Poland’s growing economy and strategic location in Central Europe have made it an attractive destination for entrepreneurs looking to open a holding company. This business structure offers numerous advantages, including efficient management of multiple subsidiaries and potential tax benefits. Understanding the process to establish a holding company in Poland is crucial for those seeking to expand their business operations or consolidate their corporate assets in the region.
This comprehensive guide aims to provide a step-by-step approach to open a holding company in Poland. It covers essential aspects such as the legal framework governing Polish holding companies, the registration process, and the tax implications of this business structure.
Additionally, the guide explores the benefits of setting up a holding company in Poland and offers insights into the regulatory environment that businesses must navigate. By following this guide, entrepreneurs and investors can gain a clear understanding of what it takes to establish and operate a holding company in Poland successfully.
Understanding Polish Holding Companies
Definition of a Polish Holding Company
A Polish holding company is a legal entity that primarily owns shares in another company rather than engaging in direct commercial activities. It has the power to make important decisions related to the owned company by purchasing an outstanding part of the shares. This business structure was introduced into Polish legislation in 2022 as part of the “Polish Deal” package of amendments to income tax acts, with further improvements implemented from January 1, 2023.
Legal Entities Suitable for Holding Companies
The most common legal forms for establishing a holding company in Poland are:
- Limited Liability Company (Spółka z ograniczoną odpowiedzialnością or Sp. z o.o.)
- Joint Stock Company (Spółka Akcyjna or S.A.)
- Simple Joint Stock Company (Prosta Spółka Akcyjna or P.S.A.)
These legal entities provide limited liability protection for shareholders, which is a crucial consideration for investors in holding companies.
Key Requirements for Holding Companies
To qualify as a Polish holding company and benefit from the associated tax exemptions, the following criteria must be met:
- Ownership: The holding company must directly own at least 10% of the shares in its subsidiary for a minimum of one year.
- Independence: It cannot be part of a tax capital group or benefit from tax exemptions related to special economic zones or new investments supported by specific decisions.
- Genuine Business Activity: The holding company must conduct real economic activity, including having premises, qualified personnel, and actual business operations.
- Non-Harmful Jurisdiction: Shareholders of the holding company cannot be entities based in jurisdictions engaging in harmful tax practices or those listed as non-cooperative by the EU or Poland, unless an appropriate international agreement is in place.
- Subsidiary Requirements: The subsidiary company must not hold shares in investment funds, collective investment schemes, partnerships, or similar fiduciary structures.
It is important to note that there is no specific registration process for holding companies in Poland. A company is considered a holding company once it meets the necessary criteria outlined above.
How to Open a Holding Company in Poland?
The following steps to open a holding company in Poland includes:
Choosing the Legal Structure
The first step in opening a holding company in Poland involves selecting the appropriate legal entity. The most common and preferred option for foreign investors is the Limited Liability Company (LLC), with over 80% of investors choosing this structure. Other options include the Joint Stock Company (JSC) and the Simple Joint Stock Company (SJSC). Each structure has its own advantages, with LLCs offering a balance between liability protection and operational flexibility.
Preparing Necessary Documents
Once the legal structure has been chosen, the next step is to prepare the essential documents for incorporation. The required documentation varies depending on whether the shareholders are individuals or legal entities:
For individual shareholders:
- Legalized Power of Attorney (if setting up the company remotely)
- Copy of identification documents
For legal entity shareholders:
- Local Register Extract confirming the company’s active
- statusIncorporation documents (statute or memorandum of incorporation) Identification documents of board members and parent company representatives
Registering the Company
The registration process involves several stages:
- Deciding on key company features, including name, share capital, and business scope
- Executing the articles of association, which can be done online via the S24 portal or traditionally at a notary’s office
- Submitting the registration application to the National Court Register (KRS)
- Obtaining tax identification (NIP) and statistical (REGON) numbers
Meeting Capital Requirements
The minimum share capital requirements vary depending on the chosen legal structure:
- Limited Liability Company (LLC): 5,000 PLN
- Joint Stock Company (JSC): 100,000 PLN
It’s important to note that a registration tax of 0.5% is calculated based on the initial share capital.
Appointing Directors and Shareholders
The final step involves appointing directors and shareholders. For a Polish holding company:
- At least one director must be appointed
- There are no restrictions on the number or nationality of shareholders
- Directors must have full legal capacity and a clean criminal record
After completing these steps, the company must fulfill post-registration compliance requirements, including reporting ultimate beneficial owners, paying transfer tax, and registering for VAT if necessary. The entire process of establishing a holding company in Poland typically takes between 3 to 5 weeks.
Tax Benefits and Regulations
Corporate Income Tax Exemptions
The Polish holding company model, introduced on January 1, 2022, offers significant tax benefits to qualifying entities. A key advantage is the exemption from taxation of capital gains resulting from the sale of shares in subsidiaries to unrelated entities. This exemption, however, does not apply to the disposal of shares in subsidiaries whose assets consist of 50% or more in real estate located in Poland.
To qualify for these benefits, a Polish holding company must be a capital company and a Polish tax resident. It must directly hold at least 10% of shares in the subsidiary company for a continuous period of at least two years preceding the receipt of income. Additionally, the holding company must carry out genuine business activities as defined by Controlled Foreign Corporation (CFC) rules.
Dividend Tax Considerations
Another significant benefit is the exemption from taxation of dividends paid to the holding company by its subsidiaries. This exemption applies to dividends received from subsidiaries seated in the EU, European Economic Area (EEA), Switzerland, or outside these territories, providing a wider range of application compared to the EU Parent-Subsidiary Directive.
It’s important to note that dividends distributed by Polish residents are typically subject to a 19% withholding tax. However, based on the participation exemption, domestic dividends are not subject to this tax if the Polish beneficiary holds at least a 10% share in the paying company for at least two years.
Capital Gains Tax Advantages
Poland does not have a separate capital gains tax. Instead, revenues and related costs are categorized into two baskets: ‘capital gains’ and ‘operational activity’. Income or loss from each basket is disclosed separately. The capital gains basket includes share and capital transactions, as well as royalties, license fees, and similar rights.
The Polish holding company model allows for a capital gains tax participation exemption. This exemption applies to both EU/EEA/Swiss companies and those outside these territories, offering a broader scope of tax advantages for holding companies operating in Poland.
Conclusion
Opening a holding company in Poland offers a range of benefits for entrepreneurs and investors looking to expand their business operations in Central Europe. The country’s growing economy, strategic location, and favorable tax regulations make it an attractive destination for establishing such a corporate structure.
By following the steps outlined in this guide, businesses can navigate the process of setting up a holding company in Poland, from choosing the right legal entity to meeting capital requirements and appointing directors.
The tax advantages provided by the Polish holding company model, including exemptions on capital gains and dividends, further enhance its appeal to international investors. These benefits, combined with Poland’s stable business environment, create a solid foundation for companies to manage their subsidiaries efficiently and consolidate their assets.
To get expert assistance in setting up your holding company in Poland, consider reaching out to OnDemand International, a trusted partner in international business expansion. In the end, a well-structured holding company in Poland can serve as a powerful tool to drive growth and maximize financial opportunities in the region
FAQ’s
Can someone who is not a Polish citizen establish a company in Poland?
Yes, non-Polish citizens can establish and operate a business in Poland. There are various legal forms available for business activities, including sole proprietorships and corporate entities. To register your company, you will need to choose the appropriate legal structure and follow the registration process.
What are the costs involved in starting a company in Poland?
The initial costs for registering a company in Poland include a registration fee of approximately 600 PLN (around 140 euros) to be paid to the National Court Register. For a private limited liability company, a minimum share capital of at least 5,000 PLN (approximately 1164 euros) is also required.
What expenses should be anticipated when establishing a holding company?
The cost of setting up a holding company varies depending on the jurisdiction. For example, in the U.S., the average state filing fee for setting up an LLC ranges from USD 10.00 to USD 800.00. Additional costs may apply if you engage professional services from attorneys or financial planners.
Which European country is preferred for setting up a holding company?
The Netherlands is a popular choice for establishing holding companies due to its participation exemption, which allows for tax-free dividends and capital gains on qualifying shareholdings. The country’s favorable intellectual property regime and an extensive network of tax treaties also contribute to its attractiveness for holding companies.
