Poland: Evaluating the tax consolidation for groups regime

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Poland: Evaluating the tax consolidation for groups regime

Sponsored by

sponsored-firms-mddp.png
A broad solution to base erosion is being explored by policy makers

Agnieszka Wnuk of MDDP explains the implications of recent developments concerning the consolidation of tax groups regime in Poland.

Capital groups are allowed to consolidate their corporate tax (CIT) results provided that they fulfil a number of conditions.



Firstly, consolidation for CIT purposes is possible in clear capital structures. A group of at least two companies may be treated as one CIT payer provided that it consists of a Polish parent company holding at least 75% of shares in at least one another Polish company. Thus, in practice, there may be a Polish holding company with several direct subsidiaries (second and further tier subsidiaries results may not be consolidated).



Figure 1 shows a typical consolidated tax group (CTG) structure, including tax transparent partnerships belonging to Polish companies.

Figure 1. A typical CTG structure in Poland




d541c30585bb4f4aa7991f4837a0a114



There is also a minimal capitalisation requirement, and the condition that the companies cannot have tax arrears or benefit from tax exemptions. The CTG must be set for at least three years based on the agreement concluded by the companies and registered by the head of the tax office.



It should be noted that under the Polish CTG regime, the tax results of Polish subsidiaries of a foreign holding company – including an EU parent company – cannot be consolidated. This may be controversial in regard to subsidiaries of holding companies from the EU countries, when taking into account Court of Justice of the European Union (CJEU) verdicts.



After registration, the CTG must achieve a minimum profitability level of 2% (taxable income to tax revenues). This condition is sometimes perceived as an obstacle by the groups, in particular taking into account that the CTG is tied up for at least three years. In response to the expectations of the business, in 2020, the requirement of minimum profitability was suspended for the groups that faced negative consequences from the COVID-19 pandemic. The suspension is expected to be prolonged to 2021 based on the most recent draft amendments to CIT law.



Moreover, in contrary to the case of breaking other CTG regime requirements – such as the abuse of transfer pricing rules with regard to the transaction concluded with the entity from outside the CTG, or decreasing the number of companies constituting the CTG – failing to achieve the required level of income does not result in severe tax consequences such as the obligation of a retroactive CIT settlement at the level of particular companies. If the CTG fails to report required profitability, the CTG is dissolved at the end of the year in which the condition was broken.



The CTG regime provides for several other advantages apart from the consolidation of the tax regime of member companies.



For instance, the limitation of tax deductibility of debt financing costs (interest, etc.) is not applicable to loans or similar agreements concluded between the members of the CTG.



Likewise, the limitation of tax deductibility of costs of intangible services acquired from related parties is not applicable to the costs of such services bought from other CTG members.



Furthermore, the local transfer pricing documentation file is not required for the transactions concluded between CTG companies.



Taking into account the most recent changes in CIT law, limited partnerships that are tax transparent may become tax opaque (CIT payers) in 2021. A CTG may become an attractive alternative for these groups whose businesses require the conducting of activities through several entities (e.g. the construction industry where particular projects are often held by separate partnerships), allowing for tax consolidation.



Moreover, due to other CIT law changes implemented in recent years, the effective tax rates of numerous groups are constantly increasing. This has happened despite the nominal CIT rate being the same or even decreased in some cases. The level of tax safety has also been brought down by the unclear, low quality legislation and the increasingly aggressive approach of tax authorities during tax audits. Applying an instrument for utilising tax losses generated by another group company on current basis, even though it requires the fulfilment of sometimes restrictive conditions, may seem to be a worthwhile solution.

 

Agnieszka Wnuk

E: agnieszka.wnuk@mddp.pl



more across site & shared bottom lb ros

More from across our site

Heads of tax need to push their teams forward as strategic business advisers to add value across the organisation, says Sandy Markwick
Scott Bessent reportedly felt undermined by Musk naming Gary Shapley as acting IRS commissioner; in other news, Baker Tilly will combine with a top 15 US firm
The promise of nine years’ tax certainty and a ‘rational and pragmatic’ government process makes APAs a no-brainer, Indian tax advisers tell ITR
Despite garnering significant revenues from multinationals, Italy’s digital services tax presents pressing double taxation issues, say Stefano Simontacchi and Francesco Saverio Scandone of BonelliErede
ITR’s research shows that in-house tax counsel in Asia also feel underserved by their advisers’ international networks
World Tax global head of research Jon Moore tells ITR how his team spots standout submissions, and gives early statistical insights into this year’s entries
Australia’s conservative opposition will repeal controversial tax agent reporting rules if elected in the country’s May general election
Shapley would be the fourth person to hold the job this year; in other news, UK tax advisory firm MHA raised fewer funds than expected from its London IPO
The US needs to be involved in pillar one for there to be more international acceptance of the project, Michael Masciangelo says
The UK regulator is investigating EY’s auditing of the national postal service as it relates to the high-profile Horizon scandal, which saw hundreds wrongfully convicted
Gift this article