An operating company can be moved under a parent company by a sale of shares, by an ordinary contribution in kind or by an exchange of shares. Only the last of those routes makes it possible to do so without current tax in the hands of the shareholder. The price is high: failure to meet any one of the statutory conditions does not produce partial neutrality but ordinary taxation of the contribution in kind. Two conditions usually settle the matter — the threshold of an absolute majority of voting rights and the once-only rule. Both are examined separately for each shareholder, including where all of them sign the same notarial deed.
The mechanism: what the acquiring company has to obtain or increase
An exchange of shares is not a separate institution of company law — it is a special tax regime for a contribution in kind of shares or stock.
The definition is contained in Article 12(4d) (art. 12 ust. 4d) of the Corporate Income Tax Act (ustawa o podatku dochodowym od osób prawnych, the CIT Act) and in Article 24(8a) (art. 24 ust. 8a) of the Personal Income Tax Act (ustawa o podatku dochodowym od osób fizycznych, the PIT Act), in almost identical terms. A company acquires from a shareholder of another company that company's shares (stock) and, in exchange, transfers its own shares (stock) to that shareholder, possibly together with a cash payment not exceeding 10% of the nominal value of the shares issued. Neutrality comes into play only where, as a result of the acquisition, the acquiring company obtains an absolute majority of voting rights in the company being acquired or — already holding such a majority — increases the number of shares or stock it holds. The effect runs both ways: revenue includes neither the value of the shares transferred to the shareholder nor the value of the shares acquired by the company.
If the condition is not met, the transaction does not cease to exist — it ceases to be an exchange of shares. A natural person then derives revenue under Article 17(1)(9) (art. 17 ust. 1 pkt 9) of the PIT Act, and a CIT taxpayer under Article 12(1)(7) (art. 12 ust. 1 pkt 7) of the CIT Act. We discuss how the deferral is constructed in our article on tax neutrality in restructurings.
The conditions for a neutral exchange of shares
| Condition | Content | Basis in CIT | Basis in PIT | What most often defeats it |
|---|---|---|---|---|
| Voting threshold | The acquiring company obtains an absolute majority of voting rights or — already holding it — increases the number of shares | Article 12(4d) | Article 24(8a) | A minority block; confusing a holding in the share capital with voting rights |
| One shareholder, or six months | Successive acquisitions from the same shareholder are taken into account together over a period of up to 6 months from the month of the first acquisition | Article 12(12) | Article 24(8c) | Adding together the blocks of different shareholders; going beyond six months |
| Condition as to the entities and the territory | Both companies listed in Annex 3, or taxed on their worldwide income in an EEA State; the shareholder is a taxpayer for income tax purposes | Article 12(11)(1)–(2) and Article 12(16) | Article 24(8b)(1)–(2) | An entity from outside the EU or the EEA; a legal form not listed in the Annex |
| Contribution to share capital | The shares contributed must go, in whole or in part, to the acquiring company's share capital | Article 12(11)(2) | Article 24(8b)(2) | Allocating the whole contribution to supplementary capital |
| The once-only rule | The shares contributed must not come from another exchange of shares or from an earlier merger or division | Article 12(11)(3); Article 12(4)(12) | Article 24(8b)(3); Article 24(8db) | The second tier of a holding structure; a block coming from an earlier reorganisation |
| Carry-over of the tax value | The tax value of the shares taken up no higher than that of the shares contributed | Article 12(11)(4) | Article 24(8b)(4) | Taking market value or issue value as a new cost |
| Limit on the cash payment | A cash payment of up to 10% of the nominal value of the shares issued (or, where there is none, of their market value) | Article 12(4d) | Article 24(8a) | Balancing the exchange ratio with cash above the limit |
| Valid economic reasons | Neutrality does not apply where the main purpose is tax avoidance or tax evasion | Article 12(13)–(14) | Article 24(19)–(20) | Documentation of the purpose created after the transaction |
| Burden of proof | Rests on the shareholder — the history of the shares and their tax value | Article 12(12b) | Article 24(8dc) | No matrix of how each block was acquired |
An absolute majority of voting rights — a threshold measured separately for each shareholder
The majority condition is either met or not met in relation to a particular shareholder and his contribution; a joint notarial deed does not change that.
The aggregation rule is set out in Article 12(12) of the CIT Act and Article 24(8c) of the PIT Act: the neutrality provision also applies where the company acquires shares from the same shareholder in more than one transaction carried out over a period not exceeding six months, counted from the month of the first acquisition. A first acquisition in September 2026 marks out the period from September 2026 to February 2027.
The authority's practice is unambiguous. In an individual tax ruling of the Director of the National Revenue Information Service (Dyrektor Krajowej Informacji Skarbowej, the Director of the KIS) of 20 May 2026, no. 0114-KDIP3-1.4011.345.2026.1.MK1, all the shareholders were contributing their shares at the same time, by a single notarial deed, together covering 100% of the capital; the applicant held approximately 2.66% of the shares. The authority stated: "Even though the shares will be contributed by all the shareholders at the same time (in the same transaction), the position of each shareholder must be assessed separately in the light of Article 24(8c) of the Personal Income Tax Act. That provision, in the wording currently in force, does not permit transactions carried out between different entities to be combined and treated as a single transaction" (translation by the author). The consequence: revenue under Article 17(1)(9) of the PIT Act.
The operating conclusion. If no shareholder holds more than half of the votes on his own, the "everybody at once" variant does not work. Either a majority block has to be concentrated in one pair of hands first, or it has to be accepted that only some of the shareholders will enter the holding structure neutrally. The order of the contributions has to be documented: the first is to give the acquiring company its majority, and only the subsequent ones rely on the variant of increasing the number of shares. The point of terminology that costs the most is this: the statute speaks of voting rights, not of a holding in the share capital. Where there are preference shares and contractual restrictions, those two figures come apart.
The conditions as to the entities and the territory
Neutrality is reserved for a closed circle of entities, not for every capital company.
Under Article 12(11)(1) of the CIT Act and Article 24(8b)(1) of the PIT Act, the acquiring company and the company being acquired must be entities listed in Annex 3 to the relevant Act, or companies taxed on their worldwide income in an EEA State outside the European Union. Article 12(4d) of the CIT Act itself requires in addition that all the entities taking part in the transaction be subject, in an EU or EEA State, to taxation on their worldwide income irrespective of where it is earned. The annexes implement Council Directive 2009/133/EC.
Two consequences are worth checking before work begins. The entry for Poland lists the spółka akcyjna (S.A.), the Polish joint-stock company, and the spółka z ograniczoną odpowiedzialnością (sp. z o.o.), the Polish limited liability company — the prosta spółka akcyjna (P.S.A.), the Polish simple joint-stock company, is not included there, so its participation in a neutral exchange cannot be assumed in advance. A non-resident shareholder, in turn, calls for a separate analysis of the State of residence and of the applicable double taxation treaty.
The once-only rule — why a tiered holding structure breaks on the second tier
The legislature allows one movement of the same block of shares without tax, not a series of movements.
The condition is expressed in Article 12(11)(3) of the CIT Act and Article 24(8b)(3) of the PIT Act: the shares disposed of must not have been acquired or taken up as a result of another exchange of shares, nor allotted earlier as a result of a merger or a division of entities. The restriction operates symmetrically — Article 12(4)(12) of the CIT Act and Article 24(8db) of the PIT Act switch off neutrality in the hands of a shareholder on a merger or a division where his shares came from an earlier exchange, merger or division. The burden of proof rests on the shareholder: Article 12(12b) of the CIT Act and Article 24(8dc) of the PIT Act.
For a tiered holding structure this means the following. The first move — contributing the shares in the operating company to the holding company — may be neutral. The second, that is, contributing the shares in that holding company to a company above it, already concerns shares taken up in an exchange of shares, and so does not satisfy the condition. The same barrier closes off the route to a merger or a division involving such a block; we develop that thread in our article on merger by acquisition.
That is why the authority, when confirming neutrality, records the history of the block expressly. An individual tax ruling of the Director of the KIS of 18 August 2025, no. 0111-KDIB2-1.4010.213.2025.3.AJ, contains the following finding: "The shares disposed of by the Applicant were not acquired or taken up as a result of another exchange of shares, nor allotted earlier as a result of a merger or a division of entities". Only after setting that alongside the remaining conditions did the authority hold that "the value both of the shares transferred and of the shares acquired will not be included in the Applicant's revenue, in accordance with Article 12(4d) of the CIT Act".
Whether the national restriction is compatible with Directive 2009/133/EC is in dispute — Case C-434/25 SANOFI SA v Dyrektor Krajowej Informacji Skarbowej is pending before the Court of Justice, on a reference made by the Provincial Administrative Court in Gliwice (Wojewódzki Sąd Administracyjny) on 1 July 2025. Until the case is decided, the basic scenario is calculated under the national provision, and the directive-based argument remains a separate procedural route.
The tax cost after an exchange — deferral, not exemption
Neutrality moves the moment of taxation; it does not remove the income from the system.
On the shareholder's side the statute preserves the historical cost. On a later disposal for consideration of the shares in the acquiring company, the cost consists of the expenditure incurred at some point in the past on acquiring or taking up the shares contributed to that company — Article 23(1)(38c) (art. 23 ust. 1 pkt 38c) of the PIT Act for a natural person, and Article 16(1)(8d) (art. 16 ust. 1 pkt 8d) of the CIT Act for a CIT taxpayer. If the shares in the operating company once cost PLN 50,000 and went into the holding structure at a valuation of PLN 12,000,000, the cost on a sale of the shares in the holding company remains PLN 50,000. Issue value and the share premium (agio) create no new cost.
On the acquiring company's side the rule is a different one, and the two are sometimes confused. Under Article 16(1)(8e) of the CIT Act, the cost on a future disposal of the shares acquired is the nominal value of its own shares issued to the shareholder, increased by the cash payment referred to in Article 12(4d) of the CIT Act.
After an exchange, therefore, two different tax values for the same business exist within the group. They have to be recorded separately, and the evidence of acquisitions made years earlier has to be kept. It is also worth checking Article 12(1)(8bb) of the CIT Act and Article 24(5)(7b) of the PIT Act separately — those provisions recognise revenue arising from the excess of the market value on one side of the exchange over that on the other, so a divergence in the exchange ratio is not neutral for tax purposes.
The cash payment and its consequences
A cash payment within the limit does not spoil the classification of the transaction, but it is itself taxable.
Two questions have to be kept apart. First: does the cash payment fall within 10% of the nominal value of the shares issued (Article 12(4d) of the CIT Act, Article 24(8a) of the PIT Act)? Exceeding the limit means that the transaction is not an exchange of shares at all — what is then taxed is the contribution in kind, not merely the excess cash. Second: how is a cash payment within the limit to be taxed? For a natural person that is answered by Article 24(5)(11) of the PIT Act, which classifies the payment as income from a share in the profits of legal persons.
It was on that distinction that the applicant lost in the case closed by an individual tax ruling of the Director of the KIS of 9 May 2025, no. 0112-KDIL2-1.4011.236.2025.2.JK. The authority confirmed that the transactions met the conditions for an exchange of shares and nevertheless held the applicant's position to be incorrect: "However, the cash payment, should it be granted, will give rise on your part to taxable revenue on the terms set out in Article 24(5)(11) of the aforementioned Act". The proposition that, where the conditions are met, no "revenue of any kind" arises proved to be one word too wide.
The practical consequence: a cash payment triggers remitter obligations on the acquiring company's side. If the exchange ratio can be balanced through the number of shares issued, it is worth doing that rather than reaching for cash. The limits of the concept of a cash payment in EU law were examined by the Court of Justice in its judgment of 5 July 2007 in Case C-321/05 Hans Markus Kofoed v Skatteministeriet, ECLI:EU:C:2007:408.
The specific anti-avoidance clause
Meeting the technical conditions does not close the analysis if the transaction has no economic justification of its own.
Article 12(13) of the CIT Act and Article 24(19) of the PIT Act switch off the neutrality provisions where the main purpose, or one of the main purposes, of the exchange of shares is tax avoidance or tax evasion. Article 12(14) of the CIT Act and Article 24(20) of the PIT Act add a presumption: if the transactions were not carried out for valid economic reasons, it is presumed that that was precisely their main purpose. The presumption operates against the taxpayer — the absence of documentation is not a neutral state of affairs.
It does not, however, relieve the authority of the duty to examine the particular case. In its judgment of 17 July 1997 in Case C-28/95 A. Leur-Bloem v Inspecteur der Belastingdienst/Ondernemingen Amsterdam 2, ECLI:EU:C:1997:369, construing the predecessor of today's anti-abuse provision of the directive, the Court of Justice held that the national authorities "cannot confine themselves to applying predetermined general criteria but must subject each particular case to a general examination", and that their assessment must be open to judicial review.
The conclusion: the economic justification is built before the transaction and described in concrete terms — consolidation of supervision, centralisation of financing, preparation for succession, dividend policy. We discuss the method of proof in our article on valid economic reasons. Article 119a of the Tax Ordinance (Ordynacja podatkowa) has to be assessed separately, because an individual tax ruling affords no protection to the extent that the general anti-avoidance rule applies.
PCC on an increase of the acquiring company's share capital
An increase of the acquiring company's share capital is an amendment to the articles of association of a capital company and is as a rule subject to PCC — the base is the amount by which the share capital was increased (Article 1(3)(2) and Article 6(1)(8)(b) of the Tax on Civil Law Transactions Act (ustawa o podatku od czynności cywilnoprawnych, the PCC Act)), and the rate is 0.5% (Article 7(1)(9) of the PCC Act). An exchange of shares is taken out of the charge by Article 2(6)(c) of the PCC Act, which covers the contribution to a capital company — in exchange for its shares or stock — of shares or stock in another capital company conferring a majority of voting rights in it, or of further shares or stock where the company receiving the contribution already holds that majority. That exclusion has conditions of its own: it contains neither the six-month rule nor the once-only rule, so a transaction that is taxed for CIT or PIT purposes may at the same time remain outside PCC. We go into this at greater length in our article on PCC in restructurings.
The most common mistake
The most common mistake comes in two variants, and both follow from the same assumption: that the conditions are examined for the transaction as a whole rather than for each shareholder separately.
The first variant is spreading the contributions by several shareholders over time, in the belief that the six-month rule will allow them to be added together. It does not. Article 12(12) of the CIT Act and Article 24(8c) of the PIT Act concern successive acquisitions from the same shareholder; going beyond six months takes away even that aggregation, and where the blocks belong to different people there was no aggregation to begin with.
The second variant is including in the exchange shares that the shareholder received earlier in a reorganisation: in a previous exchange, in a merger or in a division. The condition in Article 12(11)(3) of the CIT Act and Article 24(8b)(3) of the PIT Act is then unmet, however well the holding structure itself is justified in economic terms.
How to avoid this: before the timetable is drawn up, prepare a matrix covering each shareholder separately — the number of voting rights, the date and manner of acquisition of each block, and its tax value. The matrix shows whose contribution gives the acquiring company its majority, and identifies the blocks that, by reason of their history, are not suited to a neutral exchange.
Summary
- Establish the voting rights, not the holdings in the share capital, and check whether any shareholder on his own gives the acquiring company an absolute majority — the order of the contributions depends on that. Apply the six-month aggregation only to successive acquisitions from the same shareholder.
- Examine the history of every block. Shares coming from an earlier exchange, merger or division do not satisfy the condition in Article 12(11)(3) of the CIT Act and Article 24(8b)(3) of the PIT Act, and that determines the shape of a tiered holding structure.
- Record both tax values arising after the exchange: the shareholder's cost in the shares of the acquiring company, and that company's cost in the shares of the company acquired. Keep the evidence of acquisitions made years earlier — the burden of proof rests on the shareholder.
- If the exchange ratio can be balanced through the number of shares, do without the cash payment; it falls within the limit, but for a natural person it constitutes separate income from a share in the profits of legal persons.
- Prepare the description of the economic purpose before the transaction and root it in the specific functions of the holding structure, not in a general declaration about tidying up the group.
Sources cited
All quotations from Polish-language sources — statutes, tax rulings and court judgments — are given here in the author's translation; the Polish wording is authoritative.
- Individual tax ruling of the Director of the National Revenue Information Service of 20 May 2026, no. 0114-KDIP3-1.4011.345.2026.1.MK1 (simultaneous contribution of shares by all the shareholders; the position of each shareholder assessed separately; no exclusion from revenue for a minority shareholder). https://eureka.mf.gov.pl/informacje/podglad/693188
- Individual tax ruling of the Director of the National Revenue Information Service of 9 May 2025, no. 0112-KDIL2-1.4011.236.2025.2.JK (the conditions for an exchange of shares met, but the cash payment constitutes revenue under Article 24(5)(11) of the PIT Act; the applicant's position held to be incorrect). https://eureka.mf.gov.pl/informacje/podglad/639232
- Individual tax ruling of the Director of the National Revenue Information Service of 18 August 2025, no. 0111-KDIB2-1.4010.213.2025.3.AJ (confirmation of neutrality for CIT purposes; express finding as to the history of the shares disposed of and as to the carry-over of the tax value). https://eureka.mf.gov.pl/informacje/podglad/653482
- Judgment of the Court of Justice of the European Union of 17 July 1997 in Case C-28/95 A. Leur-Bloem v Inspecteur der Belastingdienst/Ondernemingen Amsterdam 2, ECLI:EU:C:1997:369 (the date, the case number and the parties confirmed in the EUR-Lex database, CELEX document 61995CJ0028; the ECLI identifier confirmed by the citation of this judgment in the Advocate General's Opinion ECLI:EU:C:2018:148, footnote 12). https://eur-lex.europa.eu/legal-content/PL/TXT/?uri=CELEX:61995CJ0028 — no official Polish language version of this judgment exists: the special edition of the Official Journal of the European Union covered legislative acts, not judgments of the Court. For that reason the passage from paragraph 41 of the reasoning is reproduced as it stands in the English language version of the judgment.
- Judgment of the Court of Justice of the European Union (First Chamber) of 5 July 2007 in Case C-321/05 Hans Markus Kofoed v Skatteministeriet, ECLI:EU:C:2007:408 (the date, the case number, the formation and the parties confirmed in the EUR-Lex database, CELEX document 62005CJ0321; the ECLI identifier confirmed by the citation of this judgment in paragraph 70 of the judgment of the Court ECLI:EU:C:2019:135). https://eur-lex.europa.eu/legal-content/PL/TXT/?uri=CELEX:62005CJ0321
- Request for a preliminary ruling lodged by the Provincial Administrative Court in Gliwice on 1 July 2025, Case C-434/25 SANOFI SA v Dyrektor Krajowej Informacji Skarbowej (the case number, the referring court, the date of the request and the parties confirmed in the EUR-Lex database, CELEX document 62025CN0434). https://eur-lex.europa.eu/legal-content/PL/TXT/?uri=CELEX:62025CN0434 — notice published at Dz.Urz. UE C/2025/5567 z dnia 27 października 2025 r. The referring court put a single question: whether Article 8(2) and (6) of Directive 2009/133/EC, read together with Article 63(1) of the Treaty on the Functioning of the European Union, precludes national provisions which make the tax neutrality of the allotment of securities to a shareholder of the transferring company conditional on the shares in the acquired or divided entity not having been previously acquired or taken up as a result of an exchange of shares, or allotted as a result of another merger or division of entities. As at the date of publication the case remains pending.
E-book references
Selected restructuring topics are discussed at greater length in the e-book series Biblioteka Restrukturyzacji (Restructuring Library; Zbyszko Pora, JTWPOLAND): converting a sole trader into a sp. z o.o., the division of a company by spin-off or by separation, and the test for an organised part of an enterprise. The PDF files are available free of charge in the e-book section; the series is currently published in Polish.
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Get in touch →Legal basis: Act of 15 February 1992 on corporate income tax (Dz.U. z 2026 r. poz. 554, as amended) — in particular Article 7b(1)(2) and (3), Article 12(1)(7) and (8bb), Article 12(4)(12), Article 12(4d), Article 12(11)–(14) and (16), Article 12(12b), Article 16(1)(8d) and (8e), and Annex 3.; Act of 26 July 1991 on personal income tax (Dz.U. z 2026 r. poz. 592, as amended) — in particular Article 10(1)(7), Article 17(1)(9) and Article 17(1a), Article 23(1)(38c), Article 24(5)(7b) and (11), Article 24(8a)–(8dc) and (19)–(20), Article 30b, and Annex 3.; Act of 9 September 2000 on the tax on civil law transactions (Dz.U. z 2026 r. poz. 191) — Article 1(1)(1)(k) and (2), Article 1(3)(2), Article 2(6)(c), Article 6(1)(8)(b), Article 7(1)(9).; Act of 15 September 2000 — Commercial Companies Code (Dz.U. z 2024 r. poz. 18, as amended) — in particular Article 14, Article 158, Articles 257–262 and the provisions on the issue of stock.; Act of 29 August 1997 — Tax Ordinance (Dz.U. z 2026 r. poz. 622, as amended) — Article 14b, Articles 14k–14na and Article 119a et seq.; Council Directive 2009/133/EC of 19 October 2009 on the common system of taxation applicable to mergers, divisions, partial divisions, transfers of assets and exchanges of shares concerning companies of different Member States and to the transfer of the registered office of an SE or SCE between Member States (Dz.Urz. UE L 310 z 25.11.2009, s. 34).