VAT on Transactions Between Spouses Operating Separate Businesses
Running separate businesses by spouses under a statutory community property regime is a common phenomenon in Poland. Yet the tax classification of asset transfers between spouses’ enterprises is an area where case law has undergone a fundamental evolution in recent years — from denying the possibility of taxing such transactions, through a period of inconsistency, to the crystallisation of a line of jurisprudence grounded in the principle of autonomy of tax law and pro-EU interpretation. This state of affairs demands particular caution from entrepreneurs when tax planning intra-spousal transactions.
Starting Point: Spouses as Separate VAT Taxpayers
The foundation of the current approach is the judgment of the Court of Justice of the European Union of 24 March 2022 in Case C-697/20. The CJEU ruled unequivocally that Article 9 of the VAT Directive (2006/112/EC) establishes a very broad scope for the concept of a taxable person — it encompasses any person independently carrying out an economic activity, regardless of the purpose or results of that activity. The assessment of taxpayer status is to be made solely in light of the criteria set out in that provision: acting in one’s own name, on one’s own account and at one’s own responsibility, bearing the economic risk.
Consequently, the CJEU held that the VAT Directive precludes a Member State practice that excludes the possibility of recognising spouses conducting business using assets covered by community property as separate VAT taxpayers — provided each of them carries out the activity independently. The fact that spouses use assets covered by community property is irrelevant. What matters is economic independence, not the property law regime.
This judgment was fully received by the Supreme Administrative Court — first in the judgment of 7 June 2023 (I FSK 440/19), and then confirmed in the judgment of 4 March 2025 (I FSK 1619/21), which expressly relies on the legal assessment contained in the 2023 ruling as an established position.
The Key Consequence: Transfer of Goods Between Spouses’ Enterprises Constitutes a Taxable Supply
From the recognition of spouses as separate taxpayers flows a far-reaching conclusion, which the SAC articulated with full conviction in its 2023 and 2025 judgments: since we are dealing with two separate taxpayers, they may carry out taxable transactions between themselves as specified in the VAT Act, including supplies of goods.
In Case I FSK 1619/21, the facts concerned a planned gratuitous transfer of commercial goods (sports footwear) from the husband’s sole proprietorship to the wife’s newly established business. Both were registered as active VAT taxpayers, they were subject to statutory community property, and the goods formed part of the joint estate. The SAC overturned the taxpayer-favourable judgment of the Voivodeship Administrative Court and held that such a transfer constitutes a taxable supply of goods.
The SAC’s reasoning rests on two pillars.
First, the principle of autonomy of tax law. The definition of supply of goods in Article 7(1) of the VAT Act emphasises the economic aspects of disposing of goods as an owner — not the transfer of ownership in the civil law sense. The SAC invoked the view of R. Mastalski that tax law should be bound by its own concepts, and its capacity to achieve the intended objectives of taxation depends on the extent to which the legislator can translate those objectives into legal language independent of civil law.
Second, even where the transfer is gratuitous, Article 7(2)(2) of the VAT Act applies, under which the supply of goods also includes the gratuitous transfer by a taxable person of goods belonging to their enterprise, in particular any donations — provided the taxpayer was entitled to deduct input VAT on the acquisition of those goods. This condition was met in both cases.
The Earlier Line of Case Law — and Why It Was Abandoned
The position expressed by the SAC in 2023 and 2025 stands in clear opposition to the earlier approach, represented notably by the SAC judgment of 4 April 2018 (I FSK 887/16). In that ruling, the SAC held that where statutory community property exists between spouses, all transactions concluded between them in the course of their separate business activities cannot have a paid character — and if there is no consideration, there is no paid supply of goods. The reasoning was as follows: the wife cannot pay the husband with joint funds for assets forming part of the joint estate, since there is no possibility of paying remuneration, no enrichment will occur, as the spouses are linked by a regime of joint and undivided ownership. Importantly, the SAC in its 2018 judgment did not question the tax separateness of the spouses — it expressly stated that each of them may be a separate active VAT taxpayer. The problem was located solely in the element of consideration for transactions involving joint property assets.
An analogous position, expressly using the phrase “a contract with oneself”, was taken by the SAC in the judgment of 26 October 2021 (II FSK 204/19) on the grounds of income tax, holding a lease agreement for community property assets between spouses to be legally ineffective.
The 2023 and 2025 judgments do not directly argue against the 2018 line on the issue of consideration — in both later cases the transfers were gratuitous. The SAC resolved the problem elegantly: instead of attempting to demonstrate the possibility of consideration within joint and undivided ownership, it based taxation on Article 7(2) of the VAT Act, which equates with a paid supply also the gratuitous transfer of goods from a taxpayer’s enterprise where the right to deduct input VAT was available. This approach entirely bypasses the problem of the impossibility of payment within joint ownership, while simultaneously fulfilling the objective of the VAT Directive and the principle of neutrality — a taxpayer who deducted VAT on acquisition must “settle” that deduction at the moment of removing the goods from the taxed activity.
Risk Map: What Entrepreneurs Need to Know
The current state of case law allows the following practical conclusions to be drawn.
A gratuitous transfer of goods from one spouse’s enterprise to the other’s constitutes a taxable supply for VAT purposes under Article 7(2) of the VAT Act, provided the right to deduct input tax existed at the time of acquisition. This applies to both commercial goods and fixed assets. It is irrelevant that the goods form part of the spouses’ joint property — what matters is economic control over the goods within a specific enterprise.
The tax base for such a gratuitous transfer is — pursuant to Article 29a(2) of the VAT Act — the purchase price of the goods or similar goods, or where there is no purchase price — the cost of production, determined at the time of supply. In practice, this means the need to establish the current market value of the transferred asset.
Paid transactions between spouses subject to statutory community property, involving joint property assets, remain contentious. The 2018 judgment (I FSK 887/16) denying the possibility of consideration has not been formally overruled, although its foundations — the primacy of civil law over the autonomy of tax law — have been significantly weakened by subsequent case law. On income tax grounds, the 2021 judgment (II FSK 204/19) maintains the position that leases between spouses involving community property assets are legally ineffective. Entrepreneurs planning paid transactions on joint property assets should anticipate the risk of challenge both to tax-deductible costs on the buyer’s side and to the characterisation of the transaction for VAT purposes.
Services between spouses (e.g. advisory, accounting, training services — i.e. supplies not involving the transfer of control over a jointly owned physical asset) are subject to separate assessment. Case law does not preclude their taxation, provided they are genuine rather than fictitious.
Risk of tax audit. Tax authorities have tools to verify transactions between related parties, which include spouses. In the course of verification activities or customs and fiscal audits, they may challenge both the classification of the transaction and the adopted tax base. A lack of proper documentation of the asset transfer may lead to denial of the right to deduct on the buyer’s side or to the determination of an additional tax liability.
Recommendations for Practice
Spouses running separate businesses under a statutory community property regime should observe the following principles.
Every transfer of a business asset (commercial goods, fixed assets, equipment) from one spouse’s enterprise to the other’s should be treated as a taxable event for VAT purposes. If input VAT was deducted on the acquisition of that asset, the transfer — even if gratuitous — is subject to taxation as a supply of goods under Article 7(2) of the VAT Act.
Before making such a transfer, it is advisable to determine and document the market value of the asset being transferred, which will serve as the tax base. Documentation should include a valuation as at the date of transfer.
In the case of fixed assets, the obligations regarding input tax adjustment (Article 91 of the VAT Act) should additionally be analysed, especially where the transfer occurs within the adjustment period.
In doubtful situations, it is recommended to apply for an individual tax ruling, which will protect the taxpayer against the negative consequences of applying an incorrect interpretation of the law.
When planning business structures involving both spouses, it is worth considering whether introducing separation of property simplifies the tax position. Separation of property eliminates the problem of the impossibility of payment within joint ownership and allows for an unambiguous classification of transactions between spouses as dealings between independent entities — both for VAT and income tax purposes. Alternatively, it is worth analysing conducting joint business in the form of a company between spouses, which avoids the problems of classifying mutual transactions.
Entrepreneurs who in the past made transfers of business assets between spouses’ activities without accounting for VAT should consider the tax risk in light of the current line of case law and the potential need for corrective filings. In the event that tax proceedings are initiated in this regard, it is crucial to mount a defence already at the stage of verification activities, and in the case of an unfavourable tax decision — to exercise the right to appeal or file a complaint with the administrative court.
Summary
Case law is moving towards consistently treating spouse-entrepreneurs as separate VAT taxpayers, with all the attendant consequences — including the taxation of asset transfers between their enterprises. The key instrument is Article 7(2) of the VAT Act, which allows gratuitous transfers to be taxed without the need to resolve the civil law dispute over the possibility of consideration within joint and undivided ownership. The principle of autonomy of tax law, supported by pro-EU interpretation following the CJEU judgment in Case C-697/20, determines that economic control over goods — not legal title — dictates VAT consequences.
For entrepreneurs, this means the necessity of treating every transfer of a business asset between spouses’ firms as a potential taxable event, requiring analysis, documentation and proper accounting. Professional tax advisory in this area helps avoid costly errors and safeguard the interests of both spouses as taxpayers.
Robert Nogacki is a Polish attorney at law (radca prawny), the founder and managing partner of Kancelaria Prawna Skarbiec (Skarbiec Law Firm), which has operated continuously since 2006.
The law is equal for everyone, but the parties rarely are: on one side stands an organization with time, money, and lawyers, on the other a person with one business, one nest egg, and one life.
Clients rarely come to him with a legal problem. They come with a problem that also has a legal side: an audit that began with a single invoice, money entrusted to someone who has disappeared, a company that has to be passed on before it is too late. Most such matters are decided long before the first letter is written, in decisions made without asking and in deadlines nobody remembered. So he begins by asking how the client got here, not what the client should have done.
He advises entrepreneurs and families from more than a dozen countries, including those whose accounts the tax office has just seized and who do not know what to do tomorrow morning. He defends them in tax audits, customs and fiscal inspections, disputes with the tax authorities, and criminal tax proceedings. He represents victims of investment fraud and Ponzi schemes. He helps families set up family foundations and plan succession, so that a life’s work outlasts a single generation.
Not every case can be won. Every case can be run so that the client knows where they stand. Since 2006 he has represented the victims in the WGI case (Warszawska Grupa Inwestycyjna, the Warsaw Investment Group), one of the longest criminal cases in the history of the Polish financial market, because some things must not be left half finished, even when they take two decades. In the case of the collapsed cryptocurrency exchange Zonda (Zondacrypto, operated by BB Trade Estonia OÜ), he represents several hundred victims in the criminal investigation conducted by Poland’s National Prosecutor’s Office and in the Estonian bankruptcy proceedings.
Kancelaria Prawna Skarbiec is listed in the rankings of Poland’s largest tax advisory firms published by Dziennik Gazeta Prawna and Rzeczpospolita, and it is a four-time recipient (2015 to 2018) of the European Medal awarded by the Business Centre Club and the European Economic and Social Committee. Robert Nogacki publishes regularly, in the press and on the firm’s website, for people who have a problem rather than a law degree, because a legal opinion the client cannot understand protects only the lawyer.
He believes that the best legal advice is the kind that means the client never has to appear in court.
