The points of law addressed in this case are relevant for:
- investment funds from non-Member States that are not comparable to Polish open-ended funds (FIO) but are comparable to Polish close-ended funds (FIZ) or so-called special open-ended investment funds (non UCITS), and
- foreign investment funds that are transparent for tax purposes (flow-through entities).
There are interesting implications of a new judgment of the Provincial Administrative Court in Lublin dated 12 Nov 2025 in case no. I SA/Lu 346/25 (the “Polish Case”). The Polish Case in fact revolves around two issues:
- whether the CJEU judgment of 10 April 2014 in case C-190/12 (Case C-190/12) is relevant solely for type-of-entity exemptions and is as such inapplicable to the type-of-income exemptions that became operative in Poland as of 1 January 2017;
- whether the fact that a foreign investment fund is a flow-through entity under the rules of its home jurisdiction disqualifies such fund from the Polish tax exemptions for foreign investment funds (which apply to funds from EU and EEA countries pursuant to national law, and to funds from non-Member States pursuant to the test designed to check if they are comparable to Polish investment funds).
If Case C-190/12 is considered to apply also to the type-of-income exemptions that became operative in Poland after its date, then any other issues decided in the Polish Case, e.g. whether a fund is an FIZ or an FIO, are of secondary relevance.
The Polish Case involves the following facts:
- A US investment fund (US Fund) requested a refund of WHT charged on its Polish dividend income between 2020 and 2021.
- The US Fund sought the refund pursuant to CJEU case law, including Case C-190/12.
- The US Fund argued that it is comparable to Polish FIOs (open-ended funds).
- Under US law the US Fund was an open-ended investment company (trust fund).
- Being a flow-through entity, the US Fund did not offer during the proceedings any certificate of residence, but instead provided Form 6166, which refers to Form 1065, which in turn is dedicated to partnerships that do not pay income tax themselves and instead report income distributable to partners.
Re. 1
Under the law applicable until 31 December 2016, foreign investment funds from EU or EEA countries were exempt as such from Polish corporate income tax (Article 6(1)(10a) of the CIT Act). This exemption had been introduced to cure the infringement under notice 2006/4093 addressed by the European Commission to Poland, alleging Poland treated foreign investment funds unequally with equivalent Polish investment funds. There was no doubt that the exemption in question applied also to non-Member State investment funds which pass the comparability test. In such cases, the tax authorities granted tax refunds based on CJEU case law, including particularly Case C-190/12.
A new law was introduced as of 1 January 2017 to change the taxation framework for Polish and foreign undertakings for collective investment. After the changes, tax exemptions for foreign investment funds are governed by CIT Act Article 6(1)(10a) (type-of-entity exemptions) and Article 17(1)(58) (type-of-income exemptions).
In the Polish Case, the tax authorities argued that a non-Member State fund may not rely on Case C-190/12 when claiming the type-of-income exemption under Article 17(1)(58) CIT Act (as the exemption entered into force after Case 190/12 was resolved).
The Polish court disagreed and made a clear point of noting that Case C-190/12 must be interpreted as a prohibition of discriminating against comparable entities based on the location of their registered offices. Contrary to what the tax authorities claimed, the judgment in Case C-190/12 is a preliminary ruling that is effective erga omnes and applies to interpretation of Community law, not national law. Thus, it is not appropriate to conclude that Case C-190/12 does not apply to a tax law that was introduced after the judgment was rendered.
Re. 2
One of the conditions for the tax exemption to apply, whether to UCITs or AIFs, is that the fund must be "subject to income tax on all of its income, wherever arising," in the country of residence (this condition is designed for both type-of-entity and type-of-income exemptions).
The requirement should be understood as the tax residence principle, not the effective taxation principle, as confirmed by the Polish Finance Minister already in 2012 (public tax ruling dated 3 July 2012, ref. DD5/033/4/12/RDX/DD-363).
In the Polish Case, the tax authorities refused exemption on the basis that the US Fund was unable to prove its tax residence due to being a flow-through entity (no certificate of residence).
Concerning this point, the court in Polish Case finds that US Fund being a flow-through entity (with taxation in the country of residence being applicable to its investors) is irrelevant for whether or not it is entitled to Polish tax exemption as long as the fund is comparable to Polish investment funds. While the court's argument is brief, it rests on the purposive and functional construal of the tax exemption regulations, rather than being limited to their literal (linguistic) interpretation.
Incidentally, while it did not seem to be relied on by the US Fund or entertained by the court in the Polish Case, the fact that the tax transparent nature of a fund cannot defeat its right to tax exemption was also confirmed by the European Commission.
Note here that, after Poland introduced the type-of-entity exemption for foreign investment funds from EU and EEA countries but made the exemption contingent on the fund being "subject to income tax on all of its income, wherever arising," in the country of residence, the European Commission requested Poland on 16 June 2011 to change the regulations that discriminate foreign pension funds and investment funds: "However, the Commission considers that the amendments to the Polish Law do not entirely eliminate tax discrimination against foreign funds. The Polish tax legislation grants the tax exemption to foreign funds on condition that they are subject to tax in their states of residence, whereas the exemption for domestic funds is granted unconditionally. Such a condition is not in line with EU law as some pension and investment funds from other EU/EEA States will not be granted the benefit of the exemption in Poland, which would otherwise be granted to all similar Polish funds without any additional requirements."
Yet, Poland has still not amended the impugned provision of Article 6(1)(10a)(a) CIT Act. In such circumstances, the requirements for the application of the tax exemption should be construed without reference to the discriminatory condition this provision lays down.
The implications of the judgment in the Polish Case are positive for the reclaim of Polish WHT by the types of funds concerned. The judgement is final yet; the Polish tax authority has appealed. We will inform you of the approach the higher court may take in this case.
