Polish Holding Company – important ruling of the Supreme Administrative Court on the residence of shareholders

The introduction of a tax exemption known as the Polish Holding Company (PHC) into the Corporate Income Tax Act was intended to increase Poland’s attractiveness as a location for investment structures and to create a competitive tax environment. It is difficult not to notice that on the tax map of Europe alone, Poland has long remained one of those jurisdictions where the exemption of dividends and interest from participation did not accompany the exemption of capital gains from the sale of shares.

The PHC allows for CIT exemption for, among other things, income from the sale of shares and dividends paid by subsidiaries, provided that certain conditions are met.

One of these conditions is the absence of direct or indirect shareholders with their registered office or management in so-called tax havens. This condition is intended to exclude from the scope of the exemption those Polish companies in which entities from tax havens have any capital involvement. This seemingly simple provision of the Act has caused many practical difficulties and, when interpreted literally, prevents the exemption from being applied to entities with a dispersed shareholding structure, such as public companies and companies owned by investment funds.

In its judgment of 9 July 2025, ref. no. II FSK 1425/24, the Supreme Administrative Court ruled in favour of a purposive interpretation of the PHC provisions. This is an important ruling that should affect the applicability of PHC to a wider group of taxpayers.

An impossible condition

Pursuant to Article 24m(2)(e) of the CIT Act, a holding company may not have entities from so-called tax havens in its ownership structure (either directly or indirectly). In practice, this means that the residence of the entire ownership chain must be verified, including above the level of direct shareholders.

In the case of listed companies, this requirement is essentially impossible to meet. The ownership structure of such entities is by its nature fluid, dispersed and, to a certain extent, even anonymous. Data on shareholders is often available only in aggregate form and changes dynamically as a result of stock exchange trading. As a result, the taxpayer may not have the actual ability to determine with certainty the residence of each indirect investor.

Approach of the authorities

The tax authorities have so far adopted a literal interpretation. In binding interpretations, the Director of the National Tax Information Service indicated that even partial lack of knowledge about the ownership structure – e.g. above the level of a public company – means that the condition of not holding, directly or indirectly, shares in a company by an entity from a tax haven is not proven and is therefore considered not to be met.

The authority did not accept the argument that taxpayers do not have the legal or technical tools to access full data on – often direct – shareholders.

The authority was not even convinced by the argument that the law cannot be interpreted in a way that would result in imposing obligations on an entity that are impossible to fulfil, in accordance with the principle of ‘impossibilium nulla obligatio est’. This position was presented, for example, in the interpretation of 27 December 2024, ref. no.: 0111-KDIB2-1.4010.574.2024.1.BJ.

Purposive interpretation by administrative courts

Administrative courts have begun to notice the limitations associated with excessive formalism. In judgments of the Provincial Administrative Court, including in Rzeszów of 20 May 2025, ref. no. I SA/Rz 126/25, and the Provincial Administrative Court in Warsaw of 18 September 2024, ref. no. III SA/Wa 1529/24 – arguments were raised that the obligation to determine the residence of indirect shareholders may be unenforceable, especially in the case of listed companies.

In the judgments cited above, the courts agreed with the taxpayers, pointing out that the requirement to fully identify all indirect shareholders cannot lead to a situation where a public company automatically loses its right to exemption, even though it operates in accordance with the law and exercises due diligence.

In their opinion, the analysis of the structure may end at the level of a listed company, where the entity has objective possibilities to verify the structure. A different approach would not only be disproportionate, but also contrary to the purpose-based interpretation of the provisions.

Analogous position of the Supreme Administrative Court

A similar view of the issue was presented by the Supreme Administrative Court in its judgment of 9 July 2025, ref. no. II FSK 1425/24.

The case concerned a public company which, after selling shares in a subsidiary, submitted a CIT-8 correction and an application for a refund, invoking the right to apply for tax exemption under the PHC regime. Despite fulfilling the material conditions and submitting the required statement, the tax authority refused the right to exemption, indicating that the company had not demonstrated the residence of all indirect shareholders.

The Supreme Administrative Court disagreed with this position. In the court’s opinion, a number of actions taken by the company should be considered sufficient: it obtained data on the shareholding structure from the National Depository for Securities, verified the available registers and information on the residence of shareholders, and collected statements where data was not available from other sources. In the opinion of the court, these were exhaustive measures, corresponding to the real capabilities of a company operating as a listed entity.

The court emphasised that it was difficult to indicate what more the taxpayer could have done in such a situation. This was particularly true given that the tax authority itself was unable to clearly specify what additional measures it expected.

In its oral justification, the court pointed out that the fulfilment of this condition should be analysed on a case-by-case basis and that there may be situations in which the taxpayer’s negligence will result in the loss of the right to apply the exemption.

What does this mean for taxpayers?

The judgment confirms that PHC preferences may also be used by taxpayers who, due to a dispersed shareholding structure, are unable to determine the full ownership structure, provided that they demonstrate that they have exercised due diligence in their analysis, i.e. that they have taken all possible steps to exclude entities from tax havens from their indirect shareholding structure.

The approach confirms the principle of ‘impossibilium nulla obligatio est’, which is one of the fundamental principles of law and should also apply in tax practice. Requirements that are impossible to meet cannot deprive taxpayers of their right to preferences.

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At MDDP, we assist in the analysis of holding structures and the safe application of the PHC regime, including the verification of all prerequisites necessary for the application of preferences. If you have any doubts, please contact our team of experts.

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