Answer ... Under Polish tax law, no specific relief is available that would apply directly to restructurings in capital groups.
However, certain regulations provide that, in the event of a merger, division or transformation of companies, or where non-monetary contributions are made in the form of an enterprise or an organised part thereof, the assets thus obtained will not be categorised as income, which results in lower taxation.
First, in the case of a merger or division of companies, the income of a shareholder of the target or divided company constituting the issue value of the shares allocated by the acquiring or newly established company is not regarded as taxable income (Article 12, section 4, point 12 of the CIT Act). However, the issue value of shares of the acquiring or newly established company assigned to the shareholder of the company being divided, determined as at the date of the division, is considered as income if the assets taken over as a result of the division – or, in the case of division by separation, the assets taken over as a result of the division or the assets remaining in the company – do not constitute an organised part of the enterprise (Article 12, section 1, point 8 of the CIT Act).
In the event of the merger or division of companies, as a rule, the value of the assets of the target or the divided company received by the acquiring or newly incorporated company as at the date of the merger or division is deemed to constitute income (Article 12, section 1, point 8 of the CIT Act). Additionally, in a company that is subject to division or spin-off, the market value of the assets transferred to the acquiring or newly established company as at the date of the division or spin-off is deemed to be income on its account if the assets taken over as a result of the division – or, in the case of a spin-off, the assets taken over as a result of the spin-off or the assets remaining in the company – do not constitute an organised part of the enterprise (Article 12, section 1, point 9 of the CIT Act).
However, the regulations also provide for an exemption from taxation in this respect. The value of the assets of the acquired or divided company received by the acquiring company corresponding to the issue value of the shares allocated to shareholders of the merged companies or of the divided company is not regarded as income (Article 12, section 4, point 3e of the CIT Act). This also applies to the value of the assets of the target or the divided company corresponding to the acquiring company’s percentage share in the share capital of the target or the divided company, as determined on the last day preceding the date of merger or division, received by the acquiring company holding a share of at least 10% in the share capital of the target or the divided company (Article 12, section 4, point 3f of the CIT Act).
With regard to the transfer of assets between companies by way of a non-monetary contribution to a company or a cooperative, as a rule, the taxable income is the value of the contribution as specified in the articles of association of the company or, in the absence thereof, the value of the contribution as specified in another document of a similar nature. However, if this value is lower than the market value of the contribution, or if the value of the contribution is not specified in the articles of association or another document of a similar nature, the income is the market value of such contribution, determined as at the date on which the ownership of the object of the non-monetary contribution was transferred (Article 12, section 1, point 7 of the CIT Act).
However, this determined value of the non-cash contribution will not be recognised as income if the object of the non-cash contribution to:
- a capital company is commercialised intellectual property contributed by the commercialising entity; or
- a company or a cooperative is an enterprise or its organised part (Article 12, section 4, point 25 of the CIT Act).
In relation to the exclusions described above, the legislature decided to implement a so-called ‘specific anti-avoidance rule’, as the exclusions do not apply where the main purpose or one of the main purposes of the merger or division of companies, the exchange of shares or a contribution in kind is to avoid or evade tax (Article 12, section 13 of the CIT Act). Furthermore, if a merger or division of companies, exchange of shares or contribution in kind is not carried out for justified economic reasons, it is presumed for the purposes of applying the aforementioned Article 12, section 13 of the CIT Act that its main or one of its main purposes is tax avoidance or evasion (Article 12, section 13 of the CIT Act).