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Poland

Shareholder loans to a company

The Polish Legal Persons Income Tax Act was recently amended, changing the status of loans granted by a shareholder to a company. The changes may have significant repercussions on multinational holdings with inter-company loans. The newly amended statute states that the interest from loans meeting the criteria outlined below are not considered to be a revenue earning cost.

Loan given from one company to another company where the shareholder holds stock in the loan-granting company

When (a) a shareholder in one company, who holds no less than 25% of the shares in that company, gives a loan to the company, or shareholders having, in total, no less than 25% of the shares give a loan to the company; or (b) a loan is extended by more than one shareholder if and when, in total, they own at least 25% of the shares; and, (c) if the total liability of the said company towards this shareholder owning at least 25% of the shares, or those shareholders holding at least 25% of the shares in the company, reaches the tripled amount of the value of the share capital of the company; then, the amount which is not considered to be a revenue earning cost is the interest from the loan calculated from the amount by which the loan exceeds the tripled amount of the capital of the company.

Loans between companies where the shareholder owns shares in both entities

(a) When a loan is granted by one company to another company, and if in both of these companies an identical shareholder holds at least 25% of shares or a loan is extended by more than one shareholder if and when, in total, they own at least 25% of the shares; and,(b) if the total liability of the company towards the shareholder and/or the other company, or towards those shareholders holding at least 25% of the shares in one of the companies, reaches three time the value of the share capital of the company; (c) then, the amount which is not considered to be a revenue earning cost is the interest from the loan calculated from the amount by which the loan exceeds the tripled amount of the capital value of the company.

Grandfathering Clause

According to the new regulations, the restrictions in the above statute are binding on loan agreements executed after the effective publishing date of this legislation. In effect, this creates a situation where a grandfathering clause operates for an agreement executed prior to the publishing of the new legislation. However, in order for this grandfathering to apply, certain conditions must be met.

The regulations require that a loan agreement, to which a grandfathering should be applied, must be registered with the Treasury Office together with the relevant information with regard to the interest and security arising out of the loan agreement.

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