Capital-free partnership conversions escape PCC tax, Court holds

Poland may not levy its civil-law transactions tax on the conversion of a profit-making limited partnership into a profit-making general partnership where the conversion involves no contribution of capitalEuropa, even where Poland is taken to exercise the Article 9 option not to treat such entities as capital companiesEuropa. In Case C-197/25 the Court of Justice (Third Chamber) held that Article 9 of Directive 2008/7 covers only capital dutyEuropa — the indirect tax on contributions of capitalEuropa — and does not displace the Article 5(1)(d)(i) ban on any indirect tax on a conversion of a capital company into a different type of capital companyEuropa, with deemed capital-company status under Article 2(2) intact outside capital dutyEuropa.

The dispute concerns the conversion of a Polish spółka komandytowa into a spółka jawnaEuropa. On 9 July 2021 the converted entity sought a refund of tax on civil-law transactions (PCC), arguing the conversion was wrongly treated as an increase in partnership assets under Article 1(3)(3) of the PCC Law; the tax office refused in March 2022, the provincial administrative court dismissed the action in July 2022, and the entity — by then a limited liability company — appealed to the Naczelny Sąd Administracyjny. The notarial deed set the resulting general partnership's contributions at the same amount as beforeEuropa, with no fresh cash or in-kind contributionsEuropa, so the referring court asked whether pre-conversion assets becoming the new partnership's assets count as contributions of the converted partnership under Article 6(1)(8)(f) PCC Law, and whether Poland's Article 9 exercise permits the levy.

The Court recalled the directive's complete harmonisationEuropa: capital duty on contributions of capital to capital companies is banned by Article 5(1)(a), save for Member States levying it on 1 January 2006 under Article 7(1) within Articles 8 to 14Europa, while Article 5 as a whole — including the conversion shield in Article 5(1)(d)(i) — is interpreted broadly and capital duty strictlyEuropa. Article 2(1) lists inherent capital companies, with Polish spółka akcyjna and spółka z ograniczoną odpowiedzialnością among them, while Article 2(2) deems every other profit-making company, firm, association or legal person a capital companyEuropa so that legal form does not change the fiscal treatment of economically equivalent transactionsEuropa. Article 9 sits in Chapter IIIEuropa, devoted exclusively to capital dutyEuropa, and its words for the purposes of levying capital duty confine the opt-out to that dutyEuropa: it lets a qualifying Member State disregard deemed status when levying capital duty, but not for other indirect taxesEuropa.

Accordingly a capital-free conversion of one non-Article 2(1) profit entity into another is a conversion of a capital company into a different type of capital company under Article 5(1)(d)(i) with Article 2(2)Europa, and Article 9 is irrelevant to itEuropa — Chapter III does not even apply without a contribution of capitalEuropa. Whether this conversion involved such a contribution is for the referring court under the exhaustive Article 3 listEuropa; on the request's facts it appears not toEuropa, so subject to the Article 6 carve-outs for transfer duties, mortgage charges, fees and VAT — which appear irrelevant hereEuropa — no indirect tax of any kind may attachEuropa, and conflicting PCC Law provisions must be disapplied by primacyEuropa. Costs of the main proceedings are for the referring court. The legal basis is one closing sentence: the ruling interprets Article 9 with Articles 2(2), 5(1)(d)(i), 3, 6 and 7(1) of Directive 2008/7Europa.