Limiting the Tax Neutrality of Reorganizations Solely to the First Transaction is Contrary to EU Law
Let us recall that since January 1, 2022, Article 12(4)(12)(a) of the CIT Act has been in force, stating that mergers and demergers of companies are tax-neutral only if the shares in the acquired or divided entity were not obtained through a share exchange or allocated as a result of another merger or division. This means that for over three years, the tax neutrality of company mergers and demergers has been restricted to the first reorganization transaction.
In a ruling dated December 5, 2024 (case no. I SA/Gl 522/24), the Voivodeship Administrative Court (WSA) in Gliwice determined that limiting the tax neutrality of a company merger (following a prior share exchange) solely to the first transaction is contrary to Directive 2009/133/EC. EU law does not impose such restrictions, and the purpose of the directive is to ensure the tax neutrality of mergers and demergers.
Moreover, the court confirmed that this restriction cannot be applied to restructurings that took place before January 1, 2022—it can only apply to factual situations occurring entirely after this date.
The latest ruling from the WSA in Gliwice aligns with a favorable trend in case law for taxpayers, highlighting the incompatibility of restrictions on the tax neutrality of reorganizations with EU law. This position has also been supported by rulings from courts in Olsztyn (case no. I SA/Ol 118/23) and Warsaw (case no. III SA/Wa 1657/23).
At Thedy & Partners, we assist our clients with all tax matters related to corporate reorganizations. If you have any doubts regarding such transactions, we encourage you to reach out to us.