No tax exemption for dividend payments and participatory loans


On April 14, 2014, the draft amending the PIT and CIT Act was submitted to the Sejm. It consists of two other projects already developed in 2013:

  • the Act on amending the CIT and PIT Act, containing provisions on Controlled Foreign Corporation - CFCs

  • the Act on amending the CIT Act, the PIT Act and some other acts.

The main objective of the changes provided for in the planned amendment is to combat harmful competition from states that apply highly optimizing tax systems and to counteract practices aimed at postponing - or even avoiding - taxation.

Additionally, modifications will be introduced to clarify and tighten the current state of tax regulations.

Exclusion of the right to benefit from tax exemption for dividend payments and participatory loans

The proposed amendment to the provisions provides, inter alia, exclusion of the right to benefit from tax exemption in the case of payment of dividends and other income (revenues) from participation in the profits of legal persons subject to deduction in the paying company (the so-called participatory loan). This is primarily to eliminate the possibility of "double non-taxation" of profits transferred by affiliated companies based in an EEA country to Polish residents.

Assessment of the financial effects of the changes to the amendments to the PIT and CIT Acts

It is estimated that the introduction of the above-mentioned exemption from the right to benefit from the tax exemption may result in an increase in the revenues of the public finance sector in the amount of approximately PLN 15 million. When determining this increase, the data resulting from information on the amount of income earned by CIT taxpayers who have no headquarters or management in Poland were taken into account.

The period under study covered the years 2009-2011. The calculations assumed that participation loans constitute 1% of tax-exempt income from dividends and other income (income) from participation in the profits of legal persons.

The aforementioned amendment to the CIT Act is one of many planned by the government. Modifications regarding:

1) introduce provisions on the principles and conditions of income taxation

controlled foreign companies;

2) introduction of rules for determining the initial value of fixed assets in the company

European, European cooperative and a foreign plant located at

territory of the Republic of Poland;

3) an unambiguous indication of how to determine the value of revenues and costs of benefits

in nature;

4) introducing a solution consisting in shifting income taxation

on account of the contribution by, inter alia, universities, research institutes as well as individuals

physical (innovative creators) to the company of an in-kind contribution in the form of ownership

intellectual property (e.g. patent, copyright, know-how) for a period of 5 years from the date of acquisition

thus shares (stocks);

5) clarification of the provisions on undistributed profit.