Share deals


Corporate income tax effects

Under the Corporate Income Tax Act of 15 February 1992, expenditures on acquisition of shares are not deductible as revenue-earning costs at the time of acquiring or taking up the shares. Such expenditures may be recognised as revenue-earning costs only upon sale of the shares. Shares that are held by the taxpayer are also not subject to amortisation.

When a company sells shares it holds, it is required to pay CIT on the income earned from sale of the shares, calculated as the difference between the revenue obtained from sale of the shares (typically the sale price) and the revenue-earning costs, which generally include the expenditures incurred in acquiring or taking up the shares, i.e. the purchase price for the shares plus expenditures directly related to the acquisition, such as notary fees, brokerage fees and the like.

There are special rules for calculating revenue-earning costs in the case of sale of shares that were taken up in exchange for an in-kind contribution. In such case, the method for recognising revenue-earning costs depends on the subject matter of the in-kind contribution (i.e. whether it was in the form of an enterprise or organised part of an enterprise, or in some other form).

Income from the sale of shares is taxed according to general rules at the CIT rate of 19%.

If the seller of the shares does not have Polish tax residency, the income from sale of the shares may be taxed in Poland only if the income is deemed to be earned in Poland. Effective from 1 January 2017, the CIT Act provides that income from the sale of shares on the Warsaw Stock Exchange is deemed to be earned in Poland. Income from transfer of title to shares in a company in which at least 50% of the value of the assets, directly or indirectly, constitutes real estate located in Poland or rights to such real estate is also deemed to be earned in Poland.

The rules for taxation of income earned on the sale of shares by such persons are then analogous to those applicable to persons with Polish tax residency, except as modified by applicable tax treaties.

Typically the tax treaties to which Poland is a party provide that income from the sale of shares may be taxed only in the country in which the seller has its residence, registered office or management. An exception is tax treaties containing a real estate clause, permitting Poland to tax the income on the sale of shares in companies whose principal assets are made up of Polish real estate (for example, the tax treaty between Poland and Germany).

Effect for purposes of indirect taxes (VAT, transaction tax)

Sale of shares in a limited-liability company or joint-stock company is generally not subject to VAT.

Sale of shares in a Polish limited-liability company or joint-stock company is subject to the tax on civil-law transactions at the rate of 1% of the market value of the shares. The taxpayer is the acquirer of the shares. However, there is an exemption from transaction tax for sale of shares in a Polish joint-stock company:

  • To domestic or foreign investment firms
  • Via domestic or foreign investment firms
  • In organised trading, or
  • Outside organised trading, by domestic or foreign investment firms, if they acquired the shares in organised trading.