Dividend Tax Rate Between India and Poland Under DTAA

Quick answer: Under Article 11(2) of the India-Poland DTAA, dividends paid to a Polish beneficial owner are taxed at a flat 10% of the gross amount, versus India's domestic rate of 20% under section 207(1) (Table, Sl. No. 1) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961) -- a 50% reduction. The rate applies uniformly regardless of shareholding percentage; there is no participation tier and no exempt category for dividends. The original treaty was signed 21 June 1989 and the current 10% rate stems from the 2013 Protocol, effective in India from 1 April 2015. Claiming it requires a Tax Residency Certificate from Poland's Krajowa Administracja Skarbowa and Form 41 (formerly Form 10F); the treaty's bilateral Limitation of Benefits clause (Article 28A) and the MLI Principal Purpose Test (effective for India from 1 April 2020) both police treaty shopping.

Key takeaways:

• Flat 10% DTAA dividend rate vs 20% domestic rate -- no shareholding tiers, no exempt slab
• Treaty signed 21 June 1989; the 10% rate was substituted by the 2013 Protocol, effective in India from 1 April 2015
• Requires a Polish Tax Residency Certificate plus electronically filed Form 41
• Anti-abuse is doubly layered: bilateral LOB under Article 28A plus the MLI's Principal Purpose Test (from 1 April 2020)
• Since Dividend Distribution Tax was abolished on 1 April 2020, dividends are taxed in shareholders' hands, so the 10% treaty cap applies directly to the withholding

Dividend Tax Rate Between India and Poland

The Double Taxation Avoidance Agreement (DTAA) between India and Poland was originally signed on 21 June 1989 in Warsaw and entered into force on 26 October 1989, taking effect in India for previous years beginning on or after 1 April 1990. Its dividend article was substantially rewritten by an Amending Protocol signed 29 January 2013, which entered into force on 1 June 2014 and took effect in India from 1 April 2015. Under Article 11(2) as substituted by that Protocol, the maximum withholding tax on dividends paid between the two countries is capped at 10% of the gross amount, compared to India's domestic rate of 20% under section 207(1) of the Income-tax Act, 2025.

This reduced rate runs both ways -- it applies to Indian companies paying dividends to Polish shareholders, and to Polish companies distributing dividends to Indian residents. For Polish investors holding stakes in Indian companies, and for Indian businesses with Polish parents or joint-venture partners, the flat 10% cap removes one of the larger frictions in cross-border structuring. Our tax advisory team helps groups model the after-tax cash flow on both sides of the treaty.

For the full treaty text and PE, capital gains, and MAP provisions, see our India-Poland DTAA complete guide; for a side-by-side rate table across all income types, see withholding tax rates: India to Poland.

Treaty Rate vs Domestic Rate: Detailed Comparison

Domestic Rate (Without DTAA)

Absent treaty relief, dividends paid by an Indian company to a non-resident shareholder are taxed at 20% (plus applicable surcharge and health & education cess) under section 207(1) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961). This flat rate applies irrespective of the non-resident's country of residence, unless a DTAA provides a lower ceiling.

DTAA Rate (With Treaty)

Article 11(2) of the India-Poland DTAA limits the source-State tax to 10% of the gross amount of dividends where the recipient is the beneficial owner. The treaty text is unqualified by shareholding percentage: "dividends paid by a company which is resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State" (Article 11(1)), with the source-State tax then capped at 10% under paragraph 2. Unlike India's treaties with some other countries that reserve a lower rate for substantial (typically 10%+) shareholdings, the India-Poland treaty applies the same 10% cap to a 1% portfolio holding and a 100% subsidiary alike.

Effective Tax Savings

For a Polish parent receiving INR 1 crore in dividends from its Indian subsidiary, the treaty saves INR 10 lakh in withholding tax (10% instead of 20%). Poland then relieves any residual double taxation through its own domestic mechanism for foreign-sourced dividend income (Poland generally applies participation-exemption or credit treatment depending on the shareholding and holding period under its domestic corporate income tax law) -- the Indian tax actually withheld is what a Polish recipient can set against Polish tax on the same income, so groups should confirm the applicable Polish-law treatment with a Polish adviser alongside their Indian withholding position.

Who Qualifies for the Reduced Rate

Beneficial Ownership Requirement

The recipient must be the beneficial owner of the dividend -- the person entitled to use and enjoy the income in its own right, not merely a nominee, agent, or conduit contractually or economically bound to pass it on. Article 11(2)'s cap applies "if the beneficial owner of the dividends is a resident of the other Contracting State"; a Polish holding company inserted purely to access the treaty, with no independent economic function, risks having beneficial-ownership status -- and therefore the 10% rate -- denied.

Tax Residency Requirement

The recipient must be a tax resident of Poland under Article 4 of the treaty. For dual-resident individuals, Article 4(2) applies a tie-breaker cascade: permanent home, then centre of vital interests, then habitual abode, then nationality, and finally mutual agreement between the competent authorities. Companies are resident where incorporated or effectively managed under Polish domestic law.

Anti-Abuse Rules: MLI PPT and Bilateral LOB (Article 28A)

The India-Poland treaty carries two independent anti-abuse layers. First, the 2013 Protocol inserted a bespoke Limitation of Benefits clause at Article 28A, denying treaty benefits to a non-individual resident, or to an arrangement or transaction, where obtaining the benefit was "the main purpose or one of the main purposes." Second, because the treaty is a Covered Tax Agreement under the Multilateral Instrument (MLI) for both India and Poland, the MLI's Principal Purpose Test (PPT) also applies -- effective for India's withholding taxes from 1 April 2020. Either test, applied independently, can strip a conduit structure of the 10% rate even where the beneficial-ownership test is technically satisfied.

No Permanent Establishment Connection

Article 11(4) withdraws the 10% cap where the beneficial owner carries on business in the source State through a permanent establishment (or a fixed base for independent personal services) and the shareholding generating the dividend is effectively connected with it. In that case the dividend is instead taxed as business profits under Article 7 (or as independent personal services under Article 15), at ordinary rates rather than the 10% ceiling.

Dividend-Specific Treaty Provisions Under Article 11

Article 11(1): Residence-State Taxation

The starting rule allows the recipient's State of residence to tax the dividend; Article 11(1) provides that dividends paid by a Polish (or Indian) company to a resident of the other State "may be taxed in that other State."

Article 11(2): The 10% Source-State Cap

Paragraph 2 then lets the source State also tax the dividend, "but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the dividends." This is the operative cap referenced throughout this page.

Article 11(3): Definition of Dividends

"Dividends" is defined broadly as "income from shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares" under the paying company's State of residence law.

Article 11(5): Extra-Territorial Taxation Barred

Article 11(5) prevents one State from taxing dividends paid by a company resident in the other State merely because that company derives profits or income from the first State, unless the dividend is paid to a resident of the first State or is effectively connected with a PE there -- and it also bars a tax on the paying company's undistributed profits on that ground. This protects, for example, a Polish company with Indian-sourced income from India taxing its dividend distributions to third-country shareholders.

Documentation Required to Claim the Reduced Rate

Tax Residency Certificate (TRC)

The Polish shareholder must obtain a Tax Residency Certificate from the Krajowa Administracja Skarbowa (Polish National Revenue Administration) confirming Polish tax residency for the relevant financial year, as required under section 159(8) of the Income-tax Act, 2025 (section 90(4) of the Income-tax Act, 1961).

Form 41 (formerly Form 10F)

Where the TRC does not carry all the prescribed particulars (name, status, nationality, tax identification number, period of residency, address), the Polish recipient must additionally file Form 41 electronically on the Indian income tax e-filing portal -- a PAN is not mandatory for this filing, since a non-PAN registration route exists.

Self-Declaration and No-PE Declaration

A self-declaration confirming beneficial ownership of the dividend, and that no Indian permanent establishment holds the shares generating it, completes the standard documentation package Indian payers request before applying the treaty rate.

Withholding Procedure for Indian Payers

Section 393(2): TDS Obligation

Under section 393(2) of the Income-tax Act, 2025 (Table, Sl. No. 17; section 195 of the Income-tax Act, 1961), an Indian company paying dividends to a non-resident must deduct tax at source -- 10% where the TRC and Form 41 are in order, or 20% by default if the documentation is missing or incomplete.

Forms 145 and 146 (formerly Forms 15CA and 15CB)

Before remitting the dividend, the Indian payer must file Form 145 online. For remittances exceeding INR 5 lakh in a financial year, a Chartered Accountant must additionally certify Form 146, confirming the applicable DTAA rate and correct TDS deduction.

Section 395(1): Lower Withholding Certificate

If the Polish shareholder's actual Indian tax liability is expected to be below even the 10% treaty rate -- for instance because of losses or other set-offs -- it may apply to the Assessing Officer for a certificate authorising a lower or nil rate of deduction under section 395(1) of the Income-tax Act, 2025 (section 197 of the Income-tax Act, 1961).

Anti-Abuse in Practice

Because the India-Poland treaty layers a bilateral LOB test on top of the MLI's PPT, tax authorities on either side have two independent grounds to challenge a dividend-routing structure. A Polish holding company with no employees, no board decision-making in Poland, and no assets beyond the Indian shareholding is the paradigm case both tests are designed to catch -- the "main purpose" language in Article 28A and the MLI's PPT both ask whether obtaining the treaty benefit was a principal reason for the arrangement, not merely a welcome side-effect of a commercially-driven structure. Groups structuring through Poland should be able to point to genuine management, decision-making, or financing activity carried on there.

Practical Examples and Calculations

Example 1: Polish Parent Receiving Dividends from an Indian Subsidiary

Polska Holding S.A. holds 100% of an Indian private limited company, which declares a dividend of INR 3 crore.

• Without DTAA: TDS at 20% = INR 60 lakh. Polska Holding receives INR 2.40 crore.
• With DTAA: TDS at 10% = INR 30 lakh. Polska Holding receives INR 2.70 crore.
• Saving: INR 30 lakh, provided the TRC and Form 41 are on file before the payment date.

Example 2: Indian Resident Investing in Polish Shares

Mr. Verma, an Indian resident, holds shares in a company listed on the Warsaw Stock Exchange and receives a dividend equivalent to INR 8 lakh.

• Polish withholding: Capped at 10% under Article 11(2) = INR 80,000, provided Mr. Verma furnishes proof of Indian tax residency to the Polish payer or its agent.
• Indian taxation: The gross INR 8 lakh is included in Mr. Verma's total income and taxed at his applicable slab rate.
• Relief: Mr. Verma claims a foreign tax credit for the Polish tax withheld under section 159 of the Income-tax Act, 2025 (section 90 of the Income-tax Act, 1961).

Example 3: PE Attribution Scenario

A Polish company holds Indian shares both through a portfolio account and through the balance sheet of its Mumbai branch office. Dividends on the portfolio holding qualify for the 10% cap; dividends on shares effectively connected with the branch (a PE) are instead taxed as business profits under Article 7, at ordinary corporate rates -- not the 10% ceiling.

Frequently Asked Questions

What is the dividend withholding tax rate under the India-Poland DTAA?

Article 11(2) of the India-Poland DTAA caps withholding tax on dividends at 10% of the gross amount, provided the recipient is the beneficial owner and a Polish tax resident. This compares to India's domestic rate of 20% under section 207(1) of the Income-tax Act, 2025.

Does the 10% rate depend on how much of the company the Polish shareholder owns?

No. Unlike some Indian treaties that reserve a lower rate for substantial shareholdings, Article 11(2) applies a single flat 10% rate regardless of the percentage held -- a 1% portfolio investor and a 100% parent receive the same treaty rate.

What documents does a Polish shareholder need to claim the 10% rate?

A Tax Residency Certificate from the Krajowa Administracja Skarbowa (Polish National Revenue Administration), Form 41 (formerly Form 10F) filed electronically on the Indian income tax portal, and a self-declaration confirming beneficial ownership and no permanent establishment in India. The Indian payer should verify all three documents are current before applying the 10% rate at the time of payment.

Can the 10% dividend rate be denied even if the recipient is the beneficial owner?

Yes. The treaty's bilateral Limitation of Benefits clause (Article 28A) and, separately, the MLI's Principal Purpose Test (effective for India from 1 April 2020) can both deny treaty benefits where obtaining the reduced rate was a main purpose of the arrangement, independent of the beneficial-ownership analysis.

What happens if the Polish shareholder has a permanent establishment in India?

If the shareholding generating the dividend is effectively connected with a PE (or fixed base) of the Polish shareholder in India, Article 11(4) withdraws the 10% cap and the dividend is instead taxed as business profits under Article 7, or under Article 15 for independent personal services.

Does surcharge and cess apply on top of the 10% treaty rate?

The treaty rate is generally treated as the ceiling on the total Indian tax on the dividend. When the domestic rate applies instead (for example, for want of documentation), surcharge and health & education cess are added on top of the 20% headline rate.