TCG – a tax capital group (a group of companies jointly accounting for CIT) is a completely safe and compliant solution that supports reducing an effective tax rate at a capital group level, which has become an increasingly attractive alternative.
Changes have been recently introduced that make it easier to establish and function within a TCG.
For whom?
- TCG may be established by a group of at least 2 companies that are Polish tax residents;
- A parent company in a TCG must have at least 75% of shares in subsidiaries (at the same time, mutual connections between subsidiaries that form a TCG have become possible);
- Average share capital per company is also required in the amount of PLN 250,000;
- Upon establishing a TCG, companies cannot report tax arrears with regard to taxes constituting the income of the state budget..
Benefits
- Consolidation of CIT results at a group level – especially attractive when part of group entities are profitable, while others report tax losses.
- Along with the recent changes in tax regulations, a possibility to settle some losses of companies arising in a period before the establishment of a TCG.
- Reduction of formal obligations in CIT – all companies that are members of a TCG are represented by one entity – a parent company.
- Specific regulations with regard to the limits of debt financing costs (when calculating the excess of debt financing costs, interest costs and revenues resulting from contracts to which only companies forming a TCG are parties are not taken into account).
- Exemption of transactions within TCG from the obligation to prepare local transfer pricing documentation.
- Possibility to carry out some reorganization activities (e.g. a division of a subsidiary) while maintaining a taxpayer status by a TCG.
- Elimination of the TCG’s profitability requirement (i.e. the share of TCG income in revenues at a level of at least 2%).
- Simplified conditions for concluding an agreement to establish a TCG (resignation from the requirement of a notarial deed in favor of a written form) and an agreement to extend its functioning (possibility to amend an existing agreement instead of the obligation to conclude a new agreement for a next period).
How can we help?
We provide comprehensive support to capital groups: at the stage of a feasibility study for implementation of a TCG, reviewing consequences, benefits and risks, as well as at the stage of registration and operation of a TCG.
We will develop a feasibility study
We will assess a possibility of meeting the formal criteria by a group – we will indicate TCG eligible entities,
We will assess benefits and possible tax and financial risks of operating within a TCG,
We will calculate an impact of establishing a tax group on an effective tax rate in a group – based on forecasted results for the coming years,
We will present recommendations to a TCG's functioning model, entities that should join it, as well as a practical settlement mechanism after creation of a TCG.
We will support at the implementation stage
We will prepare documents necessary to establish / extend operations of a TCG,
We will represent companies that make up a TCG before the head of the competent tax office in matters related to establishment of a TCG or its extension,
We will draft sample internal documentation related to functioning within a TCG.
We will advise on functioning of a TCG
We will provide ongoing tax advice on TCG-specific matters,
As and when needed, we will apply for individual interpretations of regulations related to TCG functioning.
Feel free to contact us
Monika Dziedzic
Partner | Tax adviser | Attorney at Law E: monika.dziedzic@mddp.pl T: (+48) (22) 322 68 90