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Hidden dividend law to be repealed


by Piotr Ziółkowski

21 July 2022 ​


The Finance Ministry's draft amendments to the CIT Act repeal the provisions on hidden dividend that were supposed to become effective in 2023.
The ministry has met the demands of trade organisations, businesses and experts who have raised numerous concerns about the application of the controversial law.

Doubts surrounding the hidden dividend

The hidden dividend law was introduced by the Polish Deal legislative package and were supposed to be effective from 1 January 2023. It was designed to prevent distribution of profit in a way that reduces the taxpayer's income by including certain payments in tax-deductible expenses.
The lawmakers wanted to make payments to shareholders and their associated enterprises as well as company's associated enterprises non-deductible whenever:

  • the amount or the date of the payments would depend in any way on the taxpayer's earning the profit or on the amount of that profit;
  • a reasonable taxpayer would not make such payments or would pay less if an independent enterprise rendered similar services;
  • the payments would be made for the right to use assets owned or co-owned by the shareholder (or an associated entity of the shareholder) before the taxpayer was formed.


The complexity and inaccurate wording of the regulations raised concerns that they would also apply to economically justified business transactions among associated enterprises. As a result, payments for e.g. licences, leases, managers' salaries, could be disqualified from tax-deductible expenses.
There were also doubts about the concurrent application of the hidden dividend law and transfer pricing rules.

Law revoked

Due to the broad range of grounds for treating expenses as a hidden dividend, too many anti-abuse provisions which could apply to similar payments, and the adverse impact of the hidden dividend law on corporate groups, the ministry has decided to abandon the hidden dividend law altogether.
The bill amending the Corporate Income Tax Act and certain other acts is now in the review stage.
Do you have questions? Contact Rödl & Partner experts. 


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