Fund Taxation Alert 2025-07

On March 3, 2025, we published a Tax Alert explaining that the Court of Justice of the European Union (‘CJEU’) had rendered its decision in the case C-18/23, ruling that self-managed foreign investment funds, which have their own internal management teams, are allowed the opportunity to file reclaim withholding tax (“WHT”) collected on income generated from their Polish investments.

In response to the recent judgments listed below from the Court of Justice of the European Union (CJEU), the Polish Ministry of Finance is preparing a draft bill to amend the Polish Corporate Income Tax (CIT) Act:

• CJEU Judgment C-18/23 (27 February 2025): This ruling challenged the existing requirement that EU/EEA-based investment funds must be managed by external entities, referred to as the 'ManCo condition,' to qualify for tax exemption.
  
  
• CJEU Judgment C-190/12 (10 April 2014): In this case, the CJEU determined that Polish CIT provisions excluding investment funds from third countries (non-EU/EEA member states) that are comparable to domestic funds were incompatible with EU law.

The primary objective of these amendments is to clarify the conditions under which non-resident investment funds can benefit from tax exemptions.

To align the CIT Act with the CJEU judgments, the draft bill proposes the following changes:

• Removal of the EU/EEA Requirement: The amendment will eliminate the requirement for an investment fund to be in an EU member state or an EEA country (excluding Poland) to qualify for tax exemption. This change aims to broaden the scope of eligible funds and enhance the attractiveness of the Polish market for foreign investment.
  
  
• Inclusion of Internally Managed Funds: The definition of the 'ManCo condition' will be rephrased to encompass funds that are managed internally. Specifically, funds that have a management board established in accordance with the laws of their country of residency will now qualify for the tax exemption. This adjustment recognizes internally managed funds as legitimate and aligns Polish law with EU standards.

The Council of Ministers plans to adopt the bill in the third quarter of 2025, with the changes expected to take effect in 2026.

The incorporation of recent CJEU judgments into the Polish CIT Act will create a clear legal framework for tax authorities and affected entities, streamlining withholding tax claims procedures for third-country claimants and internally managed funds. However, this change will prevent third-country investment funds from receiving late interest on overpayments, as future claims will be based on domestic law rather than EU regulations. The amendments will address both subject-based exemptions for UCITS-like funds and object-based exemptions for other collective investment vehicles, countering the recent tax authority’s stance that excluded third-country funds from object-based exemptions.

We will keep you updated in case new information becomes available.

Should you have any questions/comments, do not hesitate to contact us.