In February 2025, the Court of Justice of the European Union (CJEU) issued a judgment which opened up the possibility of all foreign funds invested in Poland benefiting from corporate income tax (CIT) exemptions.
Controversial Provisions
Investment funds are divided into two categories: externally managed funds and internally managed funds. The former are managed by an external management company, while the latter are managed by their own board of directors.
Funds based in Poland operate exclusively under the external management model. At the same time, the Polish Corporate Income Tax Act provides a tax exemption for certain collective investment institutions based in EU/European Economic Area (EEA) countries. In order for foreign funds to benefit from a CIT exemption in Poland, they must meet several conditions, one of the most controversial being the requirement for supervision by competent financial authorities in the fund's country of residence. As a result, foreign funds managed internally, i.e. those without an external manager, face difficulties in obtaining a CIT exemption in Poland.
CJEU Clear Ruling
The CJEU clearly stated that internally managed investment funds based in the EU/EEA are eligible to apply for a CIT exemption on the same terms as externally managed funds.
The CJEU ruled that the method of fund management, whether internal or external, does not affect the ability to benefit from the tax exemption. The court concluded that provisions of EU member states that create such a distinction are contrary to Article 63(1) of the Treaty on the Functioning of the European Union (TFEU), whichguarantees the free movement of capital.
Opportunities for Foreign Investment Funds
Internally managed funds, which previously could not benefit from tax preferences (tax exemption),can now apply for a CIT exemptionon equal terms as externally managed funds.
Funds that were previously unable to obtain a CIT exemption due to their internal management structuremay now request the reopening of concluded proceedingsand seek a refund of overpaid taxes along with interest.
Based on the judgment of the CJEU, funds that are currently subject to tax proceedings maynow demand a tax exemptionregardless of their management structure.
Funds that previously did not request a tax refund can now take advantage of the CJEU ruling andapply for a refund of overpaid tax, including interest.
Originally published by GGI.
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