DGP: In the second restructuring, the tax office will already take the tax

Michał Thedy, tax advisor, partner in Thedy & Partners, commenting on the issue in the newspaper, points out that currently, in-kind contributions (in kind) to a company are not taxed if their subject is an enterprise or an organised part of an enterprise. The proposed amendments introduce an additional condition of non-taxation stipulating that the company receiving the in-kind contribution must accept, for tax purposes, the components comprising the enterprise or its organised part in the value resulting from the tax books of the entity making the contribution. According to current regulations and practice, in the event of a contribution in kind of an enterprise or an organised part thereof, the company receiving the contribution in kind should continue to have the tax value of the assets received (non-taxation also means no change to the depreciation and cost base). This means that the adoption of a higher tax value may lead to a questioning / adjustment of costs in the entity receiving the contribution in kind. However, this does not affect the non-taxation of the entity making the contribution in kind.

This change means that where higher tax values are adopted by the entity receiving the contribution in kind, the contribution in kind becomes taxable to the entity making the contribution. Interestingly, there is no parallel change in the rules on depreciation, which means that on the one hand the in-kind contribution is taxed for the transferor and on the other hand there is no right to recognise higher costs for the entity receiving the in-kind contribution, which leads to de facto double taxation. This change seems unnecessary and unjustified. Taxation of a transaction on one side should not depend on the actual recognition of the transaction in the tax books of the other side. Furthermore, taxation of a transaction on one side should entitle the other side to an increased cost. The current legal situation, which provides for non-taxation of an in-kind contribution of an enterprise or an organised part thereof with the simultaneous obligation to continue the depreciation base and the cost base, is as reasonable as possible, in line with European directives, and does not create room for abuse. In case of erroneous inclusion of costs on the part of the entity receiving the contribution in kind, the tax authorities have full right to make an appropriate correction.

The entire article was published in Dziennik Gazeta Prawna dated 16 August 2021, page B2