Polish Supreme Administrative Court confirms availability of tax exemption for German real estate investment funds

In November 2021 the Supreme Administrative Court confirmed that revenue generated by real estate investment funds with their registered offices in Germany was exempt from income tax in Poland, provided it originated from investments carried out in Poland by limited liability companies (Polish: spółki z o.o.). This ’s view is expressed by several decisions of the Court (case file no. II FSK 470/19, II FSK 862/19, II FSK 813/19, II FSK 1176/19, II FSK 1269/19).

The Court examined cases regarding CIT exemption of revenue generated by German real estate investment funds in the form of dividends received from Polish limited liability companies (spółki z o.o.), interest on the originated loans and capital gains (if any) from disposal of shares in SPV in accordance with the CIT Act in the version effective as of 1 January 2017.

Rulings issued by competent tax authorities and appealed against by taxpayers presented the view that the legal and fiscal status of such funds was not comparable to that of Polish investment funds because German regulations applicable to business operations of real estate investment funds allowed investing in partnerships.

The Supreme Administrative Court denied the approach adopted by the tax authorities, stating that being able to invest in partnerships did not disallow the use of tax exemption in Poland, in particular when such funds actually generated revenue from investments in Polish limited liability companies, permitted for Polish investment funds as well. Foreign investment funds cannot be expected to achieve a legal status identical to Polish ones for tax exemption purposes and so, the restriction of access to tax exemption would mean discrimination and unequality of treatment without a valid reason.
Therefore, the differences indicated by tax authorities in their rulings cannot be a reason to refuse the same tax treatment, in this case the ability to use tax exemption in Poland.

This statement marks the approach of the Supreme Administrative Court that undermines the interpretation commonly applied by Polish tax authorities disallowing tax exemption of income generated by foreign investment funds in Poland (available to Polish investment funds) on the grounds of differences in their legal status.

The decisions referred to in the beginning of this article are therefore of great importance for all common investment entities being residents of other EU countries, as they provide a starting point for an analysis whether they qualify for a refund of taxes paid in Poland in the past.