We have written a substantial amount on the directions of travel for business development most frequently chosen by Polish entrepreneurs, i.e. Germany, the Czech Republic, Romania, Cyprus and other European destinations. Now we would like to take you on a journey south, beyond the Mediterranean, but also to the Middle and Far East. When thinking about expansion on a larger scale, these destinations become a natural choice.
The United Arab Emirates is, from an international perspective, a confederation of seven states, known as emirates. Although most of them, e.g. Fujairah or Umm al-Quwain, do not mean much to Polish entrepreneurs, Abu Dhabi and Dubai are widely known.
Although Abu Dhabi is increasingly being considered as a competitor to Dubai, the latter is still the main point of business interest.
Due to its friendly legal environment and high level of development, as well as pro-business legal and tax regimes, Dubai has become the nation’s local business centre. More and more companies operating internationally choose Dubai as their headquarters for business expansion not only into the immediate neighbourhood, i.e. in the Middle East or Africa, but also towards Asia.
Dubai has no income tax regime (with the exception of oil companies and foreign banks) and a low VAT of 5%. Similar rules apply to individuals and companies, but it is worth noting that in order to become a Dubai tax resident, local authorities require proof of at least 180 days of continuous residency in the emirate. Additionally, when setting up a company in Dubai, additional local conditions must be met, amongst them is ensuring that at least half of the board of directors are local residents.
Finally, it is well worth highlighting that the authorities of Dubai and the UAE have been taking proactive steps to ensure adequate recognition of the country in the business world. They also take great care of the country’s image, by, among other things, concluding treaties for the avoidance of double taxation with many countries including Poland.
SINGAPORE – the Far East’s nearest country – favours start-ups – 3 years’ tax exemption
Singapore is one of the relatively small nation located in the Far East. It is however, from a legal, business, but also tax standpoint, perhaps the closest to Europe of all the countries located in that region.
A former British colony, now an independent state with a high level of economic development, Singapore practices many of the principles of the British legal and business systems, and it has also created legal and government environments friendly to business activities, especially those focusing on holding and investment operations.
Just like other locations that use Anglo-Saxon systems, such as Malta or Cyprus, there is no tax on activities carried out outside Singapore unless the profits and funds from those activities are transferred to Singapore. However, corporate income made in Singapore is taxed at a flat rate of 17%. For individuals, the tax scale is between 0 and 22%.
Singapore also offers very interesting tax solutions for start-ups. One of them is a tax exemption for three years for start-ups operating in Singapore, it is not available to entities conducting investment and holding activities. Furthermore, dividends paid by Singaporean companies are exempt from local taxation.
From a Polish investor’s point of view, it is particularly significant that Singapore and Poland have a double taxation treaty, as it greatly facilitates the activities of Polish entrepreneurs or through Singaporean entities.
HONG KONG – the gateway to China
Despite similar historical and economic conditions, Honk Kong currently offers a business environment with slightly different characteristics to Singapore. Legal solutions are based on British forms of business regulation, while the government offers a reasonably friendly attitude in the context of contacts with business, in particular holding and investment companies. For many Polish investors the proximity, both geographical and legal, to China may be of significant importance. Due to a number of formal connections Hong Kong may be a good location for the expansion of activities into the Middle Kingdom.
From a tax perspective, Hong Kong represents an interesting combination of progressive tax rates, both for individuals and legal entities, as well as tax exemptions on dividends and capital gains. At the same time, profits made outside the Hong Kong territory are not subject to taxation. Another interesting aspect of Hong Kong’s tax system is the lack of VAT.
From a Polish perspective, one of the disadvantages of Hong Kong is the lack of a separate agreement on the avoidance of double taxation as well as the inability to apply the existing Polish-Chinese agreement to operations in Hong Kong. Furthermore, Hong Kong is still on the list of countries with harmful tax regimes. This results in complex processes aimed at avoiding double taxation, in both Poland and Hong Kong, as well as in a complicated situation for the Polish investor in relation to the regulations on foreign controlled companies.
MAURITIUS, THE SEYCHELLES – exotic paradises, not only tax havens
Many entrepreneurs are increasingly looking to exotic locations, mainly for personal reasons. The climate and living conditions, combined with the experience of the pandemic, have prompted many to move away, whilst still keeping sight of their business. Often, exotic locations are also used as a place for international business expansion, both specifically for holding companies as well as from a purely financial perspective.
Mauritius tax system is characterized by low income tax on individuals (10%-15%) and no tax on income earned abroad. At the same time, companies are taxed at a flat rate of 15% with a reduction to 3% for export activities.
The Republic of Seychelles is another island state in the Indian Ocean. The tax system of the Seychelles has fairly high corporate taxes (25%-30%) and high taxes on natural persons conducting business activities (0%-30%). However, for some industries, taxation in lower at between 0% and 15% depending on the type of business (i.e. tourism, fisheries, agriculture, health and education). In addition, the Seychelles have introduced a special legal structure known as IBC (International Business Company) which, provided that it does not operate on the territory of Seychelles is not subject to tax.
Both Mauritius and the Republic of Seychelles are yet to conclude double taxation treaties with Poland. In addition, both jurisdictions are on the so-called black list of countries utilising harmful tax regimes. As a consequence, Polish entrepreneurs may find it difficult to conduct their business from there due to the double taxation or taxation of foreign controlled companies, which will apply as long as they are a Polish tax resident.
Comparison of the main tax regulations in the above captioned countries – what to expect when planning a business expansion strategy
There is a so-called departure tax, which is added to the price of airline tickets for people leaving Dubai
Exemption for income from overseas activities that is not transferred to Singapore
from 0% (up to SGD 20,000) to 22% (above SGD 320,000)
from 8.25% (to HKD 2 million) to 16.5% (from HKD 2 million)
from 2% (up to HKD 50,000) to 17% (from HKD 200,000)
3% for export companies
from 10% (up to MUR 650,000) to 15% (from MUR 650,000)
from 25% (up to SCR 1 million) to
from 0% (up SRC 8,555.50) to 30%
WHAT DOES THIS MEAN?
In the last part of our tax tour around the world, we visited locations a bit more exotic from a Polish entrepreneur’s point of view. However, as it turns out, this does not mean that these locations are inaccessible and ignored by Polish entrepreneurs. On the contrary, business people are increasingly looking towards distant markets and locations that offer not only interesting business prospects, but also attractive living conditions.
However, in the case of this type of location, it is particularly important to have a good understanding and carry out due diligence of the legal and tax situation before deciding to expand one’s business or move. Due to the fact that exotic locations are often treated as havens not only by tourists, but also by tax authorities, one can face unforeseen and not very pleasant consequences. However, this does not mean these locations are unavailable. On the contrary, with suitable preparation, they can allow for significant scaling of businesses and change the quality of life of entrepreneur and their immediate family.
This is the third and last of the series on the most frequently chosen expansion destinations by Polish entrepreneurs. However, we will be publishing further posts in which we will share practical tips on planning for and securing international growth.
Part I – Expanding Next Door – The Czech Republic, Slovakia, Germany, Romania
Part II – Taxes in Estonia, Italy, United Kingdom, Malta and Cyprus
Adam has over eight years of experience in tax advisory for Polish and international clients. He worked in tax advisory departments of several of the so called Big Four companies as well as leading Polish tax advisory firms. He also supported one of key construction groups operating in Poland as an in-house tax advisor. Licensed […]
This website uses so-called „Cookies”. Further use of the website without changing your cookie settings, means consent to their recording or use. Detailed information can be found in the Regulations tab.