CMS Expert Guide to Holding Company Regimes in Poland

In 2022, as part of the New Deal regulations, the Polish government introduced a new type of tax advantaged entity, the ‘Polish Holding Company’ (Polish: “Polska Spółka Holdingowa”, “PSH”). The new regulations are aimed at strengthening the competitiveness of the Polish tax system through encouraging investment via Polish companies in other entities and the establishment of holding companies in Poland. The new regime, and especially its changes introduced in 2023, have been well received by Polish entrepreneurs.

The PSH regime is designed to improve the cost-effectiveness of ongoing and planned investments made by domestic and foreign investors.

The design of the regime facilitates this via the following.

• A full corporate income tax exemption for gains on the disposal of shares of a subsidiary company by a PSH to an unrelated party. The exemption does not apply to real estate companies i.e. companies whose real properties located in Poland or rights to such properties directly or indirectly constitute at least 50% of the value of the assets of the subsidiary (Polish or foreign).
• To benefit from this exemption, a PSH is required to make a statement of intent to apply the exemption at least 5 days before disposal.
•  A full corporate income tax exemption for dividend payments received by a PSH from a subsidiary (including a foreign subsidiary). This exemption also applies to dividends received from companies located outside the EU or EEA (as opposed to the participation dividend exemption).
• Allowing PSHs to benefit from the holding company regime by applying the PSH dividend exemption, while additionally being able to benefit from the participation exemption (i.e. the exemption from corporate income tax on dividends and other income derived from participations in corporate profits paid within one capital group).

Shares in the PSH may not be held, directly or indirectly, by a shareholder with a registered seat or management board in a country practicing harmful tax competition, or in a country that neither Poland nor the EU has signed an agreement on exchange of tax information.

The PSH must conduct actual economic activity which is demonstrated, for example, by having a place of business and resources in Poland which would enable it to conduct activities in an economically reasonable and rational way.

A PSH must own at least 10% of the shares (stocks) in the capital of a subsidiary company continuously for a period of at least 2 years, as of the day before the date of receiving the relevant income.

Entities applying the regime, both PSHs and subsidiary companies, must provide the Polish tax authorities with data on the amount of the income (revenue) received within the PSH regime in the annual corporate income tax declaration (CIT-8).

In Poland, the last two years have brought revolutionary changes to the taxation of holding companies, with investors choosing to place their funds in Poland obtaining a new vehicle – the PSH – which allows them to invest on favorable terms. It is particularly attractive as it: (i) reduces the risk of preferential tax treatment being challenged under tax avoidance laws, (ii) eliminates the risk of applying CFC regulations and (iii) reduces the cost of day-to-day operations (in comparison to using a foreign company).