PHC (Polish Holding Company)

To become a holding company an entity must fulfil all of the following conditions jointly:

• it must be a limited liability company (sp. z o.o.), joint-stock company (S.A.) or simple joint-stock company (PSA) ) not belonging to a tax capital group,
• it must hold directly at least 10% of shares of the subsidiary,
• it may not apply special economic zone exemptions (currently the exemption includes special economic zone and dividend exemptions),
• it must be engaged in a genuine business activity,
• its shareholder may not be a tax-haven entity.

A subsidiary may be a company which:

• does not belong to a tax capital group,
• has a legal personality (foreign subsidiary),
• is not incorporated in a tax haven (foreign subsidiary),
• does not meet the conditions for qualification as a CFC (foreign subsidiary) in the year of payment of dividends or in any of the 3 fiscal years preceding that year  unless the subsidiary is engaged in substantial genuine business activity in EU / EEA country.

The aforementioned conditions set for PHC and the subsidiary should be met for an uninterrupted period of at least 2 years calculated on the day preceding revenues from dividends or capital gains.

So far Polish tax authorities stated that the above period should start at the earliest on the date of entry into force of the PHC regulations, i.e. on 1 January 2022.  Therefore, 2024 would be the first year, in which the holding company can apply the exemptions provided for under the PHC model.

According to the latest standpoint, the above period may start earlier than the date of entry into force of the PHC regulations. It has not yet been resolved whether the above interpretation should also be applied to the income from the sale of shares/dividend income received before 1 January, 2023.

However, it is worth to determine whether the application of exemptions under PHC is possible in the current capital structure or  to consider potential changes in 2023.