On January 1, 2022, the regulations introduced by the Polish Deal program are planned to enter into force. Inter alia the changes will apply to the taxation of holding companies specified in the newly introduced chapter 5b to the Corporate Income Tax Act - "Taxation of holding companies".
The draft defines the concepts of a holding company, subsidiary, domestic subsidiary and foreign subsidiary. The holding company may only be a limited liability company or a joint stock company with a Polish tax residence. The basic condition for recognizing a company as a holding company is that it holds, for a period of at least 1 year, directly on the basis of title, at least 10% of shares or stocks in the capital of a subsidiary. Moreover, the provisions will apply to single-tier holdings - a subsidiary may not hold more than 5% of shares in the capital of another company, nor, inter alia, participation titles in an investment fund or all rights and obligations in a company that is not a legal person. Like a holding company, a subsidiary may not benefit from certain tax exemptions or belong to the Polish Capital Group.
The changes were based on two basic principles:
- exemption from corporate income tax of 95% of dividends received by the holding company from its subsidiaries
In the current law, this exemption is 100%, but it applies to a limited number of entities - located in the European Union or the European Economic Area. The new rules reduce the exemption to 95%, but extend its personal scope to companies from outside the EU and EEA. The remaining part of the dividend, not covered by the proposed exemption - 5% of the dividend amount, will be subject to CIT on general principles for the taxation of dividends, at the 19% tax rate.
- full exemption from CIT of profits from the sale of shares in subsidiaries.
This amendment concerns the income tax exemption for income earned by a holding company from the sale of shares (stocks) of a domestic subsidiary or foreign subsidiary for an unrelated entity, provided that the holding company submits a declaration of intention to use such an exemption to the tax office for 30 days before the transaction.
This exemption will not apply to the sale of shares or stocks in companies where at least 50% of the value of the assets, directly or indirectly, are real estates located in Poland or rights to such real estates.
The declaration of intention to use the exemption must contain:
1) names and surnames, addresses and tax identification numbers of the parties to the contract;
2) the name, address and tax identification number of the subsidiary, the shares of which will be sold;
3) an indication of the share in the capital of the subsidiary, which will be the subject of sale for consideration;
4) the planned date of conclusion of the contract.
If the above regulations enter into force, the taxpayer will be able to choose whether he wants to take advantage of the existing or new exemptions. However, it should be taken into account that the possibility of their merger was not provided for, so if the company uses the existing regulation, it will not be able to obtain an exemption upon the sale of shares in the subsidiary.