Polish Ministry of Finance clarifies CFC
By Artur Plutowski, EFS Group Sp.z.o.o.
On 1 January 2015, Poland introduced the Controlled Foreign Corporations (CFC) regime. Clarifications to the CFC were recently published by the Ministry of Finance (MF). Among others, the CFC regime is applicable if the following conditions are met (cumulatively):
a. Polish resident (directly or indirectly) holds at least 25% of share capital or voting/profit rights for a minimum of 30 days
b. At least 50% of profit earned comes from passive sources (e.g. dividends, disposal of shares/stocks, interest, IPR)
c. Any type of the passive income is either exempt or excluded from taxation or is taxed at a lower rate (by 25%) than in Poland
Under the clarifications, the MF tightened some conditions and claims that a holding ratio (25%) should be understood as the cumulative holding of a taxpayer, spouse and relatives (e.g. children, siblings, parents). The MF confirms that the CFC will not apply to entities established in the EU Member States or EEA countries and conducting factual business activities, for example:
a. Setting up of the CFC is triggered by existence of a going concern, e.g. office, qualified staff, equipment used for business purposes
b. Equivalency exists between scope of activity of the CFC and its office, qualified personnel and equipment used
c. Arrangements concluded by the CFC are in line with business practice, are commercially reasonable and are not purely against the commercial interest of the CFC
d. The CFC executes its basic business functions itself by using its own resources
EFS Group Sp.z.o.o., Lodz, Warsaw, Poland
T: +48 22 828 48 75
The EFS Group provides Polish and international tax and legal services to companies and HNWI both considering Polish investment opportunities and already doing business in Poland. It works closely with clients and provides added value that makes a real difference.
Artur Plutowski gained experience in providing 15 years of continuous support to a wide range of clients, starting from large multinational groups, family-owned businesses and HNWI. The focus is on local and international structuring and restructuring, M&A, litigation and transfer pricing.
published: April 2015