Can the contribution of shares in the form of a contribution in kind be treated as a disposal of shares benefiting from the CIT exemption for income of alternative investment companies (in Poland called: “ASI”)?

• The wording of Article 17(1)(58a) of the CIT implies the following conditions for the tax exemption for ASI: the income (revenue) of ASI derived in a given tax year from the disposal of shares (stocks) is exempt, provided that the alternative investment companies which dispose of the shares: (a) held, prior to the date of disposal, directly not less than 5% of the shares (stocks) in the capital of the company whose shares (stocks) are disposed of, (b) held these shares continuously for a period of two years.
• First of all, it should be pointed out that a strict and literal interpretation of the provisions is necessary for all reliefs and exemptions, which must not give rise to an unjustified extension of their scope.
• It should be recalled that in-kind contributions in a capital company may be all assets (goods and rights), if they are transferable and can be entered as assets on the company’s balance sheet, and they must be listed in the articles of association, indicating the person making the contribution and the shares granted in return for that contribution. Making a contribution-in-kind means transferring all rights to the object of the contribution (i.e. its ownership) to the company. Thus, an in-kind contribution may be, inter alia, movables, real estate, receivables, patents and even the company as a whole. A shareholder making a contribution-in-kind is responsible for the correct valuation of the contribution-in-kind, and in case of doubt should use the services of professionals such as auditors.
• Both commentaries and individual tax interpretations point to the similarity between the transfer to a capital company of the ownership of property or property rights in exchange for acquired shares (stocks) and the transfer of property or property rights in exchange for a price specified in a bond agreement. In both cases, there is a chargeable transfer of an asset. The consideration for the transfer to the company of the subject of the in-kind contribution (the “price” of the transfer specified by the parties) is the shares (stocks) taken up by the taxpayer with a specified nominal value.
• Pursuant to the interpretation presented by the Director of the National Tax Information, the “disposal of shares” referred to in Article 17(1)(58a) of CIT should be understood as the performance of legal transactions based on which the ownership of shares is transferred. It should be emphasised that disposal is not only a sale – it is a much broader concept in which sale is included. It also includes an in-kind contribution to a company or a donation. This is what the Director of the National Tax Information indicated, inter alia, in the individual interpretation of 11 August 2023 0111-KDIB1-2.4010.296.2023.1.ANK and in the individual interpretation of 8 February 2023 0114-KDIP2-1.4010.244.2022.1.MR.

Our comment:

• An in-kind contribution of shares will therefore benefit from the tax exemption referred to in Article 17(1)(58a) of the CIT, provided that, prior to the date of disposal, the shares disposed of directly constitute not less than 5% of the shares in the capital of the company whose shares are disposed of, for an uninterrupted period of two years.
• We would also like to remind you that Article 17 Section 10b of the CIT Act contains an additional condition for the exemption in question, namely: the exemption referred to in Section 1(58a) does not apply to income (revenue) derived from the disposal of shares in a company if at least 50% of the value of the assets of such company, directly or indirectly, consists of real estate located in the territory of the Republic of Poland or rights to such real estate.
• From what point in time in the case of an in-kind contribution do we therefore count the possession period referred to in 17(1)(58a) CIT?
• The Director of the National Fiscal Information in interpretations (as in: in the individual interpretation of 8 February 2023r. 0114-KDIP2 4010.244.2022.1.MR) confirms that the holding period referred to in Article 17(1)(58a) of the CIT, in the case of acquisition of shares (stocks) as a result of incorporation of a company or in increased share capital in a limited liability company, simple joint-stock company or joint-stock partnership, should be counted from the moment of acquisition of the shares (stocks) and not from the moment of disclosure of this fact in the National Court Register.