Avoidance of double taxation in Poland and Germany
Poland and Germany have an Agreement for the avoidance of double taxation with respect to the taxes on income and on capital. The treaty signed between the two countries in 2003 replaces the first one signed in 1979. This is just one of the treaties signed by the two countries in order to protect individuals from double taxation.
Poland has signed approximately 80 double tax treaties
with countries around the world. The Convention signed with Germany aims not only to provide tax benefits to individuals but also to prevent fiscal evasion and strengthen the economic relations between the two countries.
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The taxation of dividends, interest and royalties
The double tax treaty
concerns residents of the two countries, either individuals who are considered nationals according to law or legal entities in Poland or in Germany that are incorporated according to the specific company laws. The taxes covered by the Convention are those that concern personal taxation and corporate taxation
The treaty also defines the manner in which different types of income produced by individuals in one of the Contracting States can be taxed in the other state. The types of income refer to dividends, interest, royalties, business profits, profits derived from immovable property, pensions and various other type of income.
According to the double tax treaty between Poland and Germany, dividends are taxed in the country of origin at a 5% rate provided that the company receiving the dividends holds at least 10% of capital of the dividend payer. In other cases the tax on dividends is 15%.
Other taxation principles
According to the tax treaty, the tax on interest can be withheld in the country of origin with the condition that the amount of tax does not exceed 5% of gross interest. The treaty also has a clause referring to the fees and remuneration paid to supervisory and management boards in the contracting state where a company is incorporated.