In recent years Cyprus and the United Arab Emirates (hereinafter: UAE) have been among the more widespread optimization directions. However, Lebanon has recently become increasingly popular. This is the consequence of the amendment of the Polish-Cyprian double taxation agreement and the local regulations of the UAE.
The basic optimization mechanism in the double avoidance agreements with Cyprus and the UAE prior to the changes was the payment of remuneration for serving as a board member in the company (the so-called principal remuneration), which is exempt from taxation both in Poland and in the country of origin.
In seeking new solutions with this mechanism, particular attention should be paid to Lebanon. The regulation of the double taxation agreement concluded between Lebanon and Poland and the local law of Lebanon is extremely beneficial and meets the expectations and objectives of international tax planning linked to the payment of the principal salary previously applied in Cyprus and the UAE.
By Article 16 Polish-Lebanese Agreements, revenues of a natural person who is a Polish tax resident received as remuneration of a member of the board of directors of the Lebanese Company may be taxed in Lebanon. This wording is tantamount to granting the right to tax such income to Lebanon, which Lebanon may but must not benefit from.
The above regulation means that the principal remuneration of a Polish natural person who is a Polish tax resident for serving in a Lebanese company is exempt from taxation in Poland. It is important that the place of performance of the duties of a member of the board of directors of the Lebanese company does not have to be performed in the territory of Lebanon.
In order to benefit from the benefits of local legislation, it is also very important to select the appropriate legal form of the company. The ideal solution is the establishment of a SAL offshore company, where the principal's salary for acting as a member of the board is subject to the Polish-Lebanese double taxation agreement, i.e. it is exempt from taxation in Poland and is not subject to taxation in the territory of Lebanon.
In conclusion, Lebanon is an interesting direction in the development of tax planning, which competes with the existing solutions offered by Cyprus and the UAE.