Optimising the taxation of business conducted in Poland through the use of personal companies allows to avoid double taxation, which would occur at the stage of payment of dividends from the capital company.
The use of a moose foreign passenger company sometimes allows for a total reduction of income tax at the stage of repatriation of profits generated to Poland, usually directly to the real beneficiary, who is a partner of such a company.
Participation in a foreign partnership constitutes an establishment (and permanent establishment) within the meaning of Article 5 most double taxation agreements.
The profits of the establishment may, on the other hand, be taxed only in the country where the establishment is situated, equivalent to the registered office of the foreign passenger company.
At the same time, where an agreement provides for a method only with progress as a way of avoiding double taxation, Poland is required to exempt revenue paid as a participation in a foreign passenger company from taxation in Poland, and this revenue may be taken into account when determining the income tax rate applicable to the other income of the person concerned, from Polish sources.
This legal qualification is confirmed in many individual interpretations, e.g. the Director of the Tax Chamber in Bydgoszcz in an individual interpretation from 31 July 2013 (reference no.
ITB1/415-575/13/MW) concluded that "the activity of a company based in Slovakia, which is operated by an applicant - a Polish tax resident, will constitute a Slovak plant of this person... ".
The most popular method of this mechanism are Slovak limited companies. Their popularity is due to change of day 1 January 2013 Polish-Cyprian double taxation agreement . Aport of shares in a Cypriot company to a Slovak limited partnership allows tax-neutral dividend to be paid on the basis of European law.
The Slovak company is exempt from taxation in respect of the dividend received from Cyprus, and the payment of the profit to its Polish partner from the perspective of the Polish-Slovak double taxation agreement is treated as the profit of the Slovak shareholder establishment and can therefore only be taxed in Slovakia.
At the same time, Slovak national law does not provide for taxation of such non-resident profits. As a result, the payment of profit from the Slovak limited partnership is not effectively taxed in Poland or Slovakia. These tax advantages are possible because the Slovak company has the status of a Slovak tax resident.
Due to the delay in the planned ratification of the protocol amending the Polish-Slovak Agreement, it is increasingly likely that the above solutions will also work. In 2014
Source: Business Pulse, Author: Rafał Nawrot