Partnership limited by shares under Polish law exempt from tax on civil law acts
In its judgment of 22 April 2015 in Case C-357/13 Drukarnia Multipress Sp. z o.o., the Court of Justice of the European Union confirmed that, contrary to what is claimed by the Polish Minister of Finance, a Polish partnership limited by shares (spółka komandytowo-akcyjna) (hereinafter: PLS) must be regarded as a capital company within the meaning of Directive 2008/7/EC concerning indirect taxes on the raising of capital, even if only some of its capital and members are able to satisfy the conditions laid down by that directive. In consequence of such reasoning, PLS is covered by the exemption from tax on civil acts in respect of restructuring operations carried out with participation of PLS (among others merger, transformation, certain share exchange transactions).
The above resolution is the result of a dispute between the taxpayer and the Minister of Finance. The partnership applied to the Minister of Finance for a binding ruling on the tax effects, within the scope of tax on civil law acts (podatek od czynności cywilnoprawnych) (hereinafter: PCC), of the planned transformation transactions consisting in an increase of the capital of PLS, into which a Polish limited liability company will be transformed, by contributions in kind made up of shares in another PLS, shares in a joint stock company and shares in a limited liability company. Pursuant to the PCC Law, PCC shall be chargeable, among others, on amendments to the founding documents of a company or partnership, if they give rise to an increase in the basis of assessment for PCC. The tax shall not be chargeable on the founding documents of a company or partnership and amendments to them in connection with a contribution to a capital company, in return for shares in it, of shares in another capital company giving a majority of votes in it, or of further shares in the event that the company to which those shares are contributed already holds a majority of votes. This provision corresponds to restructuring operations set forth in Article 4(1)(b) of said directive, consisting in the acquisition, by a capital company which is in the process of being formed or which is already in existence, of shares representing a majority of the voting rights of another capital company, provided that the consideration for the shares acquired consists at least in part of securities representing the capital of the former company. Where the majority of the voting rights is reached by means of two or more transactions, only the transaction whereby the majority of voting rights is reached and any subsequent transactions shall be regarded as restructuring operations.
According to Polish tax authorities, PLS was not a capital company and so the taxpayer was to pay PCC on the planned transaction.
Recognition of PLS by the CJEU as a capital company within the meaning of Directive 2008/7/EC means that Polish tax authorities should apply the exemption from PCC which follows from that directive. Such resolution has a lot of benefits – especially for entities which in the past, when the conduct of business as PLS gave more optimisation possibilities, paid to the authorities the tax on analogous transformation transactions in the amount of 0.5% of the contribution made. They may now request that tax overpayment be stated and duty collected unlawfully be returned to them together with interest.
The CJEU has emphasised again that in the interpretation of a provision of EU law, account must be taken not only of its wording but also of the context in which it occurs and the objectives pursued by the rules of which it forms part, and if appropriate of the origins of those rules. At the same time the judgment indicates that the purpose of the directive is to harmonise the legislation in order to eliminate, as far as possible, factors which may distort conditions of competition or hinder the free movement of capital, and thus to ensure the smooth functioning of the internal market. Full realisation of the objectives pursued by the directive presupposes that the raising of capital which may be characterised as a capital company in accordance with the criteria envisaged in that directive is burdened by indirect taxes only on the strict conditions laid down by the EU legislature. The restrictive interpretation proposed by the Minister of Finance is contrary to the purpose of the directive since it results in charging tax on partnerships which according to the directive should enjoy equal treatment with other capital companies.