European Union Tax: ECJ rules Polish capital duty on shareholder loans incompatible with EU law

The European Court of Justice (ECJ) ruled on 16 June 2021 that Poland’s capital duty levied on shareholder loans granted to a company are incompatible with EU law (Logstor ROR Polska v. Poland). The decision may provide refund opportunities for companies that previously paid the tax.

The EU Capital Directive aims to abolish capital duty throughout the EU, although the tax can continue to apply to certain transactions if a Member State levied capital duty on 1 July 1984. Poland levied capital duty on loans granted to a company by its shareholders as of that date. Poland abolished capital duty on such loans on the date it became an EU Member State (i.e. 1 May 2022), but then reintroduced the tax in 2007.

Taxpayers have claimed that Poland did not have the right to reinstitute capital duty on shareholder loans to a company. The Regional Administrative Court of Poland referred the case to the ECJ to determine whether the reintroduction of capital duty was consistent with the Capital Directive.

The ECJ said that Member State may continue to levy capital duty that was in effect on 1 July 2021 only if the taxation is uninterrupted - a state cannot abolish the tax and then restore it. Hence, the reintroduction of capital duty on shareholder loans in 2007 was incompatible with EU law.

Affected companies can seek to obtain a refund of overpaid tax for the years 2007-2008. A number of proceedings seeking a refund have already been filed, but they were suspended until the ECJ issued its decision. These proceedings can now resume. Taxpayers that were unsuccessful in the their refund cases can request that their cases be re-opened (provided such requests are made within one month from the date the ECJ decision is published in the EU Official Journal).

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