The functioning of the Tax Capital Group is associated with the reduction of CIT liabilities in the capital group. This is due to the fact that the tax capital group income is calculated as the sum of the income and losses of the parent company and its subsidiaries. Therefore, the creation of the PKG may turn out to be an interesting solution for some taxpayers.
The Tax Capital Group (hereinafter: PGK) is an institution of tax law defined in art. 1a of the Corporate Income Tax Act (hereinafter: the CIT Act). In the light of the mouth. 2 of this article, a group of at least two commercial law companies (legal persons) remaining in capital relationships may be treated as a taxpayer referred to as a "tax capital group".
In order for the above to happen, the following conditions must be met (Article 1a (2) of the CIT Act):
PGK may only be established by limited liability companies, simple joint-stock companies or joint-stock companies with their registered office in the territory of the Republic of Poland, if:
the average share capital for each of the companies in the group may not be less than PLN 500,000, and
the parent company must have a direct 75% share in the share capital of other subsidiaries included in the TCG and
subsidiaries may not hold shares in the share capital of other companies included in the TCG and
the companies forming the TCG have no tax arrears.
Agreement to establish a tax capital group:
concluded in the form of a notarial deed,
will stay for a period of at least 3 tax years,
will be registered by the competent head of the Tax Office.
PGK must maintain the share of income in revenues (the so-called profitability) in the amount of at least 2% for each tax year.
Companies forming PGK:
cannot use the services indicated in point 3 (a). a tax exemptions and
in the case of a controlled transaction with related entities that are not part of the group, do not establish or impose conditions other than those that would arise between unrelated entities, while meeting the provisions of point 3 (a). b.
The legislator made it possible to use this legal and tax tool to reduce tax liabilities within the capital group. Moreover, PGK ensures greater freedom of making transactions between its related entities.
In connection with the above, the main benefits of the operation of TCGs are the following aspects: 1. The taxpayer of CIT becomes the taxpayer, while all companies belonging to the group cease to be taxpayers - this is a facilitation for the companies belonging to the group, as they do not settle the tax separately. 2. Advance payments for CIT income tax and CIT income tax are calculated, collected and paid by the parent company on behalf of the entire group - thanks to this, formal obligations for entities belonging to the group have been limited. 3. Reduction of the total amount of CIT liabilities by calculating the tax capital group income as the sum of the subsidiaries' income and the sum of their losses (Article 1a (7) of the CIT Act). 4. The abolition of the limit of tax deductible costs when purchasing intangible services, rights or intangible assets from related companies (Article 15e of the CIT Act). 5. The abolition of the limit of tax costs due to debt financing costs in the case of contracts with a party being part of the tax group (Article 15c of the CIT Act. about transfer pricing.
However operating within such a group is also associated with riskwhich results from the need to comply with very strict PGK conditions.
Interested? Read the continuation of the article about PGK: