Polish tax regulations that limit tax relief to only the first restructuring of companies violate EU law — such is the conclusion of the ruling by the Provincial Administrative Court (WSA) in Warsaw dated 5 June 2025 (case no. III SA/Wa 513/25). The court unequivocally stated that domestic provisions that deprive subsequent mergers, demergers, or share exchanges of tax neutrality contradict Directive 2009/133/EC.
The case concerned a holding company (Company A) that is part of a corporate group planning a capital structure reorganization. As part of the plan, Company B (a subsidiary) would merge with Company C (the parent company). As a result, Company A would become the direct shareholder of Company B through the allocation of existing or newly issued shares. The company emphasized that the planned reverse merger had a valid economic rationale, which was confirmed by a protective tax ruling issued on 16 July 2024 (ref. DKP16.8082.1.2023). This ruling also confirmed that the general anti-avoidance rule (GAAR) was not applicable in this case.
The company submitted a request for confirmation that the reverse merger would not result in taxable income under CIT regulations — both in terms of the existing shares allocated to Company A as the shareholder of the acquired company and in relation to any newly issued shares. The company argued that no income would arise and cited Directive 2009/133/EC, claiming that its provisions should also apply to reverse mergers. Therefore, general tax neutrality rules should also be applicable in such cases. It further pointed out that the directive does not limit the exemption to just the first reorganization and emphasized the principle that corporate restructurings should be tax-neutral when they do not constitute tax avoidance or evasion.
The Head of the National Tax Information Service (KIS), however, disagreed. In an individual tax ruling dated 13 December 2024 (ref. 0114-KDIP2-1.4010.571.2024.1.JF), the authority stated that the first share acquisition had occurred in 2019 and only concerned part of the parent company’s shares. The remaining shares were acquired via a purchase agreement in 2023. Therefore, according to the tax authority, Article 12(1)(8ba) of the CIT Act should apply, as the conditions of Article 12(4)(12)(a) were not met. Since there were no transitional provisions, the requirements under Article 12(4)(12)(a) should apply to multi-stage reorganizations, even if earlier events occurred before 1 January 2022 and the final effect took place afterward. As such, the authority concluded that taxable income would arise.
The Provincial Administrative Court in Warsaw (judgment of 5 June 2025, ref. III SA/Wa 513/25) held that differentiating between successive restructurings is inconsistent with EU law. Directive 2009/133/EC does not include any limit on the number of tax-neutral reorganizations. An interpretation limiting the exemption to only the first restructuring contradicts both the systematic and purposive interpretation of the law. Consequently, the court found that subsequent reorganizations may also qualify for tax neutrality and not be subject to taxation.