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09-06-2017
THE CONVENTION AGAINST THE TAX AVOIDENCE HAS BEEN SIGNED AND IS WAITING FOR THE RATIFICATION

On 7th of June 2017, Poland had acceded the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. The main purpose of the Convention is to adjust the existing double tax treaties (DTT) to the standards specified in the so called BEPS supporting the prevention of international tax avoidance without renegotiation and individual changes of particular bilateral agreements.

In this area, the Convention includes two kinds of standards – so called minimum standard, the implementation/application of which is compulsory, and guidelines, which are not obligatory.

The amendments to be introduced by the Convention cover among others the following areas:

1)    preventing granting of tax benefits of DTTs in tax avoidance circumstances,

2)    preventing the avoidance of permanent establishment (PE) status and it’s taxation,

3)    preventing the use of hybrid mismatch arrangements,

4)    improving the dispute resolution mechanism available in DTTs.

The Convention will enter into force after at least five countries-signatories have ratified it. To have these changes applicable, both countries parties to a DTT have to reach agreement on the scope of modifications. The Convention must be signed and ratified by both concerned countries.

In relation to Poland, the Convention will apply to, inter alia, France, Luxemburg, Cyprus, Malta, Spain, Denmark, United Kingdom. Currently, there is no DTT with Germany and the Netherlands on the Convention list (the Netherlands did not notify DTT with Poland  to be covered by the Convention).

 

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Should you be interested in obtaining further information, or would like to discuss the impact of the above changes please contact:

 

Monika Dziedzic     tel. + 48 22 322 68 88

 

or your advisor at MDDP.

 

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