Agreements on taxation of income from the savings of individuals constitute a specific category of international agreements with a highly limited scope and thus equally limited scope of international cooperation resulting from the provisions of those agreements.
These agreements were concluded between 2004 and 2005 with eight dependent territories of the United Kingdom and two dependent territories of the Netherlands, classified as tax havens in the Minister of Finance Regulations of 16 May 2005.
Following the conclusion of these agreements, the Netherlands Antilles, Guernsey, Isle of Man and Jersey were not listed in the MF Regulations of 9 April 2013 as jurisdictions applying harmful tax competition in corporate income tax and personal income tax.
Poland has signed agreements on taxation of personal savings income in the form of an exchange of letters with:
- • The Netherlands as regards the Netherlands Antilles and Aruba,
- • directly with the subsidiary territories of the British Crown – Guernsey, Isle of Man, Jersey, British Virgin Islands, Anguilla, Cayman Islands, Turks and Caicos and Montserrat - Overseas Territory of the United Kingdom.
The conclusion of the above-mentioned agreements is a implementation of the provisions Directive 2003/48, whose primary objective is to enable savings revenue in the form of interest paid in one EU Member State to its owners who are natural persons residing for tax purposes in another EU Member State may have been subject to effective taxation in that other Member State, in accordance with the laws of that Member State.
These agreements, like the procedure for their conclusion and the way in which they are applied, show a number of specific features. While in the case of the Netherlands Antilles and Aruba these agreements were concluded with the Netherlands, i.e.
the home country of those dependent territories with direct effect to them, the agreements concerning the taxation of savings income with the British dependent territories were concluded directly with them, while the British Crown was not party to those agreements.
All these agreements were concluded in the form of an exchange of letters, and therefore a special treaty procedure.
Until now, only savings tax agreements signed with the Netherlands with respect to the Netherlands Antilles and Aruba have been ratified by the two Contracting States (territories), while all contracts signed with the UK dependent territories have been ratified only by Poland.
Their ratification by the President of the Republic of Poland120 was based on Parliament's consent to their ratification as expressed in the Act.
As Poland has not yet received notes announcing the ratification of the above-mentioned agreements by its subsidiary UK territories, these agreements are applied provisionally from 1 July 2005 on the basis of the relevant resolutions of the Council of Ministers of 15 April 2005 and of 23 May 2005 122 and exchanges of diplomatic notes confirming the provisional application of these agreements.
Agreements signed with the Netherlands in respect of the Netherlands Antilles and Aruba and agreements signed with 5 The UK subsidiary territories – Guernsey, Jersey, the Isle of Man, Turks and Caicos and the British Virgin Islands – have the same content in terms of the tax rules on savings income.
The agreements signed with Anguilla, Montserrat and the Cayman Islands introduce derogations in this respect from the other savings tax agreements which Poland has concluded with the UK dependent territories.
The conclusion of the above-mentioned agreements is a implementation of the provisions Directive 2003/48, whose primary objective is to enable savings revenue in the form of interest paid in one EU Member State to its owners who are natural persons residing for tax purposes in another EU Member State may have been subject to effective taxation in that other Member State, in accordance with the laws of that Member State.
Directive 2003/48 it has introduced a number of documentation and information obligations relating to the taxation of interest savings profits, which provide for an adequate level of flow of information in accordance with this Directive, which allows individual EU countries to tax savings income from individuals resident in those countries from sources located in other EU countries.
Directive 2003/48 it has introduced an obligation for the authorities of the Member State from which interest is paid to the relevant authorities of the Member State in which the beneficial owner is resident for tax purposes to automatically communicate the identity and address of the beneficial owner and the amount thereof, as well as the identity and address of the paying agent.123 The dependent territories of the Netherlands and the United Kingdom are generally not covered by the provisions Directive 2003/48, because they do not belong to the EU tax territory, although on the basis of agreements binding them to their home country or other legal links in connection with regulations Article 17(2) Directive 2003/48/EC124 may be covered by the provisions of that Directive.
This requires, however, that the respective EU Member States sign the relevant savings tax agreements directly with or with those territories in relation to those territories and with effect directly for them. Agreements that Poland has concluded with two subsidiary territories of the Netherlands and five The United Kingdom – i.e.
Guernsey, Jersey, the Isle of Man, Turks and Caicos and the British Virgin Islands – generally have the same content. These agreements constitute, in a substantial part, a legislative calculation of the provisions Directive 2003/48.
In view of the fact that these territories were considered to be tax harmful in the MF Regulations of 16 May 2005, and partly still in the MF Regulations of 9 April 2013, The main provisions of these agreements include the scope of the exchange of information on taxation of savings income.
This scope is, in principle, limited in this area only to information on the savings income generated in those territories, with certain exemptions.125 The provisions of these agreements therefore do not apply to any other than the savings of the categories of funds that are transferred from or to those territories and which subsequently generate profit.
As a matter of fact, the scope of the agreements is limited to natural persons only.
Thus, it is not possible to obtain, on the basis of these agreements, any information on the financial resources invested in those territories by legal persons.
These agreements introduce the principle that during a transitional period within the meaning of Article 10(2) Directive 2003/48/EC126 where the beneficial owner is resident in Poland and the paying agent is resident or established in one of the territories concerned or with which the above agreements are concluded, those territories shall levy withholding tax on the payment of interest (called ‘retained tax’ under those agreements)127 at a rate of 15% for the first three years of the transitional period, 20% by next three years and then 35%.
When collecting withholding tax on income from the savings of individuals resident in Poland, these territories are bound to allocate income from taxation of these profits in relation to 1:4,128 These agreements also provide for derogations from the withholding tax procedure to ensure that the beneficial owners of interest paid from sources located in the above territories and resident in Poland are able to request that the territories do not collect withholding tax.129 With the end of the transitional period within the meaning of Article 10(2) Directive 2003/48 territories related to Poland of the above agreements will cease to apply withholding tax on interest paid to natural persons resident in Poland and the distribution of revenue from this tax between the Contracting States (territories), which will be equivalent to effective taxation of these revenues in the territory RP.130 three of eight The agreements concluded by Poland with the British dependent territories show far-reaching special features.
These are agreements with Anguilla, Montserrat and the Caymans.
These agreements do not provide for the collection of withholding tax by these territories or for the distribution of revenue from that tax by the Contracting States (territories), so that the income obtained by natural persons resident in Poland from sources situated in those territories in full since the start of these agreements has been subject to effective taxation in the territory of Poland.
This scope of the agreements on taxation of personal savings income implies the scope of international cooperation under those agreements.
All agreements concluded by Poland with UK dependent territories implement the provisions in their scope Article 8 and Article 9 Directive 2003/48 concerning the automatic exchange of information on the identity of the entity paying the interest on the savings and the recipient of those interest, a natural person resident in one of the contracting countries (territories) and the amount of those interest.
With regard to the income invested by natural persons subject to an unlimited tax obligation in Poland in the abovementioned dependent territories, the Polish State has sufficient possibilities to control its fulfilment of public-law obligations under national tax law.
For other categories of income of natural persons achieved in the Netherlands and the United Kingdom dependent territories and for the income of legal persons Poland no longer has such opportunities under the provisions of these agreements.
Despite the limited scope of international cooperation under the above agreements at the time of their conclusion, they constituted a significant change in starting the era of Polish international cooperation with tax havens.
The conclusion of these agreements, as well as agreements on the exchange of information in tax matters, has resulted in changes in the catalogue of countries and territories considered to be applying harmful tax competition contained in the MF Regulations of 16 May 2005 MF Regulations currently in force 9 April 2013 it no longer lists several dependent territories of the United Kingdom and the Netherlands, with some jurisdictions despite the conclusion of both such types of international agreements with Poland still being regarded as applying harmful competition for income tax purposes.131 It should be stressed that the purpose of the savings tax agreements with the dependent territories of the United Kingdom and the Netherlands is not to ensure cooperation in widely understood tax matters between contracting countries, but to ensure an appropriate distribution of fiscal revenue from the taxation of savings income of individuals residing in one to a Contracting State (territory) obtained from sources located in the other contracting country (territory).
It should also be noted that these agreements have not been signed with all EU dependent territories. Poland has not concluded savings tax agreements with Bermuda and Gibraltar, which are dependent territories of the United Kingdom, but these grants have concluded tax exchange agreements with Poland.
The scope of international cooperation in tax and tax matters does not cover several European developed countries, including those belonging to the EEA, i.e. Andorra, Liechtenstein and Monaco.
These countries were considered to be applying injurious tax competition for the purposes of Polish income taxes in the MF Regulations of 9 April 2013 Clearly, therefore, the scope of international cooperation in tax and carnoscar matters, although currently undergoing substantial expansion, is far from complete.