Protocol Closes Loopholes in Slovak DTT
In recent years Poland has introduced a large number of changes to its bilateral tax treaties, inter alia, either concluding new treaties that replace the existing ones, or modifying the existing treaties by newly signed protocols. The most common modifications apply to the methods for avoidance of double taxation, mainly for the purpose of eliminating the possibilities of effective double non-taxation in the cases where the other contracting state does not tax a particular item of income, and Poland must in turn apply the exemption method to such income.
As a result of the above, the current treaty policy includes the general replacement of the exemption method with the ordinary credit method, thus eliminating one of the most popular tax optimization schemes, based upon the combination of effective non-taxation in a foreign jurisdiction with mandatory tax exemption in Poland. One recent change of this kind applies to the tax treaty between Poland the Slovak Republic dated August 18, 1994, which has been modified by a new Protocol dated August 1, 2013, which amendment became effective on January 1, 2015 and applies to income received on or after that date.