.png)
.png)
Polish convention
A new double taxation convention between the UK and Poland was signed in London on 20 July 2006. Among other things, it will introduce changes to the tax treatment of dividends, interest, royalties and employment income received by residents of one country from sources in the other.
Dividends will be paid with no withholding tax if the recipient owns at least 10% of the company paying the dividends and will have done so for a two-year period which includes the date of payment of the dividends. (The current maximum rate is 5%.) All other dividends may be taxed in the country of source at a maximum rate of 10%, compared with the current maximum rate of 15%.
Interest payments on bank loans, payments for equipment leasing and payments made to, or guaranteed by, governmental bodies will be paid with no withholding tax. Other categories of interest may be taxed in their country of source at a maximum rate of 5%. (The current convention provides for taxation only in the country of residence of the person receiving the interest.)
Royalties will be taxed in their country of source at a maximum rate of 5%. Under the current convention the maximum rate is 10%.
Finally, Poland will relieve the double taxation of employment income using the exemption method. Accordingly, Polish residents who are taxed on their employment income from the UK will not have to pay any further tax in Poland. The current Convention uses the credit method to relieve the double taxation of employment income.
The text of the Convention is available on www.hmrc.gov.uk/international/poland.pdf. It will enter into force once both countries have completed their legislative procedures. In the UK the provisions will take effect from 1 April for corporation tax purposes, and from 6 April for income tax and capital gains tax purposes, in the calendar year following the date of entry into force. In Poland, the provisions will take effect in respect of income tax and capital gains tax from 1 January in the calendar year following the date of entry into force.
HMRC press release dated 20 July 2006
Holocaust compensation
Legislation has been passed which exempts from tax compensation payments paid by UK and foreign banks and building societies to Holocaust victims or their heirs. An original tax exemption was introduced in 2000, through Extra-statutory Concession (ESC) A100, which applied to compensation payments made by UK banks and building societies in respect of dormant accounts owned by Holocaust victims or their heirs.
It has since come to light that comparable payments may be made to Holocaust victims or their heirs in respect of monies held by the banks of other countries. For example, claims may be made by victims or targets of Nazi persecution or their heirs through the Claims Resolution Tribunal for dormant accounts in Switzerland in respect of monies deposited in Swiss banks in the period before and during the Second World War. Such awards and any comparable payments made by the banks of other countries are now exempt from tax.
The legislation also exempts any additional inheritance tax (or earlier taxes) which may have arisen to an estate from rights to an original bank or building society account immediately prior to the inception of the scheme involved. By contrast, actual payments from a scheme will form part of the estate of those who receive it in the normal way.
HMRC press release dated 20 July 2006
