Polish Simple Joint Stock Company (hereinafter: “PSA”) is a relatively new form of doing business in Poland. It has been in existence for just over two years, so it is hard to say at this point that it has conquered the market. Nevertheless, it has a number of advantages, which may make it the vehicle within which we will start running our business.
In the context of the PSA, an interesting aspect is its relationship with the tax on civil law transactions (hereinafter: „TCLT”), which is not so obvious at first glance.
Starting with the very definitions contained in Article 1a of the Polish TCLT Act, attention should be drawn to the fact that, pursuant to Article 1a sec 1 and 2 of the Polish TCLT Act, the terms used in the Act mean:
- partnership – a civil partnership, general partnership, partnership, limited partnership or limited joint-stock partnership;
- capital company – a company: limited liability company, joint-stock company or European company.
It follows from the above indications that a PSA is not covered by the Polish TCLT Act at all, as it is not included in the catalogue of either partnerships (which is obvious), but neither is it included as a capital company.
This conclusion is also confirmed by many positions of the Director of the National Tax Information when amending the agreement of a PSA, e.g. related to the issue of new shares.
This topic was addressed, for example, in the individual interpretations of the Director of National Tax Information of, for example, dated:
- 6 June 2022 (file reference number 0111-KDIB2-2.4014.71.2022.3.PB), where it was indicated that: “an amendment to the articles of association of a simple joint-stock company related to an increase in the company’s share capital through the contribution of commercialised intellectual property to the company will not be subject to civil law transaction tax, as a simple joint-stock company is not regulated by the Polish TCLT Act.“
- 4 November 2022 (file reference number 0111-KDIB2-3.4014.410.2022.2.AD) which states: “In summary, an amendment to the articles of association of a simple joint-stock company related to a merger of companies by acquisition will not be subject to civil law transaction tax, as a simple joint-stock company is not regulated by the Polish TCLT Act. As a result, it is pointless to analyse the rest of your position. Indeed, in order for the exemption contained in Article 2 sec. 6 of the cited Act to apply – it would first be necessary to consider a simple joint-stock company as a capital company within the meaning of the Act on tax on civil law transactions.“
The above situation is interesting from a legal point of view, especially because if we look at Article 4 § 1 item 2 of the Commercial Companies Code we can see that the PSA is included there as a capital company.
So why did the legislator not modify the Polish TCLT Act in this respect?
This is due to the correlation that the Polish TCLT Act has with the EU regulations, specifically with the Council Directive No 2008/7/EC of 12 February 2008 concerning indirect taxes on the raising of capital (Official Journal of the EU L 46 of 21 February 2008, p. 11), which assumes, in general, the condition of not imposing tax on capital companies in any form with regard to contributions of capital. Article 7(1) of that Directive, according to which a Member State which, on 1 January 2006, charged tax on contributions of capital to capital companies may continue to do so, provided that it complies with Articles 8 to 14.
Related to this regulation is the necessity for a Member State to comply with the stand still principle, as pointed out by the Supreme Administrative Court in its judgment of 11 December 2015 (file reference number II FSK 2465/13): “The stand-still clause implies the possibility of >>movement<< by the Member State, when establishing the tax burden or determining its amount, only within the framework of the status quo existing at the date indicated by the norm of Community law.“
In this regard, the Director of the National Tax Information in an individual interpretation issued on 19 February 2020 (file reference number 0111-KDIB2-2.4014.306.2019.1.MM) emphasises that: “An analysis of the provisions of the Directive and the provisions of the Act on tax on civil law transactions, in particular in the context of the stand still principle resulting from the Directive, leads to the conclusion that since on 1 January 2006 the simple joint stock company was not standardised in the Polish legal order and thus the contract of this company was not subject to tax on civil law transactions on that date, it consequently cannot be subject to it.“
Thus, the prohibition arising from the stand still principle applies not only to the impossibility of taxing a new type of company, but also to changes in the taxation rules in force on 1 January 2006 – and consequently – including the tax treatment of a new type of capital in a capital company.
In summary, a PSA is not included in the TCLT Act as an entity that is a capital company. Thus, it will not be subject to the Act in the case of changes relating to any alteration of the articles of association of the company, such as the issue of new shares related to an increase in share capital. Of course, this does not mean that it will never pay TCLT. This exemption applies only to the articles of association and their amendments. In the case of, for example, a standard loan agreement (unless such a loan is granted by a shareholder, in which case there will also be no TCLT) or sale agreements, as a rule, it will be subject to TCLT.
