Non-emission mergers of sister companies are tax neutral

On 10 July this year, to the joy of many taxpayers and practitioners, a very important, positive ruling appeared on the tax neutrality of a non-emission merger of sister companies. It concerns a merger, carried out under a simplified procedure, in which no shares are issued to the shareholder(s) of the merging companies. The ruling is widely supported as it is consistent with EU regulations and the essence of neutrality of reorganisation measures.

The problem of (lack of) neutrality

The problem of the lack of tax neutrality of mergers arose at the end of last year, when the first negative tax interpretations were issued for certain mergers in which no shares are issued. The problem originated from the failure to adapt the tax rules to changes in commercial law. Recall that, as a result of the amendment to the Commercial Companies Code, which came into force on 15 September 2023, new situations were listed in which a simplified merger procedure could be applied. One of the simplifications was the removal of the obligation for the acquiring company to issue shares for a wider range of mergers. Previously, this was only possible for mergers between a parent company and a daughter company. It is now possible to merge companies without granting shares of the acquiring company to the shareholders of the target company in situations where one shareholder holds directly or indirectly all the shares of the merging companies or where the shareholders of the merging companies hold shares in the same proportions in all the merging companies. The change has meant a major administrative improvement for many reorganisations where there is no change of control.

You can read the entire article with our commentary in Rzeczpospolita of 12 August 2024, page D1