A claim against oneself

The ruling concerned a Polish tax resident who was the sole shareholder of a company incorporated under Estonian law. The company had granted the shareholder a loan which had not been repaid before the liquidation process began. The claim for repayment of the loan was to be transferred to the shareholder as part of the liquidation assets.

As a result of this transaction, the rights of the creditor and the obligations of the debtor arising from the same obligation would become vested in the same person. This results in confusio, i.e. the merger of the creditor’s rights and the debtor’s obligations in the same person, and consequently in the extinguishment of the debt: the shareholder cannot enforce repayment of the loan against themselves.

Confusio does not constitute debt cancellation or a release from debt within the meaning of Article 508 of the Polish Civil Code. No agreement is concluded under which the creditor waives the performance due to them. Instead, the obligation is extinguished by operation of law as a consequence of the rights and obligations becoming vested in the same person.

The Polish tax authorities divide a single event into two stages

The authority’s position is based on distinguishing between two events. The first is the transfer of the claim to the shareholder as an asset forming part of the liquidation assets. The second is the subsequent extinguishment of the claim and the corresponding obligation as a consequence of that transfer.

This distinction makes it possible to conclude that the tax neutrality of confusio does not affect the taxation of the earlier receipt of assets. A claim arising from a loan is an asset of the company. The fact that it is held against the shareholder does not deprive it of its status as a property right or exclude it from the assets available for distribution.

According to the authority, the subsequent extinguishment of the claim is solely a consequence of its transfer. Had the claim not been transferred to the shareholder, the rights of the creditor and the obligations of the debtor would not have become vested in the same person and confusio would not have occurred. The extinguishment of the right therefore does not eliminate the tax consequences arising at the time it is received.

This aspect of the authority’s reasoning gives rise to the greatest doubt. In practice, it is difficult to identify any point at which the shareholder could freely dispose of the acquired claim. The shareholder cannot enforce or sell it, or use it in a settlement with another party, because the right is extinguished as a result of its merger with the corresponding debt.

Income from liquidation assets

The ruling is based on Article 17(1)(4)(c) and Article 24(5)(3) of the Polish Personal Income Tax Act. Under these provisions, the value of assets received in connection with the liquidation of a legal person constitutes income from participation in the profits of legal persons.

The source of the income is therefore neither the benefit arising from the absence of an obligation to repay the loan nor confusio itself. According to the authority, the event giving rise to taxable income is the receipt of the claim as part of the distribution of the liquidated company’s assets.

As a rule, this income is subject to a flat-rate tax of 19%. At the same time, Article 21(1)(50a) of the Polish Personal Income Tax Act provides for an exemption in respect of the portion corresponding to the cost of acquiring or subscribing for shares in the liquidated company. Tax should therefore apply to the excess of the value of the assets received over the properly determined cost of the shares.

The nominal amount of the loan does not constitute a cost incurred by the shareholder. The economic burden of providing the financing was borne by the company. From the shareholder’s perspective, the relevant costs are those incurred in acquiring or subscribing for the shares, rather than the amount of the shareholder’s liability towards the company.

How should a right that is about to cease to exist be valued?

A further issue is how to determine the amount of taxable income. The taxable amount is to be the market value of the claim, which will not always correspond to the nominal amount of the principal plus accrued interest.

Its value is affected by factors including the debtor’s financial position, the maturity date, the applicable interest rate, any security provided, the risk of insolvency, limitation periods and the realistic possibility of enforcing the claim. In the case of loans of substantial value, adopting the nominal value without an economic analysis may therefore result in the taxable income being overstated.

The circumstances under consideration give rise to an additional paradox: the right being valued will be extinguished when it is transferred to the shareholder and will not be capable of generating any payment for them. Following the Polish tax authority’s reasoning, however, the value to be determined is that of the claim while it still forms part of the company’s assets, before confusio occurs.

A reliable valuation should therefore not be treated solely as a formal element of the liquidation documentation. It may directly determine the amount of the shareholder’s tax liability.

A restrictive approach under corporate income tax as well

The ruling of 21 July 2026 is not an isolated decision. A similar position was presented by the Head of the Polish National Revenue Administration in an amending ruling dated 10 July 2026, ref. DOP12.8221.48.2026, concerning an analogous issue under the Polish Corporate Income Tax Act.

In that case, a joint-stock company was to receive, in connection with the liquidation of its subsidiary, a claim against itself. The Director of the National Tax Information Service initially accepted the view that no definitive economic benefit arose. The Head of the National Revenue Administration, however, reversed that taxpayer-favourable ruling.

The Head of the National Revenue Administration concluded that confusio is not a separate legal transaction, but the consequence of the earlier transfer of the claim. The receipt of an asset, without which the rights of the creditor and the obligations of the debtor would not have become vested in the same person, is therefore the decisive event for tax purposes.

The reversal of the earlier ruling demonstrates that the Polish tax authorities are seeking to establish a consistent restrictive approach under both the Personal Income Tax Act and the Corporate Income Tax Act. Taxpayers should therefore not base planned settlements on older, more favourable positions without checking the tax authorities’ current practice.

Is the position of the Polish tax authorities convincing?

The authorities’ reasoning is supported by the literal wording of the provisions concerning assets received as a result of liquidation. It does not, however, resolve the doubts arising from the principle that taxable income should constitute a definitive economic benefit.

The shareholder does not receive a claim that they could actually use. Upon its acquisition, both the right and the corresponding debt are extinguished. From an economic perspective, both consequences form part of a single event.

The authorities nevertheless adopt a formal approach. Since the claim is transferred as part of the distribution of assets, its subsequent – even almost simultaneous – extinguishment does not prevent taxable income from arising. The essence of the dispute therefore comes down to whether tax applies to an actual economic benefit or merely to the value of a right that cannot exist independently in the shareholder’s assets.

Should the loan be settled before liquidation?

Leaving a loan outstanding until the distribution of the liquidation assets may result in an obligation to pay tax even though the shareholder receives no cash. The tax will then have to be financed from other sources.

Before commencing liquidation, it is therefore necessary to determine which claims the company holds against its shareholders, establish their actual market value and identify the costs of acquiring or subscribing for shares that may be taken into account. It is also worth comparing the consequences of repaying the loan, settling it at an earlier stage and transferring the claim as part of the liquidation assets.

The latest Polish tax rulings show that the tax neutrality of confusio does not determine the tax neutrality of the event that leads to it. For the Polish tax authorities, the key consideration is what the shareholder formally receives – even if the right received is extinguished before the shareholder can make any use of it.