On December 24, 2020, the European Union and the United Kingdom concluded negotiations, and reached agreement on a package of agreements governing the future relationship, which includes:
- Trade and Cooperation Agreement,
- Agreement on cooperation in the safe and peaceful use of nuclear energy,
- Agreement on security procedures for the exchange and protection of confidential information.
current provisions
Until the end of the transitional period, i.e. until December 31, 2020, the regulations dealing with Great Britain as a Member State were in effect and the solutions resulting from the directives were therefore applied:
1. Council Directive 2003/49/EC of 3 June 2003 on a Uniform System of Taxes Applicable to Payments of Interest and Royalties Payable Between Associates of Various Member States (the so-called IR Directive) aims to abolish withholding tax on interest and royalties paid by a company A subsidiary of a Member State to an associate company in another Member State.
It was implemented in the domestic legal system by the provisions of Art. 21 of the CIT Act, which provides for an exemption from withholding tax for companies subject to income tax in an EU member state other than Poland. The exemption applies to revenue from categories of interest and royalties defined by law (such as interest, copyright, trademark rights, and know-how).
2- Council Directive 2011/96/EU of November 30, 2011 on the Uniform System of Taxation Applicable to Parent Companies and Subsidiaries of Various Member States (the so-called PS Directive), aims to eliminate double taxation on dividends transferred between parent companies and subsidiaries of different countries Members.
The implementation of the PS directive relates to the application of tax exemption from income (revenue) from dividends and other income from participation in profits of legal persons in accordance with Art. 20, s. 22 Art. 22 c of the Communications and Information Technology Law.
3. Council Directive 2009/133/EC of October 19, 2009 on the Uniform System of Taxation Applicable to Mergers, Divisions and Divisions by Deduction and Transfer of Assets, Exchange of Shares of Companies from Various Member States and Transfer of Registered Ownership of a SE or SCE Office from a Member State to Another Member State (the so-called MR directive), aims to prevent discriminatory tax treatment of mergers, divisions and other legal events of a similar nature relating to companies from different member states compared to identical events involving companies in one member state.
The implementation of the MR Directive extends the provisions applicable to domestic restructuring events to companies of EU member states. Detailed regulations in this regard are contained in the provisions of the Communications and Information Technology Law with regard to the subject of taxes, revenues, the costs of obtaining them and tax collection.
The above regulations in relations with the United Kingdom are no longer in force.
Income tax law is binding after the end of the transition period
Agreements between the European Union and the United Kingdom in effect governing future relations:
- Trade and Cooperation Agreement,
- Agreement on cooperation in the safe and peaceful use of nuclear energy,
- Agreement on security procedures for the exchange and protection of confidential information.
The provisions of the Trade and Cooperation Agreement do not affect the rights and obligations of the Union or its member states and the United Kingdom under any tax agreement.
Brexit does not affect the application of the Agreement of 20 July 2006 between the Republic of Poland and the United Kingdom of Great Britain and Northern Ireland concerning the avoidance of double taxation and the prevention of tax evasion in relation to taxes on income and property gains (Journal of Laws No. 2006 No. 250, Clause 1840 and its amendments), as it is a bilateral agreement concluded in areas not covered by EU law.
The end of the transition period and the UK’s departure from the European Economic Area (EEA) affect the income tax settlement in Poland:
- The joint settlement of spouses cannot be used if the spouses or one of the spouses resides in the territory of Great Britain,
- A person residing in the territory of Great Britain will not benefit from the preferential taxes provided to single parents, under the conditions laid down in the individual income tax,
- Donations to public benefit organizations of Great Britain cannot be deducted,
- Social and health insurance contributions cannot be deducted in the UK.
In addition, the 10% tax provisions do not apply to prizes in contests, games, mutual bets or prizes related to bonus sales in Great Britain and, as a general rule, must be accounted for separately in the tax return as income from other sources (tax at 17/32% ).
The above rules apply to taxes levied on the income of natural persons obtained as of January 1, 2021.
This connection replaces July 30, 2020 letter
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