What method of financing will be better for our company to increase the capital or to apply for a loan?

The rule is that Polish limited liability company, which are a part of international groups are being funded by foreign related entities. Depending on the form there will be different tax consequences of receiving these funds.

There is an option of financing with equity, meaning increasing the initial capital or supplementary capital by cash contribution and also the possibility of debt financing.

Financing with equity allows the neutral from the perspective of the corporate income tax (CIT) providing of financial resources to the Polish company. The amount of income received for the establishment or increasement of share capital is not a tax income for a company. This principle also applies to payments contributed to the company and the amounts and values being excess of the issue value over the nominal value of shares or stocks (called agio).

Regarding the debt financing the most common method is a loan. A similar financial effect can be achieved by acquisition of newly issued debt securities (such as bonds) or by cash-pool financing. Since the above issue might be complicated please contact us before choosing the most effective method of increasing the capital of your company.