Participation exemption in Poland

2026.11.03 Author: Robert Nogacki

The participation exemption (zwolnienie dywidendy z opodatkowania) is the exclusion from income tax of a dividend flowing between companies linked by capital. The point is that profit taxed once in the subsidiary is not taxed again in the shareholder. In Poland the exemption operates in three forms.

The first is the exemption of Article 22(4) of the Corporate Income Tax Act of 15 February 1992 (the CIT Act). It covers dividends paid by Polish companies to shareholders from Poland, the European Union and the European Economic Area and implements Council Directive 2011/96/EU. The second is the exemption of Article 20(3) CIT Act for dividends a Polish company receives from the EU and the EEA. The third is the Polish holding company regime (Articles 24m to 24p), which also covers dividends from subsidiaries outside the EU. The common denominator is a holding of at least 10 percent kept for 2 years and anti-abuse clauses.

Key points

The exemption of Article 22(4) CIT Act covers dividends, the equivalent of profit allocated to share capital and undistributed profits on conversion into an entity that is not a legal person (Article 7b(1)(1)(a), (f) and (j)). It does not cover income from redemption of shares or from liquidation, although those are also income from participation in profits.
Conditions: the distributing company is a Polish CIT taxpayer; the recipient is a company from Poland, the EU or the EEA taxed on its worldwide income; it holds directly at least 10 percent of the capital; it does not benefit from an exemption of all its income. For a Swiss company the threshold is 25 percent (Article 22(4c)).
The holding must be kept for an uninterrupted 2 years (Article 22(4a)), but the period may run out after the payment. On an earlier disposal the recipient pays the tax with interest running from the day after it first benefited from the exemption, by the 20th day of the month following the month in which the right was lost (Article 22(4b)).
The non-exemption condition does not require tax to be paid on the specific dividend. Under the general ruling of 15 November 2024 an income-specific exemption for dividends at the recipient and the absence of tax because of a loss do no harm; an entity-level exemption, or an equivalent such as a zero rate on all income, does.
The exemption does not apply where obtaining it conflicts with the object or purpose of the provisions, was the main purpose or one of the main purposes of the transaction and the arrangement was artificial (Article 22c). In 2026 the Supreme Administrative Court held that Article 22(4) does not require beneficial ownership, but rejected the look-through approach for this exemption.
The withholding agent applies the exemption after receiving a certificate of residence and the recipient’s written statement (Article 26(1c) and (1f)). Payments to a related entity above PLN 2,000,000 a year fall under pay and refund, discussed in the entry on dividend withholding tax in Poland.

Conditions of the Article 22(4) exemption

Condition	Basis	Practice
Distributing company: CIT taxpayer with seat or management in Poland	Article 22(4)(1)	also limited partnerships and limited joint-stock partnerships; the exemption does not cover the general partner’s income (Article 22(4), introductory sentence); a limited partner has a separate partial exemption: 50 percent of revenue, up to PLN 60,000 a year per partnership (Article 22(4e))
Recipient: company taxed on worldwide income in Poland, the EU or the EEA	Article 22(4)(2)	certificate of residence; a transparent entity is not a recipient, its partners are the taxpayers and the conditions are examined at their level
Direct holding of at least 10 percent of capital	Article 22(4)(3)	25 percent for Switzerland (paragraph 4c); an indirect holding is not enough
Not benefiting from an exemption of all income	Article 22(4)(4)	general ruling of 15 November 2024: an income-specific exemption for dividends and a loss do no harm; an entity-level exemption excludes
Holding kept for an uninterrupted 2 years	Article 22(4a) and (4b)	the period may run out after payment; disposal before it expires means tax with interest
Title to the shares	Article 22(4d)	the qualifying holding must derive from ownership (point 1); income from shares held under another title is also covered if it would qualify had possession not been transferred (point 2(b))
Recipient’s statement and certificate	Article 26(1c) and (1f)	written statement on the condition of point 4, certificate covering the payment date
Basis for exchange of information	Article 22b	the exemption applies where there is a legal basis for the exchange of tax information with the recipient’s state

The two-year period runs from the acquisition of the shares. It may run out after the payment, because the statute allows the condition to be met later (Article 22(4b)). If the recipient disposes of the shares before 2 years have passed, it pays 19 percent tax with late-payment interest. Interest runs from the day after the day on which it first benefited from the exemption. The payment deadline is the 20th day of the month following the month in which the right was lost.

Mergers and conversions on the recipient’s side need not interrupt the period where the successor enters into all the rights of its predecessor. The authorities examine this cautiously, and documentation of the succession is worth having.

The holding must be direct. A dividend flowing through an intermediate company is exempt only where the intermediary itself meets the conditions. In a series of judgments of 8 July 2026 (II FSK 185/25, 818/25, 863/25, 79/26 and 80/26) the Supreme Administrative Court rejected the possibility of “skipping” the intermediary and applying the exemption to a company higher up the structure, although the Ministry of Finance had admitted it in its guidance of 3 July 2025; the state of the dispute is discussed in a commentary on prawo.pl (in Polish).

The non-exemption condition after the general ruling

For several years some authorities and courts derived from Article 22(4)(4) a requirement of effective taxation of the dividend itself in the recipient’s state. That excluded holding companies in Luxembourg, the Netherlands or Ireland which benefit there from an exemption for dividend income derived from the same directive.

In general ruling No. DD9.8202.1.2024 of 15 November 2024 the Minister of Finance accepted that the condition concerns an entity-level exemption. The recipient must be subject to income tax on its worldwide income without an entity-level exemption or an equivalent situation, such as a zero rate on all its revenue. An income-specific exemption for dividends and the absence of tax because of a loss do not remove the exemption. Compliance with a general ruling protects under Articles 14k and 14m of the Tax Ordinance, within the facts the ruling addresses; an English summary is available in a KPMG tax alert.

The case law confirms this direction. In its judgment of 6 February 2026, II FSK 1150/25, the Supreme Administrative Court rejected the “effective taxation” concept, and in judgments of 12 August 2026 it held that an exemption of one category of income is not an exemption of the company from tax on all its income, even where dividends are its main revenue.

The Minister of Finance treated interest and royalties differently. In general ruling No. DD9.8202.2.2024 of 20 November 2024 he took the position that an income-specific exemption of those payments in the recipient’s state excludes the exemption of Article 21(3). Details in the entries on withholding tax on interest and withholding tax on royalties.

Article 22c, the beneficial owner and due diligence

Article 22c CIT Act denies the exemption where, in the circumstances, obtaining it conflicts with the object or purpose of the provisions, is the main purpose or one of the main purposes of the transaction or other act, and the arrangement is artificial. An arrangement is artificial where it would not have been adopted for valid commercial reasons. A tax benefit alone does not replace that analysis. The provision implements the clause of Directive 2011/96/EU and operates alongside the general anti-avoidance rule of Article 119a of the Tax Ordinance.

Beneficial ownership is a separate question. Article 22(4) does not list that condition. In its guidance of 3 July 2025 the Ministry of Finance took the position that the withholding agent must examine it also for dividends. The Supreme Administrative Court, in its judgments of 3 February 2026 (II FSK 674/25) and 6 February 2026 (II FSK 1150/25), held that a literal reading does not allow that condition to be added. The court did not close the door to the authorities: in II FSK 674/25 the exemption was lost because a fund without staff, premises or its own investment decisions was treated as an artificial structure under Article 22c; see the EY commentary (in Polish).

The reference point remains the Court of Justice’s judgments of 26 February 2019 in C-116/16 and C-117/16 (T Danmark). The prohibition of abuse of rights is a general principle of EU law, and a Member State must refuse the benefit where an assessment of the objective and subjective elements of the structure shows abuse. Passing the dividend on and a lack of economic independence are indicia, not an automatic verdict.

For a company that wants to apply the exemption safely this means the following: the statutory conditions must be met formally, and the recipient’s substance and the reasons for the structure must be documented as if Article 22c were going to be applied. These disputes are discussed in our articles on beneficial ownership and dividend distributions and on the anti-abuse clause and the parent-subsidiary dividend exemption.

Foreign dividends and the Polish holding company

A Polish company receiving a dividend from an EU or EEA company is exempt under Article 20(3) CIT Act. The conditions are set in Article 20(9) to (11) and (15): a holding of at least 10 percent for 2 years, taxation of the distributing company on its worldwide income in a Member State and no entity-level exemption. For a Swiss company the threshold is 25 percent (Article 20(12)(2)). The exemption does not cover payments on the liquidation of the distributing company (Article 20(11)) or payments that were deducted or deductible in the source state (Article 20(16)).

Dividends from outside the EU and the EEA are taxed in Poland. The company credits the tax withheld at source (Article 20(1)) and, for a holding of at least 75 percent for 2 years in a company from a treaty state, also the tax paid by the subsidiary on its income (Article 20(2)). The settlement of such income is described in the entry on the taxation of foreign-source income.

The alternative is the Polish holding company regime (Articles 24m to 24p CIT Act). A limited liability company, simple joint-stock company or joint-stock company that carries on genuine business activity, is not a member of a tax capital group, does not use special economic zone exemptions and whose shares are not held, directly or indirectly, by an entity from a tax haven or a jurisdiction without exchange of information exempts in full the dividends received from domestic and foreign subsidiaries (Article 24n). The conditions, including a direct holding of at least 10 percent, must be met continuously for at least 2 years as at the day preceding the income (Article 24m(2)). The exemption does not cover dividends from a foreign subsidiary that meets the conditions of a controlled foreign company, with the exceptions of Article 24n(3) and (4). The regime also covers income from the sale of subsidiary shares to an unrelated party (Article 24o), except companies whose assets consist at least 50 percent of Polish real estate (Article 24o(3)). The full picture is on the page holding exemption, and holding structures in the entry on holding companies in tax law.

What to check before applying the exemption

The type of income: dividend, profit allocated to share capital or undistributed profits on conversion; redemption and liquidation are outside the Article 22(4) exemption.
The holding: direct, by ownership, at least 10 percent (25 percent for Switzerland), the acquisition date and the planned holding period; on disposal before 2 years, tax with interest.
The recipient: a legal form from Annex 4 to the CIT Act, residence confirmed by a certificate, no entity-level exemption; an income-specific exemption for dividends and a loss do no harm.
The statement under Article 26(1f) in writing before payment; for a transparent entity, the partners’ statements and certificates.
The recipient’s substance: management, staff, premises, own decisions on funds; the commercial rationale of the structure written down before payment, with Article 22c in mind.
The PLN 2,000,000 threshold to a related entity in the agent’s year: a WH-OSC statement or an opinion on the application of preferences under Article 26b.
On the side of a Polish recipient of foreign dividends: Article 20(3) or the Polish holding company regime, with the conditions of each checked separately.

How it compares elsewhere

The Netherlands, which created the deelnemingsvrijstelling, exempts dividends and capital gains from a holding of 5 percent, without a holding period, provided the subsidiary is not a low-taxed passive investment. Germany excludes 95 percent of the dividend from the base for a holding of at least 10 percent (section 8b Körperschaftsteuergesetz). The United Kingdom exempts most dividends without a holding threshold. The Polish 10 percent threshold and 2-year period match the directive’s minimum, while the recipient’s statement and the dispute over effective taxation, wound down only by the 2024 general ruling and the 2026 judgments, are Polish particularities. Rates and exemptions are collected in PwC Worldwide Tax Summaries.

Frequently asked questions

What are the conditions of the Polish dividend exemption?

A Polish distributing company, a recipient that is a company taxed on its worldwide income in Poland, the EU or the EEA, a direct holding of at least 10 percent (25 percent for Switzerland) kept for an uninterrupted 2 years and no entity-level exemption of the recipient (Article 22(4) to (4d) CIT Act), confirmed by a certificate and a statement.

Must the 2 years of holding expire before the payment?

No. The condition may be met after the payment (Article 22(4b)). If the recipient disposes of the shares earlier, it pays the tax with interest running from the day after it first benefited from the exemption, by the 20th day of the month following the month in which the right was lost.

Does a Luxembourg or Dutch holding lose the exemption because it pays no tax on the dividend itself?

No. Under the general ruling of 15 November 2024 and the 2026 judgments an income-specific exemption for dividends in the recipient’s state does not exclude the Polish exemption. An entity-level exemption of the recipient from tax on all its income does.

What is the clause of Article 22c?

A provision denying the exemption where obtaining it conflicts with the purpose of the provisions, was the main purpose or one of the main purposes of the transaction and the arrangement was artificial. The mere existence of a holding company is not enough; the authority must show the absence of valid commercial reasons.

Is a dividend from abroad exempt in Poland?

A dividend from an EU, EEA or Swiss company is exempt on the conditions of Article 20(3) and (9) to (15) CIT Act. A dividend from other states is taxed with a credit for foreign tax, unless the recipient meets the conditions of a Polish holding company (Article 24n).

The exemption for dividend income is defended with documentation prepared before payment: the certificate, the statement and a description of the recipient’s substance. Skarbiec Law Firm verifies the conditions of the exemption, prepares the commercial rationale of the structure and represents companies in refund proceedings and in disputes under Article 22c; the scope is described on the page withholding tax, and the design of structures in our article on the holding structure as asset protection.

Legal status as of 2 November 2026.