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Poland: Introducing one of most unorthodox CFC systems in the world? No local capital gains participation exemption


Bartosz Glowacki

Poland wants to introduce controlled foreign corporation (CFC) rules, which may start to apply even already to 2015 profits. The Polish government has cherry-picked from CFC mechanisms around the world, but somehow only the most oppressive ideas were copied. Any company seated in a territory formally blacklisted as a tax haven by Polish Ministry of Finance (or a territory with which there is no exchange of information agreement) will be treated as a CFC. No exemptions are provided. Another CFC category, which includes even companies seated within the EU and tax treaty countries, are non-Polish companies, in which the Polish tax resident (corporate or individual) owns for an uninterrupted period of 30 days per year, directly or indirectly 25% of share capital, voting rights or share in profits, when at least 50% of that company's income is passive and taxed at a rate lower than 14.25%.

The overseas company from a treaty country which is not blacklisted will not be recognised as a CFC if it runs real business. There is no definition of "real business", but some guidance is provided by the law.

Polish taxpayers will have to keep a special register of all CFCs owned directly or indirectly and to record all events in each CFC to make it possible to calculate the income of the CFC and the tax due in Poland. And all calculations must be based on Polish rules, which in fact means double accounting for CFC, one local where the CFC is registered and the second for Polish purposes.

CFC characterisation will not apply to companies with revenue below €250.000 per year. Foreign branches may be treated as CFC. Poland will still be one of the very few worldwide exceptions among modern tax systems, as Poland does not provide for any participation exemption for capital gains. There is no Polish holding company system and for the time being the government has no intention to make it. So with CFC and no holding company regime, Poland may become the most tax unfriendly country for international expansion.

However, Poland still offers very interesting exemptions, binding till 2016, for businesses investing in Special Economic Zones.

These are the main characteristics of the Polish CFC system, but it is still the draft.

Bartosz Glowacki (


Tel: +48 22 322 68 88


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