Poland is one of the most attractive locations for foreign investments. International reports highlight the economic and political stability of Poland, educated and competent human capital and a large domestic market. In times of global economic crisis Poland has strengthened its position, not only in the region of Central and Eastern Europe but also all over the continent. Foreign investors willingly invest their capital in Poland treating it as a safe haven in times of economic instability.
In 2009, Poland was the only member country of the European Union (EU) to avoid recession. During recent years, it has become the fastest growing economy in the EU and now has the largest economy in Central Europe.
The most frequently used jurisdiction to route investment into Poland remains Cyprus. We take the opportunity to highlight the significant benefits of using Cyprus to route Chinese investment into Poland.
Poland has a wealth of opportunities for overseas investors and is actively encouraging the entrance of foreign businesses into its markets. There has recently been a surge of Chinese companies eyeing the attractive investment opportunities in Poland, notably in the automotive, logistics, R&D, electronic, and chemical sectors. According to the most recent Financial Direct Investment (FDI) report compiled by FDI Intelligence, Poland ranked third worldwide as the best quality location for manufacturing projects, surpassed by only China and the U.S.
Some of the main benefits of structuring Chinese investment into Poland through a Cyprus Holding Company include the following:
1) 0% dividend, interest and royalty withholding tax based on application of the Poland-Cyprus Double Tax Treaty (DTT), as well as EU Parent Subsidiary and Interest and Royalties Directives.
2) No withholding tax on dividends, interest and royalties paid out of a Cyprus company to a non resident, irrespective of existing of DTT.
3) Exemption from Cypriot and Polish tax on disposal for shares in a Polish company, irrespective if “property rich”.
4) Exemption of dividend income at the Cyprus level.
5) 80% exemption of eligible royalty income at the Cyprus level (this is based on the “IP Box” regime introduced in Cyprus in 2012, which has changed the landscape of IP within the EU).
6) Opportunity to structure investment using regulated investment vehicles, thus eliminating all Polish corporate income tax.
7) A tax credit is allowed in Cyprus on both Polish withholding tax and corporate income tax withheld at source.
Moreover, Cyprus is a well established holding jurisdiction for Intellectual Property (IP), commonly used by Chinese investing abroad. The protection of IP rights is dealt with extensively in Cyprus. There is a comprehensive system in place that guarantees protection of the results of innovation and creativity at the European and International level. The recent developments to the IP tax regime represent a promising addition to an existing investor-attractive and business-oriented tax regime. Cross-border IP transactions via Cyprus can enjoy keynote benefits, such as withholding tax optimization on dividends, interest and royalties, the absence of any thin capitalization rules, the unrestricted access to EU Directives as well as the extensive Double Tax Treaty network Cyprus has already with almost 50 countries.
In cooperation with our partners in both China and Poland, who represent the leading tax advisory firms in their respective jurisdictions, we are well positioned to assist you in providing high level Cyprus tax advice, and assisting with the formation and ongoing administration of a tax effective investment structurecontaining the appropriate level of substance.
Since 2009, S&A has been the fastest growing professional services provider in Cyprus. We are acknowledged as the premier service provider in our field as a result of having one of the strongest technical teams on the island, adopting a service-minded approach unseen among our competitors, and being the most cost efficient tier-1 provider in Cyprus. Our team of highly experienced qualified chartered accountants and legal advisors is uniquely positioned to identify all risks and clearly communicate them to clients.
For further details and advise on structuring investment into Poland via a Cyprus vehicle as well as to discuss your tax planning needs further, please contact Charles Savva at +357 22 516 671, or by email at [email protected]
75 Prodromou Avenue
1st Floor, 2063
Tel: +357 22 516 671
Fax: +357 22 516 672