On 25 September 2026, the Polish Ministry of Finance submitted a draft amendment (UD116) to the Council of Ministers proposing significant changes to the Controlled Foreign Company (CFC) regime, known locally as “Podatek od przerzuconych dochodów”. The reforms aim to align with OECD BEPS Action 3 and EU ATAD directives, targeting artificial profit shifting to low-tax jurisdictions. Key changes include expanding the definition of controlled entities, lowering the effective tax rate threshold for exemption, and introducing stricter substance requirements for foreign subsidiaries. The proposed effective date is 1 January 2027.
Key Takeaways
- Expanded Scope and Lower Thresholds: The draft lowers the effective tax rate safe harbor from 25% to 15% of the Polish corporate income tax rate (currently 19%), meaning foreign entities taxed below 2.85% would be subject to CFC inclusion. It also broadens the definition of “control” to include indirect ownership and contractual arrangements.
- Enhanced Substance Requirements: The proposal introduces a mandatory “substance test” requiring foreign entities to have adequate personnel, premises, and operational expenditure. Failure to meet these criteria will trigger automatic CFC taxation on passive income categories such as dividends, interest, royalties, and certain service fees.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement