Poland: Deduction of VAT; tax losses in downstream merger (Supreme Administrative Court decisions)
Decisions concerning the deduction of VAT and ability to account for tax losses in a downstream merger
Deduction of VAT; tax losses in downstream merger
The Supreme Administrative Court on August 1, 2024, issued decisions concerning the deduction of value added tax (VAT) and the ability to account for tax losses in a downstream merger.
- The court held (I FSK 1093/20) that provisions of the Polish VAT law (Articles 86(10b)(2)(b), 86(10b)(3), and 86(10i) of the VAT Act) requiring that VAT due be entered in the tax declaration within three months after the month in which the tax liability arose to exercise the right to deduct VAT in the same accounting period, are incompatible with EU law.
- The court held (II FSK 1262/23) that in a downstream merger, when the majority shareholder changes from indirect to direct, the company's ownership structure remains materially unchanged. Therefore, under new tax regulations, the acquiring company can carry forward tax losses from 2017-2018 when calculating taxable income for 2021 and subsequent years.
Read an August 2024 report prepared by the KPMG member firm in Poland
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