Transactions involving the acquisition of shares in other companies may generate significant expenses, including advisory fees, which should be properly reflected in the purchaser’s tax settlements. The key question is whether expenses incurred for lawyers, consultants, and financial advisors handling an acquisition should be fully allocated to capital gains income, or whether they can be proportionally distributed between various business objectives.
In practice, the answer is far from straightforward. Tax authorities and administrative courts have presented divergent approaches, and the final outcome often depends on a detailed analysis of the underlying business rationale for the investment.
The case concerned a company engaged in the production and distribution of juices and beverages. In February, it acquired a majority stake in company J. from its main shareholder, and in October of the same year, it acquired further shares from one of two minority shareholders. Subsequently, in 2021, through the compulsory acquisition of the remaining shares constituting 0.813% of the company’s share capital from the last minority shareholder, the taxpayer obtained 100% ownership of company J.
The company explained that the acquisition was preceded by extensive analyses of the Polish market to identify potential investment targets aimed at expanding its product offering and, consequently, increasing revenue. Among the other business goals, the company cited strengthening its market position, entering the bottled water segment, and leveraging its existing know-how to develop new product lines. The primary purpose, however, was to increase income from operating activities rather than capital gains.
Accordingly, the company requested an individual tax ruling to determine whether the costs it had incurred (legal, advisory, consulting, and financial) were correctly allocated. It argued that all such expenses constituted tax-deductible costs within the meaning of Article 15(1) of the CIT Act, as they were incurred to increase revenue and develop its business. Furthermore, under Article 15(2b), in cases where expenses are shared-meaning they cannot be clearly attributed to a single income source—they should be allocated using a revenue-based allocation key. Therefore, the taxpayer claimed that the costs incurred should be proportionally attributed both to capital gains and to other income sources in proportion to the revenue derived from each in the given year.
The Director of the National Tax Information agreed with the taxpayer only in part. The authority accepted that the incurred expenses constituted indirect tax-deductible costs but rejected the application of the revenue key. In its view, applying such a key was unjustified in this case, as it is meant to be used only when it is impossible to determine which portion of the costs relates to specific income sources. According to the authority, the expenses for legal, advisory, consulting, and financial services should be entirely allocated to capital gains, since they directly contribute to income from that source, as reflected in Article 7b of the CIT Act.
The Warsaw Provincial Administrative Court (WSA) disagreed with this interpretation in its judgment of 24 September 2024 (case no. III SA/Wa 1576/24). The court held that the decisive factor is the actual business purpose of the investment. It is irrelevant that the expenses resulted in an increase in capital gains if the main objective of incurring them was to achieve broader business goals. If the expenditures were primarily aimed at expanding operations and increasing overall revenues, the tax authority was wrong to allocate all costs to capital gains income. The proper allocation of expenses between income sources follows directly from Article 15(2b) of the CIT Act, which the company also invoked.
This position was upheld by the Supreme Administrative Court (NSA) in its judgment of 17 July 2025 (case no. II FSK 173/25). The court emphasized that the company’s main objective was to conduct business activity, not to purchase shares solely for the purpose of earning capital gains. Since the acquisition of shares was aimed at broadening the product portfolio and developing business operations, the authority’s approach – treating all expenses as related exclusively to capital gains – could not be upheld.