Real estate-rich company clause in the Double Tax Treaty between Poland and the Netherlands

Real estate-rich company clause – key implications

The real estate-rich company clause provided for in the Protocol introduces taxation of gains derived by a Dutch tax resident from sale (or other disposal) of shares in a company (or comparable interests) if, at any time during the 365 days preceding the disposal, these shares derived more than 75% of their value directly or indirectly from immovable property located in Poland (indirect shareholding should also be considered in this context).

What is important, contrary to the MLI, the OECD Model Convention, certain Double Tax Treaties concluded by Poland and the Polish CIT Act, where the threshold value for immovable property is usually at the level of 50%, the Protocol introduces the threshold of 75%.

Entry into force

The real estate-rich clause will not apply before the entry into force of the Protocol. Firstly, the ratification procedure of the Protocol must be completed in both countries. Then both Poland and the Netherlands must notify each other of their ratification. The Protocol will enter into force on the last day of the third month following the month in which the last of the notifications is received by both countries. The changes introduced by the Protocol will take effect as from 1 January of the year following the year in which the Protocol enters into force.

Taking the above into consideration, the provisions of the Protocol may effectively enter into force on 1 January 2022 at the earliest.