Double taxation agreements (DTAs) are bilateral agreements between two countries that aim to prevent taxpayers from being taxed twice on the same income. Poland currently has over 90 DTAs in force, including with countries such as the United States, Germany, France, and China.
The purpose of these agreements is to eliminate any potential confusion and to provide clarity to taxpayers on their tax obligations in both countries. These agreements provide specific rules, such as how to determine residency and how to allocate income between countries, to prevent double taxation from occurring.
One of the more recent DTAs entered into force between Poland and the United Arab Emirates (UAE) in 2019. The agreement aims to strengthen the economic ties between the two countries and provide a more stable and predictable tax environment for investors and businesses operating in both countries.
Under the DTA, income such as dividends, interest, royalties, and capital gains are subject to reduced withholding tax rates, ranging from 0% to 15%. This provides significant tax benefits for companies and individuals operating in both countries, as they are no longer subject to the full tax rates in both countries.
For example, if a Polish company earns royalties from a UAE company, the withholding tax rate under the DTA is 5% instead of the usual 10% rate. This means that the Polish company can enjoy significant savings on its tax bill.
DTAs are beneficial to both countries involved, as they can encourage cross-border investment and trade. They also provide a level of fiscal transparency, making it easier for tax authorities to enforce their tax laws.
In conclusion, DTAs are essential for businesses and individuals operating in multiple countries. They provide clarity and predictability to taxpayers and reduce the risk of double taxation. As Poland continues to expand its network of DTAs, it will become an even more attractive destination for cross-border investment and trade.