Refinancing loans is becoming an increasingly popular financial management tool for companies. However, its tax implications remain a source of disputes with the tax authorities. The key question is: does refinancing a debt originally incurred to acquire shares remain subject to limitations on the deductibility of interest?
The case concerned a company engaged in franchising services and the sale of goods. The company entered into a loan agreement with a consortium of banks, using the funds obtained under the agreement to refinance its previous loan obligations and to finance new business needs. The refinancing related to an earlier loan agreement concluded with a bank consortium in 2017, which was subsequently amended in 2019. In its application for an interpretation, the company classified both the 2019 and 2023 loans as debt financing, with the corresponding interest to be treated as debt financing costs.
The company emphasized that between 2017 and 2022 it had incurred numerous investment expenditures, which is why it did not use its own funds to repay the earlier loan. These funds were allocated to the company’s development instead. In its view, this was economically justified — early repayment of the previous loan would have limited the company’s ability to finance future investments, even though it would not have generated additional financing costs.
Accordingly, the company applied for an individual interpretation to confirm whether the interest on the loan taken to refinance historical debt related to the acquisition of shares would be subject to the limitation set out in Article 16(1)(13e) of the Corporate Income Tax Act (CIT Act), and whether interest accrued on the amount that could have been repaid but was used for new investments could also be treated as tax-deductible. The company argued that this provision should not apply, since both the 2017 and 2023 loans were taken to refinance historical acquisition-related debt, not to directly finance the purchase of shares. In its view, the restriction applies only to financing obtained for the purpose of acquiring shares or stock, not to subsequent refinancing of earlier obligations.
The Director of the National Tax Information (KIS) disagreed. According to the authority, the crucial factor was that the new loan was taken to cover earlier debt financing, which itself had been used to acquire shares. Therefore, the condition referred to in Article 16(1)(13e) of the CIT Act was met. The authority stressed that what matters is the purpose of the original loan — in this case, share acquisition. Otherwise, every new refinancing would remove the possibility of verifying the true purpose of the financing. The authority also rejected the company’s position regarding funds allocated to new investments, arguing that they do not affect the nature of the refinancing loan and that not repaying the debt despite having sufficient funds does not prove that the funds were in fact allocated to investment purposes.
Both the Provincial Administrative Court (WSA) in Poznań, in its judgment of 28 June 2024 (case no. I SA/Po 113/24), and the Supreme Administrative Court (NSA), in its judgment of 17 July 2025 (case no. II FSK 1239/24), disagreed with the tax authority’s interpretation.
The WSA in Poznań held that the limitation on interest deductibility should apply only to loans taken for the purpose of acquiring shares, not to loans used to refinance earlier obligations. According to the court, the tax authority’s approach would lead to an unreasonable situation in which a company’s past financing purpose would indefinitely affect its current business decisions.
The NSA upheld the WSA’s position, stating that the primary purpose of a refinancing loan is the repayment of previous debt, and therefore Article 16(1)(13e) of the CIT Act should not apply. The provision limits deductibility only in cases where the purpose of the financing is the acquisition of shares, which was not the case here.