PSH – Practical aspects related to the application of tax exemptions
One of the conditions for taking advantage of the PSH preference is that the holding company conducts actual business activity. In assessing the nature of the company’s business, consideration is given to whether, among other things:
- the entity has premises, qualified personnel and equipment;
- the agreements it enters into have an economic rationale;
- the company independently performs its basic economic functions using its own resources, including those of its managers present.
In practice, demonstrating that such a company actually conducts business may prove problematic due to the specific nature of the activities of holding companies, whose purpose and main functions in their operations are to own and manage the shares / stocks of other entities.
Due to the difficulty of identification of shareholders by listed companies, i.e. whether, during the required 2-year period, the holding company’s shares will not be held directly or indirectly by persons / entities established / domiciled in countries practicing harmful tax competition, the application of this regulation to listed companies may be significantly hampered.
Holding companies benefiting from the exemption from taxation of dividends or disposal of shares of subsidiaries shall report data on the amount of income (revenue) covered by these exemptions in the annual CIT-8 return.