Tax Treaty Case Law around the Globe 2017

S. 53Poland: Can a Tax Authority Change the Qualification of Items of Income of a Taxpayer as a Result of a Double Taxation Convention Providing for Qualification in Accordance with Domestic Tax Law?

Hanna Litwińczuk

1. S. 54Introduction

The problem that arises from the rationale of this judgment concerns differences in the qualification of items of income on the basis of an income tax treaty and under a domestic tax law, more specifically – the Personal Income Tax Act (PITA). The structure of the Polish Personal Income Tax Act is based on classes of income such as income from employment, income from business activities, income from letting, lease and similar contracts and income from financial investments. Each class of income is taxed according to separate rules. The tax treaty concerned, which corresponds to the OECD Model, also determines in articles 6 to 21, with regard to different classes of income, the respective rights to tax of the state of source or situs and of the state of residence. It may happen that the qualification of an item of income of the taxpayer on the basis of the tax treaty and the PITA will not overlap. If the taxpayer carries on business activities and receives divid...