Entry into force of the Double Taxation Agreement (DTA) between Malaysia and Poland

The Malaysia-Poland DTA, which was signed on 8 July 2013, entered into force on 12 January 2023, replacing the previous agreement. The DTA will become effective as of 1 January 2024, except for the provisions of Articles 25 and 26 (Mutual Agreement Procedure and Exchange of Information) which became effective on 12 January 2023.

Salient points of the new Malaysia-Poland DTA

Permanent Establishment

The provision deeming supervisory activities carried out for more than 6 months in connection with a construction, installation or assembly project to be a permanent establishment is no longer included in the new article on permanent establishments.

Business Profits

In the absence of information required to determine profits to be attributed to a permanent establishment, the state where the permanent establishment is situated may assess estimated tax on the permanent establishment according to its laws based on available information and the principles of the business profits article.

Labuan

Persons taxed under the Labuan Business Activity Tax Act 1990 are excluded from the benefits of the DTA. Companies that opt to be taxed under the Income Tax Act are entitled to treaty benefits.

Other salient points

Categorie	Effect
Dividends	Tax on dividend shall not exceed 5 % (previously exempted); Exemption from Polish tax on Malaysian dividends paid out of income exempted from Malaysian tax due to special incentives in the hands of Polish shareholders resident in Poland, holding at least 25 % of share capital of the Malaysian company, will cease to have effect in respect of income derived after 31 December 2020.
Interest	Tax on interest shall not exceed 10 % (previous DTA: 15 %)
Royalties	Tax on royalties shall not exceed 8 % (previous DTA: 15 %)
Technical Services	A new technical services article is introduced where the tax on fees for technical services shall not exceed 8 %.
Capital Gains	A clause to tax capital gains from alienation of shares deriving more than 50 % of their value directly/indirectly from immovable property situated in a State by that State is now included.
Other Income	A new article on other income is introduced and states that other income arising in a State may also be taxed in that State.

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