Polish Ministry of Finance publishes the text of the DTA that was recently concluded with Ethiopia

The Polish Ministry of Finance has published the text of the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income as concluded on July 13, 2015 between The Republic of Poland and the Federal Democratic Republic of Ethiopia (Hereafter: the DTA). Although signed, the DTA has not yet entered into force. For the DTA to enter into force, the respective ratification procedures have to have been finalized in both countries.

Below we will discuss some of the regulations included in the DTA of which we think they might interest our readers.

Taxes covered
According to Article 2, Paragraph 3 of the DTA (“Taxes covered”) the existing taxes to which the Convention shall apply are in particular:

a) In the case of Poland:

i) the personal income tax; and
ii) the corporate income tax;

b) In the case of Ethiopia:

i) the tax on income and profit; and
ii) the tax on income from mining, petroleum and agricultural activities;

Paragraph 4 of Article 2 of the DTA subsequently arranges that the Convention shall also apply to any identical or substantially similar taxes which are imposed after the date of signature of this Convention addition to, or in place of, the existing taxes.

Permanent establishment
Paragraph 3 of Article 5 of the DTA (“Permanent establishment”) arranges that a building site, construction, assembly or installation project constitutes a permanent establishment only if it lasts more than nine months.

Paragraph 6 of Article 5 of the DTA arranges that an insurance enterprise of a Contracting State shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of the other State or insures risks situated therein through a person other than an agent of an independent status to whom paragraph 7 of Article 5 of the DTA applies.

Associated enterprises
Paragraph 2 of Article 9 of the DTA (“Associated enterprises”) contains a so-called appropriate adjustment clause.

Dividends
Paragraph 2 of Article 10 of the DTA (“Dividends”) maximizes the dividend withholding tax that a Source State is allowed to withhold over dividend distributions to 10% of the gross amount of the dividends.

Interest
Paragraph 2 of Article 11 of the DTA (“Interest”) maximizes the withholding tax that a Source State is allowed to withhold over interest payments to 10% of the gross amount of the interest.

Royalties
Paragraph 2 of Article 12 of the DTA (“Royalties”) maximizes the withholding tax that a Source State is allowed to withhold over royalty payments to 10% of the gross amount of the royalties.

Technical fees
The DTA also includes an article containing regulations regarding the taxation of technical fees (Article 13 of the DTA (“Technical Fees”)).

Paragraph 3 of Article 13 of the DTA defines the term “technical fees” as meaning payments of any kind to any person, other than to an employee of the person making the payments, in consideration for any services of a technical, managerial or consultancy nature.

Paragraph 2 of Article 13 of the DTA maximizes the withholding tax that a Source State is allowed to withhold over technical fees to 10% of the gross amount of the technical fees.

Capital Gains
With respect to capital gains Paragraph 1 of Article 14 of the 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.

Paragraph 4 of Article 14 subsequently arranges that gains derived by a resident of a Contracting State from the alienation of shares deriving more than 50% of their fair value directly or indirectly of immovable property situated in the other Contracting State may be taxed in that other State.
Limitation of benefits
The DTA contains an article arranging for a limitation of benefits (Article 28)

Article 28 of the DTA (“Limitation of benefits”) reads as follows:
“Benefits provided for by this Convention shall not be available where it might be considered that the main purpose or one of the main purposes for entering into arrangements has been to obtain any benefits that would not be otherwise available.”

Other
The DTA furthermore includes an article arranging for a Mutual Agreement Procedure (Article 26 of DTA) and an article on the Exchange of Information (Article 27 of the DTA).

The Polish Ministry of Finance has published both the English and the Polish version of the DTA. Click on the language of your choice to be forwarded to the DTA as available on the website of the Polish Ministry of Finance, which will open in a new window. (English or Polish)