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Holding Company in Poland

Holding Company in Poland

Since this kind of corporate entity can grant several advantages to their future business, many investors choose to open a holding company in Poland.

holding company in Poland is preferred by entrepreneurs for several reasons, one of them related to the smaller withholding taxes on profit or dividends that must be paid. Due to centralized management activities, licensing and financing, a holding company in Poland can prove itself to be a very efficient way to inssure business achievements for a group of subsidiaries in a certain country or region.

 Quick Facts  
Polish holding company – definition A Polish holding company is a legal entity that does not engage in direct commercial activities, but owns shares in another company

Conditions for Polish holding companies

Must be a limited-liability, joint-stock company or simple joint stock company;

Must have directly owned at least 10% of the shares in a subsidiary's capital for at least one year;

Must not be part of a tax capital group;

Must not receive any tax advantages or exemptions specifically related to operating within a special economic zone.

Business requirements for holding companies in Poland

Shareholders must establish their precise business goals, operational and logistical requirements, and thoroughly study the details concerning local taxes before registering a holding company in Poland;

Contact our Polish company formation specialists for details on how to start an efficient Polish holding company from the beginning

Legal system for Polish holding companies  Since January 1, 2022, the Polish legal system implemented the Polish Holding Company (PSH) institution, which applies to Polish holding companies with domestic and foreign subsidiaries
Legal entities used

Limited-liability company;

Joint-stock company;

Simple joint-stock company.

Corporate income tax for Polish holding companies

The corporate income tax rate is 19%, but can be exempted if the Polish holding company sells shares in a subsidiary, either in Poland or abroad, to a party that is not related to the holding company

 Accounting and audits

The financial statements are made annually, and the income tax calculation is finalized within three months after the end of the tax year

 VAT

A Polish holding company may be required to pay Value Added Tax (VAT) depending on its specific activities;

The standard VAT for goods and services in Poland is 23%;

Please contact our accountants in Poland for more details regarding VAT.

 Liability

A holding company will be legally responsible for a subsidiary's debt if the subsidiary was insolvent or became insolvent due to the debt;

The management board members of a holding company are not personally liable for their actions if they act in the best interest of the corporate group.

Time frame for incorporation (approx.)  3 – 4 weeks
 Local director required in Poland (YES/NO)

NO 

Dividend tax rate

A Polish Holding Company is completely exempt from Corporate Income Tax (CIT) on dividends received from both Polish and foreign subsidiaries.

Number of double taxation treaties (approx.)

88 

How to incorporate a holding company in Poland

Determine the legal structure;

Choose a company name;

Appoint directors and shareholders;

Meet the capital requirements for chosen legal structure;

Prepare necessary documents;

Register for VAT (if applicable), etc.

Advantages of opening a holding company in Poland

Holding companies enjoy favorable tax treatment regarding dividends and capital gains;

Poland's membership in the European Union and the World Trade Organization provides access to EU and global markets;

Poland has signed double tax treaties with many countries.

Business requirements for holding companies in Poland 

Before registering a holding company in Poland, the shareholders must establish their exact business goals, operational and logistical requirements and to study all details related to the local taxes. 

Generally, there are several hints that can make a business become an efficient Polish holding company right from the start:

– when opening a holding company in Poland it would be ideal for the owner to find a jurisdiction where incoming dividends from the branches of holding companies are subject to low withholding tax.

– It would be advantageous if the holding company could be created in a Polish jurisdiction where dividend income sent from the branches to the holding company would be subject to a low corporate income tax.

– The profits of the holding company in Poland obtained from selling shares should be subject to a low rate of capital gains tax.

– The dividends sent by the holding company to the parent business entity should either be exempt from or subject to low withholding tax rates in the respective jurisdiction.

Polish Holding Company in the legal system

Starting on 1 January 2022, the Polish legal system introduced the Polish Holding Company (PSH) institution. This regulation applies to Polish holding companies that have both domestic and foreign subsidiaries. PSH is an alternative to the tax capital group (TCG) and provides exemptions within a special economic zone or the Polish Investment Zone.

As a result, many entrepreneurs and investors are now considering the option of opening a Polish company to take advantage of the benefits that come with PSH.

The current form of the regulation for Polish Holding Companies (PSH) offers a 95% exemption from corporate income tax (CIT) for dividends paid by a subsidiary to the holding company, and a full exemption from CIT for profits derived from the sale of shares in subsidiaries. However, the remaining 5% of the dividend is not covered by the exemption and is subject to the standard CIT rate of 19%.

To establish a Polish holding company, the company must hold at least 10% of the shares in the subsidiary for a minimum of one year, conduct real activity, and comply with restrictions on shareholders. The subsidiary PSH must also meet certain requirements, such as not holding more than 5% of shares in the capital of another company or using tax exemptions.

If you are interested in registering a company in Poland and learning more details about the Polish Holding Company regime, we can help guide you through the process and provide support every step of the way.

You can watch the video below on how to register a Polish holding company:

Taxes for a holding company in Poland

According to the law, a holding company in Poland is not a subject to distinctive taxes or special foreign company rule. In Poland, intra-border tax consolidation is allowed, but cross border consolidation is not possible. The possibility of consolidating taxes in Poland depends on the share capital of the companies, their types and other such characteristics. For further details on this topic and an in-depth analysis of the entrepreneurs’ business and fiscal possibilities, we strongly recommend taking the advice of a company formation specialist in Poland.

Generally, the tax for dividends in Poland is 19% and can be reduced under the law of Deferred tax assets (DTA). The good news is that Poland has over 80 DTA. This type of tax does not exist for dividends paid to companies in the EU and EEA (European Economic Area) states, which are subject to the conditions of the Parent-Subsidiary Directive.

Another advantage from the taxes point of view is that in Poland, starting from 1 July 2013, the interest and royalty payments paid by Polish corporate residents to associated European Union companies are exempted from withholding taxes. 

What legal entity is suited for opening a holding company in Poland?

The most commonly used legal entities for opening a holding company in Poland are Limited Liability Companies (Spółka z ograniczoną odpowiedzialnością or Sp. z o.o.) and Joint Stock Companies (Spółka Akcyjna or S.A.). Both of these legal forms provide limited liability protection for the shareholders, which is a key consideration for investors in a holding company.

Our qualified Polish company formation specialists can help advise on the most suitable legal entity for your specific needs and circumstances.

Main advantages of opening a Polish holding company

Polish holding companies benefit from the country’s dividends and capital gains tax regime. The primary advantage of a holding company is that it is exempt from taxes on its profits, which can be reinvested in the business.

Additionally, as a member of the European Union and the World Trade Organization, Poland provides access to EU and global markets, while its strategic location and skilled workforce make it an attractive destination for foreign investment. Furthermore, the proposed changes to the Polish holding company regime, including the easing of certain conditions and the extension of legal forms, may make it even more attractive for businesses looking to establish a holding company in Poland.

Poland has also signed several double tax treaties that allow for reduced withholding rates, which can be beneficial for all types of companies, including holding companies. 

If more details are needed, our Polish company formation experts can provide assistance.

Here are a few more interesting facts about the country’s economy and investments that might be valuable if you’re considering establishing a holding company in Poland:

  • – The GDP for Poland increased by 6.8% in 2021, compared to the previous years, according to the Polish Statistical Information Centre;
  • – Poland saw a 5% net inflow of foreign direct investment in 2021;
  • – Between 2010 and 2018, the total value of assets held by companies with foreign capital in Poland rose by 70%, reaching a value of $415 billion;
  • – The biggest investors in Poland were Germany, the U.S., France, and the UK, which collectively held 48% of the assets owned by foreign companies operating in Poland;
  • – The government offers a range of investment incentives for opening a Polish company, such as an income tax exemption, available for a period between 10 to 15 years.

For more information about a Polish company formation or how to open a holding company in Poland, please contact us and we will make sure you receive advice for your business.