the protocol introducing the real estate clause will apply for tax years, periods and events occurring from January 1, 2023.

What else does the Protocol contain?

introduction of a transparent entity clause,
implementation of a general contractual clause against tax avoidance (PPT),
new provisions on permanent establishment,
implementation of the transparent entity clause,
expansion of the rules of determining tax residency of persons other than natural persons possessing double tax residency.

Source: https://orka.sejm.gov.pl/Druki9ka.nsf/0/CEB2AAC85461584CC125872100362DB1/%24File/1445.pdf