Tax Neutrality of Simplified Mergers Between Subsidiaries – an End to Disputes?

Article 515¹ of the Polish Commercial Companies Code of 15 September 2000 (consolidated text: Journal of Laws of 2024, item 18, as amended; the “CCC”) was introduced into Polish law on 15 September 2024 as part of the implementation of Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions.

The provision introduced a new type of merger in which no shares in the acquiring company are issued. The absence of the “merger issue” is justified by the fact that the merging companies have identical shareholders and identical proportions of capital participation.

At first glance, this form of merger should also be tax-neutral for the acquiring company. However, its attractiveness has been diminished by individual tax rulings issued by the Head of the National Revenue Administration (Dyrektor KIS) as well as by certain administrative court judgments.

While the Head of the National Revenue Administration confirmed the tax neutrality of mergers between a parent company and its subsidiary – on the grounds that Article 12(1)(8d) of the Corporate Income Tax Act of 15 February 1992 (consolidated text: Journal of Laws of 2025, item 278, as amended; the “CIT Act”) does not apply to such mergers (see the individual ruling of 16 October 2024, ref. 0111-KDIB1-1.4010.456.2024.2.AND) – he questioned the neutrality of mergers between sister companies. According to the Head, such mergers result in taxable income for the acquiring company under Article 12(1)(8d) of the CIT Act.

Even more unfavourably, the taxable income on the part of the acquiring company was deemed to be the market value of the assets of the acquired company on the day preceding the merger, with the entire amount treated as the surplus referred to in Article 12(1)(8d) of the CIT Act (see the individual ruling of 14 August 2024, ref. 0114-KDIP2-1.4010.192.2024.5.JF).

Discrepancies have been observed in the case law of administrative courts. The District Administrative Court in Krakow, in its judgment of 11 March 2025 (case No I SA/Kr 974/24), ruled in favour of the claimant in a dispute with the Head of the National Revenue Administration, holding unequivocally that Article 12(1)(8d) of the CIT Act does not apply to a merger without an issue of shares (i.e. a simplified merger procedure). Consequently, no taxable income arises on the part of the acquiring company. Notably, the case concerned a horizontal merger, i.e. between sister companies. Similar conclusions were reached by the District Administrative Court in Warsaw in its judgments of 10 July 2024 (case No III SA/Wa 947/24) and 3 October 2024 (case No III SA/Wa 1425/24).

Conversely, the District Administrative Court in Wroclaw, in its judgment of 25 June 2024 (case No I SA/WR 104/24), took a different position, finding that where no shares are issued, the entire value of the acquired company’s assets constitutes taxable income for the acquiring company.

After nearly two years since the introduction of Article 515¹ into the CCC, the legislature has decided to step in. In the Act Amending the Energy Law and Certain Other Acts, adopted on 5 August 2025, Article 12(1)(8d) of the CIT Act was amended to explicitly state that income under this provision does not arise in the case of mergers carried out under Article 515¹ of the CCC.

This amendment appears to have put an end to the ongoing disputes and inconsistencies regarding the tax neutrality of horizontal mergers conducted under the simplified, no-issue procedure. The act was signed by the President of the Republic of Poland on 27 August 2025, meaning it will enter into force within the next few weeks.