Changes to the Polish-Cypriot tax treaty have been negotiated by the Polish Ministry of Finance.

Details of the changes have not been officially released, however, the Ministry of Finance has indicated informally that the key changes relate to:

  • the removal of the ‘tax sparing’ clause which made it possible to decrease the effective tax rate on dividends paid by a Cypriot company to its Polish shareholders from 19% to 9% through the deduction from the tax in Poland (19%) an amount equal to the tax which is payable (even if not paid due to exemption) in Cyprus (10%);
  • taxation of income of directors of Cypriot companies who are Polish tax residents

- up to now, it was not subject to taxation, either in Cyprus or in Poland.

It is not yet known when the changes will take effect. Unofficial information suggests that this may be 1 January 2012 or 1 January 2013