PSH – Tax benefits for a Polish holding company
For entities that meet the conditions provided for the holding company and subsidiaries, the legislature has provided two main preferences.
Exemption from tax on income from the paid disposal of shares (stocks)
Income earned by a holding company from the paid disposal of shares (stocks) of a domestic or foreign subsidiary to an unrelated entity is exempt from taxation if the holding company submits a statement to the head of the tax office on its intention to take advantage of the exemption. The statement in question must be filed at least 5 days before the date of disposal.
The exemption from taxation of income from the disposal of shares of a domestic or foreign subsidiary does not apply to so-called “real estate companies“, i.e. companies of which at least 50% of the value of the assets of these companies, directly or indirectly, constitute real estate located in the territory of Poland or rights to such real estate.
Tax exemption of dividend income
As a general rule, in the PSH preference, dividend income received by a holding company from a domestic or foreign subsidiary is exempt from income tax.
However, there are exceptions in which the above exemption does not apply. This applies to dividends paid by a foreign subsidiary:
if at least 33% of the subsidiary’s income comes from certain passive sources and the income tax actually paid by the subsidiary is at least 25% lower than the income tax calculated using the 19% rate. This condition applies to the tax year in which the dividend is paid and the 3 tax years preceding that year;
to the extent that the dividend paid is deductible, deductible from income, tax base or tax by the foreign subsidiary.
If a foreign subsidiary is subject to taxation on all of its income in a European Union or European Economic Area country and conducts “substantial real economic activity,” it can apply the exemption even if more than 33% of its income comes from passive sources and the tax it pays is at least 25% lower than the income tax calculated at a rate of 19%.