More companies will benefit from PHC

The Polish Holding Company (PHC) is a new option introduced by the provisions of the Polish Order. It allows Polish Holding Companies with both domestic and foreign subsidiaries to benefit from the exemption from taxation of dividends and profits from the sale of shares.
– The draft amendment to the CIT Act proposes to clarify and improve the PHC regulation. Firstly, a change in the definition of a holding company has been proposed, where the condition of not using tax exemptions from Articles 20(3) and 22(4) of the CIT Act has been deleted. Secondly, the catalogue of legal forms in which a holding company may operate is to be expanded – to include a simple joint-stock company. Thirdly, significant changes are to take place in the definition of a subsidiary by removing the condition of not (i) owning more than 5% of shares or stocks in other companies, (ii) owning all rights and obligations in a company that is not a legal person and (iii) benefiting from an exemption within a special economic zone or the so-called Polish Investment Zone – points out Łukasz Kupryjańczyk, tax adviser, partner at Thedy & Partners.
What will these changes result in? According to Łukasz Kupryjańczyk of PHC, multi-level structures will benefit, which most often occur in the practice of economic turnover and are a consequence of business circumstances related to the development of subsidiaries, resulting, for example, in the creation of distribution companies by these companies. In turn, the possibility to exempt dividends paid by a company operating in a SEZ or PIZ from CIT will increase the attractiveness of the holding regime. This change is expected to translate, inter alia, into the creation of jobs and growth of capital present in Poland.
It should also be added that, as part of the simplification of the PHC, the draft also proposes that the income tax exemption of 95% of the dividends received by the holding company will be replaced by a full exemption.