The protocol to the Poland-India double tax treaty entered into force on June 1, 2014. The protocol will apply to income in Poland from January 1, 2015, and in India from April 1, 2015. It amends treaty provisions dealing with the taxation of dividends and interest and modifies articles dealing with the avoidance of double taxation and the mutual exchange of information on tax matters to bring the treaty in line with the OECD standard. The amendments include: • dividends and interest will be taxed at 10% (the WHT rate was reduced from 15%), • royalties will be taxed at 15% (the rate was reduced from 22,5%); the royalties will also include charges for ‘any copyright’, • tax credit method will be the only method of avoiding double taxation appropriate for Polish and Indian tax residents (the protocol eliminates an exemption method currently used for several categories of income); • specific ‘permanent establishment’ for entities furnishing services will be introduced; a PE will arise if an enterprise renders consultancy services through its employees or other personnel engaged but only where such activities continue for a period or periods exceeding in the aggregate six months within any 12-month period; this concept is relatively new in the Polish double tax treaties, it may result in PE risk for long-term services contracts performed by Indian entities to Polish entities (i.e. result in CIT on income from Polish business partners without a formal presence of an Indian company in Poland) • the procedures for the exchange of information between the Polish and Indian tax authorities, concerning the application of the treaty regulations will be smoother and quicker, • a more efficient correction of income and profits resulting from related party transaction adjustments will be introduced, • a ‘limitation of benefits’ clause will also be introduced, meaning that any benefits resulting from the treaty will not apply where the treaty abuse takes place (i.e. if the main purpose or one of the main purposes of a transaction or an arrangement is to obtain the benefits offered by the treaty).

1. 1
The protocol amending Poland-India double
tax treaty entered into force
The protocol to the Poland-India double tax treaty entered into force on June 1, 2014.
The protocol will apply to income in Poland from January 1, 2015, and in India from
April 1, 2015.
It amends treaty provisions dealing with the taxation of dividends and interest and
modifies articles dealing with the avoidance of double taxation and the mutual exchange
of information on tax matters to bring the treaty in line with the OECD standard.
The amendments include:
• dividends and interest will be taxed at 10% (the WHT rate was reduced from 15%),
• royalties will be taxed at 15% (the rate was reduced from 22,5%); the royalties will
also include charges for ‘any copyright’,
• tax credit method will be the only method of avoiding double taxation appropriate
for Polish and Indian tax residents (the protocol eliminates an exemption method
currently used for several categories of income);
• specific ‘permanent establishment’ for entities furnishing services will be
introduced; a PE will arise if an enterprise renders consultancy services through
its employees or other personnel engaged but only where such activities continue
for a period or periods exceeding in the aggregate six months within any 12-
month period; this concept is relatively new in the Polish double tax treaties, it
may result in PE risk for long-term services contracts performed by Indian
entities to Polish entities (i.e. result in CIT on income from Polish business
partners without a formal presence of an Indian company in Poland)
• the procedures for the exchange of information between the Polish and Indian tax
authorities, concerning the application of the treaty regulations will be smoother
and quicker,
• a more efficient correction of income and profits resulting from related party
transaction adjustments will be introduced,
• a ‘limitation of benefits’ clause will also be introduced, meaning that any benefits
resulting from the treaty will not apply where the treaty abuse takes place (i.e. if
the main purpose or one of the main purposes of a transaction or an arrangement
is to obtain the benefits offered by the treaty).
For any questions concerning the above contact our partners:
Maria Kukawska, partner Mariusz Machciński, partner
maria.kukawska@stonefeather.pl mariusz.machciński@stonefeather.pl