The regime of Polish holding companies (hereinafter: the “PHC”) was first introduced into domestic legislation in 2022 as part of the extensive package of amendments to income tax acts (the so-called “Polish Deal”). As a result of the Polish CIT Act amendment, starting from 1 January 2023, the PHC regulations will be considerably improved.
The fundamental purpose to introduce PHC regulations was to increase the attractiveness of Poland as a location for setting up holding companies.
The nature of the preference is to exempt from CIT:
- (1) the amount of dividends received by the PHC from its subsidiaries and
- (2) the income earned by the PHC from the disposal of shares of subsidiaries – except for cases when shares are sold to a related company or the transaction regards a real estate company.
By the end of 2022, only 95% of dividends were exempt from CIT, whereas the remaining 5% were taxed at the standard 19% rate and could not be covered by the exemptions arising from the parent-subsidiary directive. As of 2023, a PHC may benefit from the exemption of the full amount of received dividends and there is no longer a requirement for the PHC to not participate in the parent-subsidiary directive exemptions.
In the amended legal framework, a PHC may be considered a limited liability company (sp. z ograniczoną odpowiedzialnością), a simple joint-stock company (prosta sp. akcyjna) or a joint-stock company (sp. akcyjna) that meets all the following conditions:
a) It directly owns at least 10% of shares (stock) in equity of a subsidiary based on the title of ownership,
b) It does not belong to a tax group,
c) It is not tax-exempt under the SEZ (Special Economic Zone) regulations or the PIZ (Polish Investment Zone) regulations,
d) It carries out a genuine business activity,
e) Shares in that company are not held, directly or indirectly, by a person who is located or registered, or whose headquarters or management is located, in a country or territory:
- which is a tax haven (harmful tax competition), or
- which is listed by the European Council as an uncooperative tax jurisdiction, or
- with which the Republic of Poland has not ratified the relevant international agreement
Furthermore, for a company to be a subsidiary of a PHC, the following conditions should be satisfied:
a) At least 10% share capital of that company is directly owned by the PHC,
b) The company does not hold shares or units in any investment funds or collective investment schemes, or interests in any partnerships, or interests with the right to payment as a beneficiary or founder of any foundation, trust or similar fiduciary structure or arrangement, or any similar interests.
c) The company does not belong to a tax group
To benefit from the PHC regime, the conditions set out in definitions of a PHC and a PHC’s subsidiary ought to be fulfilled within an uninterrupted two-year period preceding the day of receipt of dividends or the disposal of shares.
As of 2023, the amended definition of a PHC’s subsidiary no longer requires the subsidiary to not benefit from CIT exemption provided by SEZ or PIZ regulations.
Moreover, legislation has decided to extend the PHC regime to multi-level structures. Before the amendment, application of preference was excluded if the subsidiary held more than 5% of shares in equity of any another company.
Bearing in mind the number and nature of the above legal conditions, the implementation of a PHC regime requires careful preparation.
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