Tax department

Property clauses – Agreements for Avoidance of Double Taxation

In many avoidance of double taxation agreements, it is assumed that the proceeds from the sale of real estate are taxed in the country, in which the real estate is situated. These rules specify so-called property clauses.

These issues are quite controversial. Abovementioned agreements usually do not directly define terms such as “assets” or assets “primarily” stationary. Based on the OECD commentary, more and more agreements (e.g. between Polish and Norway), introduce specific percentages value of immovable property. The OECD Model Tax Convention and the guidelines of the OECD Tax Committee indicate that “primarily” means at least 50%. Polish Supreme Administrative Court resolved this issue in the same manner. This threshold can be changed in an agreement between states, provided that the property clauses contained therein specify it precisely.

Unfortunately, the model of estimating the value of the real estate or including it in the company’s assets is still not clarified.

Therefore, in the event of significant doubts it is possible to apply for an individual interpretation of tax regulations to the Ministry of Finance.

Our Law Firm offers consulting services in establishing facts, the legal status and practical application of property clauses in avoidance of double taxation agreements.

If you want to learn more feel free to contact us.