News › Taxand’s Take Article

Civil Transaction Tax on Shareholder Loans Inconsistent with EU Law


Under Polish domestic legislation in force between 2004-2006, loans granted by shareholders to Polish companies were exempt from civil transaction tax (CTT). This changed in 2007 when CTT on shareholder loans was introduced into the CTT Law. Up until the end of 2008, CTT was chargeable on loans granted to Polish companies by their domestic and foreign shareholders at a rate of 0.5% on the market value of the loan in question. 2009 saw the situation revert back to the pre-2007 position so that loans to companies from their shareholders were again CTT exempt.

In 2010 the Polish District Court referred a question for a preliminary ruling with the ECJ to ascertain whether Poland was entitled to levy CTT on shareholder loans since it had decided to waive the levying of the tax in 2004. The reference for a preliminary ruling resulted from a dispute between a taxpayer and the Polish tax authorities over whether a company could legitimately receive a refund for incorrectly paid CTT.

Taxand Poland examines the inconsistencies of the treatment of CTT and how this will benefit Polish companies and individuals in the long run.

On 16 June 2011 the ECJ ruled that Poland had infringed EU law by introducing the taxation of shareholder loans. In the ECJ's opinion, the Directive did not allow a Member State to levy CTT on loans if the Member State had previously waived the levying of such tax. The ECJ ruled that since Poland had exempted shareholder loans from CTT after its accession to the EU, it was precluded from reintroducing such taxation - the ruling came to a "standstill" (so-called "standstill clause" - the provision which forbids a country from reintroducing taxation if it was waived previously) in the ECJ's opinion.


Taxand's Take

The ECJ ruling has a significant impact on Polish-based companies that received loans from, for example, its foreign shareholders in the 2007-2008 and were obliged to pay 0.5% CTT.

Since the ECJ ruling, taxpayers can apply for a refund of the incorrectly paid CTT. Such applications will need to be analysed from two perspectives: (i) taxpayers who had not previously filed a refund application; and (ii) taxpayers who had already filed such an application but had received a rejection from the tax authorities in this respect may also reapply for a refund. Taxpayers may recover not only the tax paid but also the interest.

(i) In the first option if the application was filed until 5 September 2011 (30 days after the ECJ ruling was published in Poland's Official Journal), the interest will be calculated from the date of payment until recovery of CTT. If the application was filed after this date, the interest will be calculated from the date of payment until 5 September 2011.

(ii) It should be pointed out that the second option is time limited, i.e. companies must have applied for a refund of the CTT paid incorrectly within one month after publication of the ECJ ruling in Poland's Official Journal (up to 6 September 2011). They are also entitled to recover the interest.

Also, any domestic court cases that were stayed pending the reference of the question to the ECJ for a preliminary ruling should resume and be resolved in favour of the taxpayers concerned.

Your Taxand contact for further queries is:
Maciej Grzyma?a
T. +48 22 324 59 42

We are interested to hear your opinion on this key piece of tax news. Join our LinkedIn Group and share your ideas. With tax professionals in nearly 50 countries you can understand the impact of tax issues affecting multinationals today.


Taxand's Take Author