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Real estate clauses in Polish tax treaties after the MLI

Łukasz Kupień of MDDP explains the developments in real estate clauses in Polish tax treaties and explores what this implies for real estate investors

The ratification of the multilateral instrument (MLI) by a number of countries has prompted the introduction of the real estate clause into a number of tax treaties concluded by Poland.

The real estate clause is one of the clauses chosen by Poland to be introduced under the MLI framework. If other signatories of the MLI notified to the OECD bilateral tax treaty with Poland and have made no reservation about the application of the real estate clause, the clause will be introduced into tax treaty. Thereby, so far the clause has been introduced under the MLI procedure into Polish tax treaties with Japan, Slovakia, Slovenia and Serbia. 

It is worth noting that the wording of the real estate clause is based on Article 9 of the MLI, and is different from the Model Tax Convention, which is usually used in Polish tax treaties. One of the differences which should be observed is the period for which the real estate proportion threshold is verified. In the Model Tax Convention, it is usually the date of the alienation of shares or the last day of the month preceding the alienation. In the MLI, the clause may apply if the relevant value threshold is met at any time during the 365 days preceding the alienation of shares. 

Nonetheless, the real estate clause is still not included in some Polish tax treaties. For example, it does not exist in the treaties with the Netherlands, Cyprus, Czech Republic, Hungary or Italy. Outside Europe, the clause is not binding for example in the treaties with South Africa, China, Indonesia, Qatar and Kuwait.

In regard to the Netherlands, which is a popular holding destination for Polish investments, government negotiations are pending to introduce the real estate clause. There is little official information about details of the wording of the clause and its implementation date. 

Based on unofficial data sources, implementation should take place at the earliest in 2022. The wording may be more taxpayer-oriented, compared to the wording from the MLI or from the Model Tax Convention. The main differences may be a higher real estate holding threshold (i.e. 75%) as well as the introduction of a minimal shareholding condition, under which the clause will not apply. Similar solutions are binding in the Dutch–German tax treaty. 

To recap, implementation and changes in the real estate clauses in Polish tax treaties are pending and should be observed both by present and future investors in real estate or real estate companies in Poland.


Łukasz Kupień

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