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Norway; Poland

20 November 2009

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Treaty between Norway and Poland – details

Details of the income tax treaty and related protocol between Norway and Poland, signed on 9 September 2009, have become available. Once in force the treaty will replace the income and capital tax treaty between Norway and Poland signed 24 May 1977 in respect of taxes covered by the new treaty. The treaty was concluded in the Norwegian, Polish and English languages, all texts having equal authenticity. In case of divergence, however, the English text prevails.

The maximum rates of withholding tax are:

-   15% on dividends; however, the rate is 0% if the receiving company owns directly at least 10% of the company paying the dividends for an uninterrupted period of at least 24 months (Art. 10(2)(a) and (b));
-   5% on interest, subject to exceptions for interest paid (i) to the government of the other state, a political subdivision or a local authority thereof, or the Central Bank of a Contracting State or any institution wholly owned by the Government of a Contracting State; (ii) on a loan of whatever kind granted, insured or guaranteed by a governmental institution for the purpose of promoting exports; (iii) in connection with the sale on credit of any industrial, commercial or scientific equipment; and (iv) on bank loans (Art. 11 (2) and (3)); and
-   5% on royalties (Art. 12(2)).

Deviations from the OECD Model Convention (2008) include:

-   a PE includes the situation that an enterprise of a contracting state performs services in the other contracting state through: (i) an individual who is present in that other contracting state for a period of more than 183 days in any 12-month period; or (ii) during a period of more than 183 days in any 12-month period and the services are performed for the same project or connected project through one or more individuals. The provision applies if more than 50% of the gross revenues attributable to the active business activities of the enterprise are derived from the services in that other state unless the services are limited to those exempt from the PE definition (Art. 5(4));
-   the term PE includes the maintenance of a fixed place of business for the purpose of the delivery of goods or merchandise belonging to the enterprises, if the enterprise, wholly or partly, carries on its business activity through such delivery (Art. 2 Protocol);
-   the definition of royalties does not include literary, artistic or scientific work, but includes films or tapes for radio or television broadcasting (Art. 12(3));
-   payments for the use of equipment in connection with the exploration or exploitation of natural resources offshore do not constitute royalties (Art. 4 Protocol);
-   remuneration derived in respect of an employment exercised aboard an aircraft, will be taxable only in the residence state (Art. 14(4));
-   the pension article also applies to annuities (Art. 17(1));
-   payments made under the social security legislation of a contracting state, any other compulsory pension scheme or under a pension scheme recognized for tax purposes and paid to a resident of the other contracting state may be taxed in the source state (Art. 17(2));
-   alimony and maintenance payments are only taxable in the state of the recipient. However, they are only taxable in the source state to the extent that the payments are not deductible for the payer (Art. 17(4));
-   a provision on offshore activities, in connection with the exploration or exploitation of the sea bed and subsoil and their natural resources, which constitute a PE if the activities in a state are carried on for a period or periods exceeding in the aggregate 30 days within any 12-month period (Art. 20(2) and (3)); and
-   the mutual agreement procedure provision does not provide for arbitration (Art. 24).

Both states provide for the ordinary credit method to avoid double taxation. If the income derived or capital owned by a resident of one state is, under the treaty, exempt from tax in that state, that state may nevertheless take into account the exempt income or capital in calculating the amount of tax on the resident's other income or capital (exemption-with-progression). (Art. 22 (1) and (2)). Neither contracting state can terminate this treaty during a period of 5 years starting from the date of its entry into force (Art. 29).

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