U.S. income tax treaty with Poland

Treaty documents and protocols

The convention in force was signed at Washington on October 8, 1974, with an exchange of notes of the same date. It entered into force on July 22, 1976 and applies from January 1, 1974, which IRS Table 3 also shows as the general effective date. The IRS lists the treaty and its Technical Explanation, and no protocol or amending convention is in force.^[1][2][5]

A newer convention was signed at Warsaw on February 13, 2013, and Treasury publishes it with a technical explanation. The Senate Foreign Relations Committee reported it in 2014 and in 2016, but the Senate did not give its advice and consent, and the matter was returned to the committee at the end of the 114th Congress in January 2017. IRS Table 3 lists only the 1974 convention. The 1974 convention remains the treaty in force because the 2013 convention has not entered into force.^[6][7][5]

Convention structure

The convention has 26 numbered articles, followed by letters and exchange notes. Their titles appear in this order: Scope of Convention; Taxes Covered by the Convention; General Definitions; Fiscal Residence; General Rules of Taxation; Permanent Establishment; Income from Real Property; Business Profits; Shipping and Air Transport; Related Persons; Dividends; Interest; Royalties; Capital Gains; Independent Personal Services; Dependent Personal Services; Teachers; Students and Trainees; Governmental Functions; Relief from Double Taxation; Nondiscrimination; Mutual Agreement Procedure; Exchange of Information; Diplomatic and Consular Officers; Entry into force; Termination.^[2]

The saving clause is at paragraph 3 of Article 5, General Rules of Taxation. The articles covering dividends, interest and royalties are Article 11, Dividends; Article 12, Interest; and Article 13, Royalties.^[2]

Dividends, interest and royalties

Article 11 says dividends paid by a company resident in one country to a resident of the other may be taxed by the recipient's country. The paying company's country may also tax them under its law, subject to a ceiling of 5 percent of gross dividends when the recipient is a company directly holding at least 10 percent of the paying company's voting shares. In other cases, the ceiling is 15 percent. The article's paragraph 2 limits the source country's tax, and paragraph 3 makes that limit inapplicable when the dividend holding is effectively connected with the recipient's permanent establishment in the source country; Article 8 then applies.^[2]

Article 12 generally exempts interest arising in one country and paid to a resident of the other from tax by the country where it arises. That rule does not apply when a resident recipient has a permanent establishment in the other country and the debt is effectively connected to it; Article 8 then applies. A special relationship between payer and recipient, or involving another person, can also limit the article to the amount that would have been agreed without that relationship. Any excess remains taxable under each country's law, subject to the convention's other provisions.^[2]

Article 13 provides that royalties arising in one country and paid to a resident of the other are taxable by the recipient's country. The source country may also tax royalties under its law, but its tax cannot exceed 10 percent of the gross royalty. The article defines royalties to include payments for use of specified intellectual property or know-how, and certain gains tied to productivity, use or disposition. The source-country ceiling does not apply where the right or property is effectively connected with the recipient's permanent establishment there; Article 8 applies. Royalties arise where the relevant property or rights are used. A special relationship can limit the article to an arm's-length amount, with excess taxable under each country's law and the convention's other provisions.^[2]

Fiscal residence and dual residence

Article 4 is titled "Fiscal Residence." For an individual treated as a resident of both countries under the specified definitions in Article 3, it assigns residence first to the country where the person maintains a permanent home. If there is a home in both countries or neither, the test is the country with closer personal and economic relations, called the center of vital interests. If that cannot be determined, habitual abode decides. If the person has a habitual abode in both or neither country, citizenship determines residence under the article.^[2]

Exchange of information

The convention allows information exchange on a routine basis or on request for particular cases. Where specifically requested, the other authority is to provide witness depositions and copies of unedited original documents to the extent its own laws and practices allow those materials for its own taxes.^[2]

Saving clause and U.S. citizens

Paragraph 3 of Article 5 states that, notwithstanding the convention except for paragraph 4, a Contracting State may tax its citizen or a resident determined under Article 4 as if the convention had not taken effect. Paragraph 4 preserves benefits under Articles 20, 21 and 22, and specified benefits under Articles 17, 18, 19 and 24 for individuals who are neither citizens nor have immigrant status in that state.^[2]

Limits on information exchange

The convention says the information must be of a class obtainable under each country's own tax laws and administrative practices, and it bars exchange that would be contrary to public policy.^[2]

Related reading

Related treaty summaries include U.S. income tax treaty with France, U.S. income tax treaty with Lithuania, and U.S. income tax treaty with Switzerland.

Questions and answers

Related resources

Related glossary terms

• Treaty rate table: A treaty rate table summarizes income categories and tax rates or exemptions under U.S. income tax treaties. The IRS explains the tables' scope and limits.

Related articles and guides

• U.S. income tax treaty with France: The U.S. income tax convention with France is amended by two protocols, and the 2009 Protocol changed the dividend and royalty rules for qualifying holders.
• U.S. income tax treaty with Kazakhstan: The U.S. treaty with Kazakhstan is the 1993 convention, with 5 and 15 percent dividend limits and 10 percent limits on source tax for interest and royalties.

Related pages

• Tax treaties: All treaty partners listed by the IRS.
• Treaty documents lookup: Find IRS-listed treaty documents by country.