Polski Ład 3.0.. Changes in the holding regime

The year 2022 marked the inception of the regulations known as the “Polish Deal,” instigating substantial and extensive alterations across various statutes. As of the onset of 2023, amendments came into effect, modifying a significant portion of its initial premises, particularly concerning corporate income tax. Provisions concerning hidden dividends were abolished, alongside the introduction of alterations regarding Polish holding companies and Estonian CIT. This legislative overhaul aims to streamline tax regulations, making them more straightforward, precise, and comprehensible for taxpayers.

Commencing January 1, 2023, changes have been implemented, purportedly incentivizing the establishment of holding companies within the territory of the Republic of Poland. It is imperative to recall that holding companies are Polish capital entities, which, among other criteria, possess at least 10% of shares (stocks) in the capital of a subsidiary.

One of the paramount changes regarding holding companies is the exemption from taxation of the entirety of dividends received by the holding company from its subsidiaries (previously, the exemption applied to 95% of these dividends). Another significant modification involves the expansion of legal forms in which a holding company can operate. The status of a holding company can now be obtained not only by joint-stock companies and limited liability companies but also by a simplified joint-stock company.

Additionally, from the commencement of the new year, a change has been introduced whereby dividends paid by subsidiaries to a holding company have been excluded from the pay and refund mechanism. This signifies that when dividends exceed 2 million PLN, there will be no immediate obligation to pay tax; instead, the process of refund application ensues.

A noteworthy alteration is the removal from the definition of a holding company the requirement concerning the period of holding at least 10% of shares (stocks) in the capital of a subsidiary. In the previous legal framework, this period was at least one year. However, a provision has been introduced stipulating that the conditions leading to the recognition of entities as holding companies or subsidiaries must be met continuously for at least two years preceding the day preceding the receipt of dividends or the sale of shares or stocks. In practical terms, this extends the aforementioned period from one year to two years. Furthermore, the negative condition stipulating that a subsidiary could only hold up to 5% of shares or stocks in the capital of another company has also been removed.

The foregoing delineates the most significant changes pertaining to the holding regime, purportedly aimed at introducing a tax regime conducive to the localization of holding companies in Poland and fostering a competitive tax environment. The attainment of such a goal will be ascertained in the ensuing months.