European Court of Justice judgment on the exemption of foreign investment funds from CIT in Poland

By Marcin Matyka

The European Court of Justice (ECJ) has issued a judgment concerning the authority of Poland to grant a corporate income tax (CIT) exemption to investment funds depending on where their registered offices are located.

Polish law provides a CIT exemption for investment and pension funds based in Poland. This exemption has been valid since 1998. After Polish accession to the European Union, the European Commission initiated proceedings against Poland claiming that the Polish Corporate Income Tax Act (the CIT Act) discriminated against foreign investment and pension funds. As a result, in 2011 Poland extended the scope of the exemption to include funds from other states of the EU and EEA, provided that they fulfilled certain conditions. However, the Polish CIT Act does not refer to funds from outside the EU and EEA region.

The ECJ’s judgment was made in the case of a fund based in the US that applied for a refund of a CIT withheld in Poland in 2005 and 2006. The fund recognised that the tax was not due and applied to the relevant tax office for a refund. The tax office refused to pay the refund, stating that the Polish legislature limited the scope of CIT exemption to funds that have their registered offices in the EU and EEA…

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