DGP: There will be two new conditions for the exchange of shares

The editors asked Michał Thedy, tax adviser and partner at Thedy & Partners, to comment on this change.
– An exchange of shares is a transaction whereby entity A contributes shares (stocks) in entity B to entity C in exchange for shares (stocks) in entity C. This transaction is tax-neutral for income tax purposes, provided that it is economically justified (and not aimed at achieving tax benefits). Introduction of neutrality of the exchange of shares results from the provisions of European directives and is aimed at facilitating reorganisation in capital groups – explained Michał Thedy.
At the same time he pointed out that the proposed changes introduce two additional conditions of neutrality. According to the first one, neutrality will not apply in the case when shares in entity B contributed to entity C were previously acquired by entity A as a result of another exchange of shares or merger/division of entities. This change is completely incomprehensible and unjustified. It limits the possibility of carrying out tax-neutral reorganisations in capital groups and contradicts the aim of the regulation in question. Excluding the neutrality of share exchange in a situation where there is no economic justification seems to be sufficient protection against abuse of this institution and its use to circumvent tax law.
The second condition states that neutrality is excluded when the value of the shares acquired by entity A in entity C, determined for tax purposes, is higher than the value of the shares disposed of in entity B, which would be assumed for tax purposes if the exchange of shares had not taken place. It seems that it should be assumed that the value for tax purposes means the cost base of the component. Under the current rules, the cost on any disposal of shares acquired by entity A in entity C is the historical cost to entity A of acquiring shares in entity B, which means that by definition the tax values are equal. The question is therefore about the sense of adding this condition.
The entire article was published in Dziennik Gazeta Prawna of 4 August 2021, page B3