On November 30, 2020, the Protocol to the Double Tax Treaty (DTT) between Poland and Malta regarding income taxes was signed.
The provisions of the Protocol implement changes proposed under the BEPS (Base Erosion and Profit Shifting) project and the latest version of the Multilateral Convention (MLI). It is also another similar document signed by Poland in recent weeks - at the end of October the Protocol to the Double Tax Treaty between Poland and the Netherlands was signed.
The amendments to the DTT result from Poland's active participation in the BEPS project and the MLI Convention, which contain a number of solutions to seal the area of international taxation and tax cooperation signed by Poland in June 2017.
The Protocol introduces in particular:
- changes in the rules of taxation real estate companies,
- withholding tax on fees for technical services,
- changes in the rules for taxation directors's remuneration,
- a new method of avoiding double taxation - the tax credit method.
When the Protocol starts to apply?
At the moment, the content of the Protocol has not yet been published. The provisions concerning the date of entry into force of the Protocol are also unknown. Due to the process of exchange of notifications between the Polish and Maltese governments, the provisions of the Protocol are expected to apply from 1 January 2022.
The changes introduced by the Protocol are another element aimed to seal the tax system in Poland. The signed Protocol will certainly have a major impact on the existing investment structures involving the Maltese companies. In particular, the change in the method of avoiding double taxation may impact the rules of taxation applicable for Maltese permanent establishments. The introduction of the tax credit method may also result in a higher amount of tax to be paid in Poland.
If you are conducting business activity involving Maltese entities or derive income from territory of Malta, please contact us.