PSH – What is a Polish Holding Company?

As of January 1, 2022, regulations on the so-called Polish Holding Company (PSH) have been introduced into Polish law. This is a solution which, through the introduction of tax preferences (including exemption from taxation on the sale of shares of subsidiaries) for entities that use it – is intended, among other things, to encourage investors to operate holding companies in Poland.

Holding company
A holding company may be a limited liability company, a simple joint-stock company or a joint-stock company subject to unlimited tax liability in Poland.

In order for an entity to be considered a holding company, it must meet a number of conditions stipulated by the legislator, specifically:

  1. must directly own at least 10% of the shares (stocks) in the capital of the subsidiary;
  2. must not be a company that is part of a tax capital group;
  3. must not enjoy a tax exemption for income earned from business activities conducted in a special economic zone or an exemption for income earned from the implementation of a new investment specified in the decision on support;
  4. must conduct actual economic activity;
  5. the shareholder (stockholder) of this company must not be an entity having its registered office or management in a country applying harmful tax competition, a country indicated in the EU list of non-cooperative jurisdictions for tax purposes, or a country with which Poland or the European Union has not ratified the relevant international agreement.

Subsidiaries of the holding company
Subsidiaries are another element of the structure. This is understood as companies in which at least 10% of the shares (stocks) are directly held by the holding company. Subsidiaries may not hold titles to an investment fund or a mutual investment institution or other rights of a similar nature, and may not be an entity forming a tax capital group.

A domestic subsidiary is a company meeting all of the above criteria, being either a limited liability company or a joint stock company, subject to unlimited tax liability in Poland. A foreign subsidiary is a subsidiary that has a legal personality; it is subject to income tax in another country on all its income and does not enjoy exemption from such taxation

Key criterion
In order to qualify for preferential taxation of holding companies, all of the statutory conditions indicated above must, as of the date preceding the receipt of dividend income or the disposal of shares (interests), have been met continuously for at least 2 years.