Share redemption (cancellation) in a Polish LLC is a legal process involving the irreversible destruction of some or all shares belonging to a shareholder. This operation leads to a reduction of a given person’s capital involvement in the company. It requires an entry in the National Court Register (KRS) and generates specific income tax obligations for both parties to the transaction.
What is share redemption in a Polish LLC?
Share redemption is the legal liquidation of a specific pool of shares, which always requires explicit authorization in the articles of association and a resolution of the shareholders’ meeting.
From the perspective of the Commercial Companies Code, redemption physically annihilates the rights and obligations arising from the held shares. The shareholder loses the voting rights from the cancelled shares. They also lose the right to a dividend attributable to this part of the capital. Their percentage share in the total ownership structure decreases. This is often a way for an investor to amicably exit a business without looking for an external buyer.
Based on our experience at Progress Holding, foreigners often confuse share redemption with their simple sale. A sale is a transfer of ownership to another person who takes the seller’s place. Redemption is the complete deletion of shares from the register. The pool of available shares is permanently reduced. We provide accounting for foreigners in Poland and thoroughly explain the differences in these operations.
When is share redemption legally permissible?
The procedure is only possible when the articles of association explicitly provide for the possibility of redeeming shares, and the company itself is registered in the KRS.
If your founding agreement does not contain a redemption clause, you must change it first. This requires a visit to a notary, a 2/3 majority vote of the shareholders’ meeting, and a court fee. Only after registering the new agreement in the National Court Register can the actual redemption process begin. You cannot redeem shares in a company in organization.
What are the types of share redemption in a Polish LLC?
Polish law distinguishes three basic types of redemption: voluntary, compulsory, and automatic (sanctioning).
Each of these modes is triggered in completely different business circumstances. The mode affects the valuation of shares and the rules for paying remuneration to the retiring shareholder. The decision to choose the path is always made by the shareholders’ meeting in the form of a resolution.
Voluntary share redemption by a shareholder
This is the most common and peaceful path. It consists in the shareholder voluntarily selling their shares to the company itself. The company acquires them for one purpose only — to destroy them immediately. The shareholders’ meeting must consent to this in a resolution. The shareholder and the company freely negotiate the buyout price (remuneration for redemption). This can be done with market remuneration or completely without remuneration.
Compulsory removal of a shareholder from the company
This mode allows depriving a shareholder of shares against their will. The articles of association must very precisely list the reasons why this can be done. An example could be the shareholder undertaking competitive activities or losing the required concessions. A resolution of the meeting is needed for compulsory expulsion. In this case, the remuneration for the shareholder cannot be lower than the book value of the shares resulting from the last annual financial statement.
Automatic redemption upon the occurrence of an event
This phenomenon occurs spontaneously after the occurrence of a specific event described in the articles of association. This could be the death of a shareholder or their declaration of consumer bankruptcy. This does not require a separate board resolution on the fact of redemption itself. The board only passes a technical resolution on lowering the share capital. This allows for the immediate exclusion of unwanted heirs or receivers from the company’s life.
From what funds does the company cover the share redemption?
An LLC can finance the remuneration for a shareholder from the company’s net profit or by deciding to formally reduce the share capital in the KRS.
The choice of funding source drastically changes the procedure before the registry court. The management board must carefully plan the operation from an accounting perspective. Company accounting services are our specialty at Progress Holding (prices from 799 PLN net). We always help boards select the most cost-optimal settlement option with a shareholder.
Redemption from generated profit (without reducing capital)
If your company has unpaid profits from previous years in its account, it can use them to pay the departing shareholder. In this situation, the total share capital in the KRS remains unchanged. Only the number of shares held by the remaining owners changes. This is a much faster and cheaper procedure because it does not require the so-called convocation proceedings towards the company’s creditors.
Redemption combined with share capital reduction
If the company has no free profits, it must use funds from the share capital. This forces the board to reduce this capital in the National Court Register. The law then protects the company’s creditors. The board must announce the reduction in the Court and Economic Monitor (MSiG). Then it must wait 3 months for possible objections from creditors. Only after this time can it physically pay the money to the former shareholder. This requires patience and accuracy.
What are the tax effects for the shareholder in 2026?
Receiving remuneration for the redemption of shares constitutes capital gains revenue for the shareholder, which is subject to a 19% flat-rate income tax.
Tax issues have aroused the greatest emotions for years when exiting a company. The tax is paid only on the earned income. This income is the difference between the received remuneration and the expenses that the shareholder historically incurred to acquire those shares. If they paid 50,000 PLN into the company, and now the company pays them 80,000 PLN for redemption, only the surplus, i.e., 30,000 PLN, is subject to taxation.
Tax remitter upon redemption
It is not the shareholder who has to worry about calculating the tax. The income tax is collected and paid to the Tax Office by the company itself. The company acts as a tax remitter here. It must deduct 19% from the income amount before transferring the funds to the shareholder’s account. Then the company submits an annual PIT-8AR declaration to the competent head of the tax office.
Share redemption without remuneration and PIT
Polish law allows voluntarily handing over shares for destruction for zero PLN. The shareholder then receives no money from the company. Consequently, no revenue arises on their side. Therefore, they do not pay PIT tax on such an operation. This is a very popular form of saving indebted entities from insolvency.
CIT tax effects for a Polish LLC
The payment of remuneration for destroyed shares is tax-neutral for the company, whereas redemption without remuneration generates revenue from gratuitous benefits subject to CIT.
A company paying money to a former co-owner cannot classify this expense as a tax-deductible cost. These funds come from the distribution of profit or capital. The company will not reduce its current CIT tax for a given year in this way.
The trap lies in free procedures. We have conducted hundreds of such processes and we know that tax authorities can be ruthless. The waiver of remuneration by a shareholder constitutes a real property gain for the company itself. The company gains financially. The market value of such a benefit is taxed at the standard CIT rate of 9% or 19% in the year in which the shares were annihilated.
Summary of differences in redemption taxation in Poland
The table below provides a brief and clear summary of tax obligations for both parties to a capital transaction. Analyzing this data allows you to make a safe decision.
| Form of share destruction | Income tax effects (Shareholder) | Income tax effects (LLC) |
|---|---|---|
| Redemption with remuneration from net profit | 19% PIT tax on earned income. | Tax neutral (no costs / no revenues). |
| Compulsory redemption for a predetermined price | 19% PIT tax on earned income. | Tax neutral (no costs / no revenues). |
| Voluntary redemption completely without remuneration | No revenue subject to PIT tax. | Revenue from gratuitous benefits (CIT to pay). |
Every activity related to the share structure requires careful documentation for the National Court Register. Company registration, obtaining licenses, and formal changes in governing bodies are the daily routine of Progress Holding experts. We advise foreigners on how to properly draft resolutions so as not to expose themselves to penal fiscal sanctions.
What are the most common reasons for liquidating shares?
The main reasons are personal conflicts between owners, the desire to transfer full control to the board, and the need to expel a shareholder acting to the detriment of the company.
In the practice of our clients, we most often see that this procedure serves as a safe mechanism for parting ways between partners. When one of the investors no longer wants to finance the venture, and the rest of the owners do not have private funds to buy out their pool, the company itself comes into play. It uses generated capital to pay off the fleeing partner. The company thus protects itself against a hostile takeover by unknown external entities.
How does it look in practice? Progress Holding’s experience
Based on the analysis of several dozen redemptions handled annually at Progress Holding, we know that the most common mistake made by foreigners is skipping the convocation procedure for creditors in the MSiG.
Entrepreneurs from the East and outside the EU try to run the capital reduction process themselves. They approve relevant resolutions at a notary’s office and then immediately pay the money from the liquidated shares to the departing colleague. In doing so, they forget to publish an official announcement in the Court and Economic Monitor. Thus, they violate the three-month protection period for the company’s debtors. The Registry Court automatically rejects such applications for entry in the KRS.
Another massive problem is incorrectly determining the book value for compulsory redemption. Many foreign accounting offices mistakenly identify the book value with the nominal value stated in the LLC’s articles of association. This is a fundamental error leading to understated payouts and lengthy civil lawsuits between the company and the shareholder. Our accountants ensure flawless preparation of valuations and a safe passage through the e-KRS process.
Frequently asked questions
Can shares be redeemed without reducing the capital?
Yes, Polish commercial law unequivocally allows the liquidation of shares without having to touch the share capital registered in court. To do this, the company must finance the entire remuneration due to the released shareholder exclusively from amounts derived from the net profit achieved in previous financial years.
Is a notary required to delete shares?
The presence of a notary is only necessary if the entire operation requires a physical reduction of the share capital, which is directly linked to an amendment of the original text of the articles of association. If the company uses generated profit for the payout, a notary is not needed, and a simple written resolution of the shareholders’ meeting is sufficient.
How much is the civil law transactions tax (PCC)?
The transaction of voluntary destruction of shares in exchange for remuneration is not subject to the civil law transactions tax (PCC). Directors of the National Tax Information consistently confirm in interpretations that this operation has a liquidation purpose, not a sales one, and therefore does not require submitting a PCC-3 declaration.
Who votes on expelling a shareholder from the company?
The decision on compulsory removal is always made by the shareholders’ meeting in the form of a formal resolution. As a rule, the interested shareholder themselves can participate in the meeting, but they are statutorily excluded from voting on matters directly concerning sanctions on their own shares.
Summary
Share redemption is a multi-stage and advanced legal process that effectively organizes and secures the enterprise’s ownership structure. Choosing the right procedure protects against unnecessary lawsuits and optimizes PIT and CIT burdens in 2026. This operation requires close cooperation between the board, a lawyer, and the chief accountant. Do you need professional advisory support and full representation in the National Court Register? Contact us at Progress Holding by calling +48 603 232 418 or emailing office@progressholding.pl.
