How not to pay tax on the sale of shares in a company?

Polish Holding Company (PSH)

The provisions on PSH enable limited liability companies, joint-stock companies or simple joint-stock companies to obtain holding company status, provided that certain requirements are met – conducting actual business activities, not being part of a capital group or benefiting from zone exemptions, and holding at least 10% of the shares in a subsidiary, no shares (stocks) in that company are held, either directly or indirectly, by a shareholder having its registered office or management board, or being registered or situated in a territory or country designated as engaging in harmful tax competition. In return for meeting these conditions, the holding company obtains:

• full exemption from CIT on dividends received from subsidiaries,
• full exemption from CIT on the sale of shares in subsidiaries, provided that the transaction is carried out with an unrelated entity and the company submits an appropriate declaration at least 5 days prior to the planned sale.

However, the exemption does not apply to shares in real estate companies where at least 50% of their assets consist (directly or indirectly) of real estate located in Poland.

Family Foundation (FF)

A family foundation may manage family assets, including acquiring and disposing of shares and securities, in accordance with the list set out in Article 5(1) of the Family Foundation Act. The advantage of this solution is the ability to sell shares, or even the entire business, through a family foundation without having to pay corporation tax, which allows funds to be reinvested in a tax-neutral manner. However, it is important to maintain the economic rationale of the transaction and avoid the appearance of a sham, so as not to risk being assessed as engaging in aggressive tax optimisation by the National Revenue Administration. Assessing whether the sale of shares by a family foundation falls within the statutory list of permitted activities requires an analysis of the factual circumstances surrounding the transaction. For example, it may be significant whether the decision to sell the shares was taken only after they had been transferred to the family foundation, whether the proceeds from the sale will be used by the foundation for further investments, and whether these funds will be used for the purposes provided for in the Family Foundation Act. Each of these factors may influence the assessment of the validity and compliance of the transaction with the provisions of the Family Foundation Act.

IKE and IKZE

The Individual Pension Account (IKE) and the Individual Pension Security Account (IKZE) are instruments designed for individuals who wish to invest in shares, bonds or funds with a view to the future. Both accounts allow funds to be accumulated without the need for ongoing capital gains tax settlements. In the case of an IKE, the withdrawal of accumulated funds upon reaching the relevant age, provided certain conditions regarding the regularity of contributions are met, allows for full exemption from tax on gains realised within the account. An IKZE, on the other hand, combines the ability to deduct contributions from income in the annual tax return with preferential taxation of the funds upon withdrawal – provided that the statutory conditions are met. Thanks to these solutions, investors can effectively accumulate capital, benefiting from tax advantages both during the saving phase and at the time of withdrawal, which provides significant support for long-term investment and saving strategies.

Summary

In practice, PSH and FR are advanced, legal structures designed to optimise investment processes, aimed primarily at businesses and families. They benefit from CIT relief, provided that formal and economic requirements are met. In turn, IKE and IKZE enable individuals to avoid capital gains tax, provided they meet the age and contribution requirements.

Whether planning the structure of an optimisation scheme or using products for individual investors, it is always worth conducting a thorough analysis to minimise the risk of a negative response from the tax authorities.

Author

Piotr Magda

Radca prawny, Senior Associate

The practice includes ongoing advice on administrative and tax law. He has extensive experience in handling judicial, administrative, tax and judicial-administrative proceedings concerning both individual clients and business entities, including that gained through many years of providing services to local government units and other units of the public finance sector.

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