A decision as to the manner of financing is to be taken, but firstly an analysis is required.
In Poland there are three most common ways of obtaining financing from shareholder(s):
- One way is via an additional payment. The repayment procedure is relatively difficult since the possibility of repayments is on a condition that the funds are not required to cover the losses shown in the financial statements (Art. 179 ofthe Commercial Companies Code). Additional payments are made in proportion to the contributions of shareholders and by ways of a shareholders resolutions. The tax on civil law transactions (PCC) should be paid in accordance with Art. 1 Item 3 No. 2 of PCC Act, as an additional payment is treated as the change of the AoA.
- A capital increase is another way of additional financing. The value of share capital is increased by ways of increasing nominal value of existing shares or issuing new shares. A capital increase or decrease, is a very formalized and time consuming process in comparison to an additional payment e.g. requires court registration or calling up creditors within a specified period of time. The process is also expensive i.e. court and notary fees. In this situation PCC tax is also required to be paid.
- The third popular way of financing is via a loan – the most basic and easiest method. There are no costs of tax on civil law transactions (PCC) as a loan from a shareholder is exempt. The repayment of the loan can be made without a time limit or any extra conditions. However, it is worthwhile considering potential thin capitalization issues where interest accrued on loans granted to the company by shareholders (defined as per Articles 60 & 61 of the Tax Law), if the amount due by the company to such shareholders is three times bigger than the value of the share capital of the company, is not tax deductible (in the part in which the loan exceeds the value of debt assessed for the day of repayment of the interest.
Taking into consideration the formal and legal aspects, the LLC has decided to take a loan. Also, the company was informed that interest from the loan can be paid out to the shareholder, irrespective of same additional financial conditions. The return of the loan is flexible and can be made on request.
In order to arrange the loan, a loan agreement needs to be signed in a single written form.
Source: Trinity_Shelf_Companies
Market leader in Poland and one of the pioneers of ready-made, shelf companies
in the CEE.
