On 15 November 2021 Polish President Andrzej Duda signed the bill with 14 October 2021 on the ratification of the Protocol between the Government of the Republic of Poland and the Government of Malta on the amendment of the agreement on the avoidance of double taxation and the prevention of tax evasion in the field of income taxes, drawn up in La Valetta 7 January 1994
The changes are aimed at sealing the tax system, countering aggressive tax optimization and strengthening international tax cooperation. They take into account both the current tax policy of Poland and the mechanisms developed under the project OECD/G20 Base Erosion and Profit Shifting (BEPS), which is reflected in the multilateral MLI Convention signed by Poland in 2017
The new agreement with Malta includes sealing regulations, thus supplementing the mechanisms introduced by the MLI Convention. As a result, the agreement will be adapted to the highest standards of tax cooperation and anti-tax avoidance.
The signing of the Protocol amending the Polish-Maltan Agreement is part of a coherent tax policy of Poland aimed at limiting the use of double taxation agreements in aggressive tax planning. There are situations where taxpayers use the weaknesses of tax agreements for the implementation of complex optimization schemes to avoid paying taxes in Poland
- indicated Deputy Minister of Finance Jan Sarnowski.
An important sealing change will be the addition of the PPT to the contract.
The PPT clause will act like the already existing in Poland from 2016 the general anti-tax avoidance clause. It will prevent entities operating between Poland and Malta from using artificial, often fictitious transactions to reduce taxes paid in Poland
- added Deputy Minister Sarnowski.
Another important change is the introduction of the so-called real estate clause in relations between Poland and Malta. It gives Poland the right to tax revenue from the sale of shares or shares of a company whose property is mainly composed of real estate located in the country.
Implementation of this solution will not allow the tax avoidance of profits from the sale of real estate located in Poland.
The practice observed by the administration was to replace sales of land itself, buildings or apartments, often located in city centres and worth even one hundred one million Zloty, sale of shares in foreign registered companies owned by them.
In this way, it was attempted to escape the tax on the increase in the value of the property located in Poland. Now such optimization will no longer be possible
- explains Deputy Minister Sarnowski.
The agreement with Malta will also change the method of avoiding double taxation. A proportional credit method will be used, allowing for greater control of Polish taxpayers' revenues achieved abroad. Signing the protocol is a result of very good cooperation between Poland and Malta. This also demonstrates the strong political will of both countries to fight tax fraud together and to ensure equal competition for companies operating on our markets
- concludes Deputy Minister Sarnowski.
Entry into force of the Protocol thirty on the day following the subsequent notification of its ratification by Poland or Malta, but this has not yet occurred. Its provisions will apply on the first day or after the first day of the calendar year following the date with which the Protocol enters into force.