Business in Poland
Law, tax and banking. Chapter 6
Most Polish banks offer a wide range of financing products for corporate cus- tomers, such as
Investment loans and project finance,
The customer is usually asked to specify and explain the objective for the funding required. In addition, the customer is asked to provide collateral for the credit facility.
Short-term funding is essentially obtained through bank overdrafts. Rates vary but are all based on the Warsaw Interbank Offered Rate (WIBOR). Leasing and factoring are available.
6.7.2. Inter-company funding
Tax on inter-company loan applies to all intra-group loans and currently levels at 2% of the loan amount. However, if a loan is granted by the direct shareholder of the borrower, is provided by the foreign company, if this company s activity is to grant loans, or is meant for starting up or continuing the core business activity of the company, such a loan is exempt from tax on civil act transactions.
Additionally, inter-company loans have to observe thin capitalisation and transfer pricing requirements.
Under Polish transfer pricing rules, transactions between related entities should be concluded taking into account the arm s length principle i.e. at prices which would have been set in this given type of transactions between unrelated com-
Based on the Polish thin capitalisation rules, interest paid on certain loans/credits drawn from qualified lenders (specifically related entities) cannot be recognised as a fully tax deductible cost. The part of interest paid on such restricted loans/credits is not deductible for corporate income tax purposes in relation to the part of the Polish entity s total debt to specific companies exceed- ing three times the value of the share capital. The term loan includes also the issue of bonds and other debt instruments as well as deposits.
A qualified lender is defined as:
a shareholder holding at least 25% of the debtor s shares,
two or more shareholders holding together at least 25% of the debtor s shares,
sister companies, if the same shareholder holds at least 25% of the shares in the creditor and the debtor company.
Danske Bank / KPMG / Mazanti-Andersen, Korsø Jensen & Partnere January 2006