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HMRC internal manual

Double Taxation Relief Manual

HM Revenue & Customs
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Poland: Dividends

Dividends payable by a Polish company are exempt from tax in Poland if the United Kingdom parent company holds at least 10 per cent of the capital of the Polish company and the date of payment of the dividend falls within an uninterrupted period of 24 months during which this level of capital was held by the United Kingdom parent company.

The exemption does not apply if the dividends are effectively connected (see INTM153110 fifth sub-paragraph) with a business carried on through a permanent establishment which the recipient has in Poland.

If a company holds less than 10 per cent of the capital or the shares are held by an individual, the agreement provides for Polish tax to be charged at a rate of 10 per cent.

This Polish tax qualifies for credit as a direct tax (see INTM164010(c)).

Under the previous agreement, there was a reduced rate for direct company investors of 5 per cent, rather than an exemption. However, the EC Parent-Subsidiary Directive applies to Poland from 1 January 2005. This bars the imposition of withholding taxes on dividends paid by a company resident in one Member State of the Community to a company resident in another Member State, where the company receiving the dividends holds a minimum of 20 per cent of the capital of the company paying the dividend.

The old United Kingdom/Poland agreement was unusual in that it did not provide for relief for underlying tax (see INTM164010(d)). Any claim for credit in respect of underlying tax must therefore be dealt with under the unilateral relief provisions at sections 8 to17 T(IOP) 2010 (see INTM164360).