Loan Agreements Under Polish Tax Law: The VAT–Transfer Tax Dichotomy

I. Introduction: The Problem of Dual Tax Regimes

The proper tax characterization of a loan agreement under Polish fiscal law presents a deceptively complex problem. At its core lies a seemingly straightforward question: does a given loan constitute a supply of services subject to value added tax, or does it fall within the ambit of the civil transaction tax (podatek od czynności cywilnoprawnych, hereinafter “CTT”)? The answer, however, is far from self-evident, for it depends on an intricate interplay between the complementarity principle governing the two levies, the subjective status of the lender as a VAT-taxable person, and an evolving body of case law from both the Polish Supreme Administrative Court (Naczelny Sąd Administracyjny, hereinafter “SAC”) and the Court of Justice of the European Union (“CJEU”).

The practical stakes are considerable. A mischaracterization may result in either the unwarranted payment of CTT at a rate of 0.5% of the loan principal — including in scenarios involving intercompany loans to corporate officers, which carry their own distinct complications — or, alternatively, the recognition of a VAT-exempt financial service under Article 43(1)(38) of the Polish VAT Act (ustawa o podatku od towarów i usług, hereinafter “VATA”), with potentially far-reaching consequences for the lender’s input VAT deduction ratio. In the most adverse scenario, the tax authority may contest the taxpayer’s classification ex post, imposing default interest on the resulting arrears.

This article examines the doctrinal foundations and jurisprudential developments governing the VAT/CTT boundary in the context of loan agreements, with particular attention to the SAC’s judgment of 15 December 2022 (I FSK 1634/19) and the CJEU’s landmark ruling in Case C-77/01 (EDM). It then proposes a structured analytical framework for practitioners navigating this terrain.

II. The Complementarity Principle: Mutual Exclusivity of VAT and CTT

The foundational mechanism for delineating the respective domains of value added tax and CTT is the complementarity principle, codified in Article 2(4) of the CTT Act. This provision establishes that civil law transactions — other than the formation or amendment of a company — are excluded from CTT where at least one party is either subject to VAT or exempt from VAT with respect to the transaction in question.

The operative logic is one of mutual exclusivity. Where the grant of a loan constitutes a transaction falling within the scope of VAT — even where that transaction benefits from an exemption — the CTT obligation does not crystallize. It is only when the loan falls entirely outside the scope of VAT, typically because the lender does not act in the capacity of a VAT-taxable person, that CTT applies.

This binary structure places the entire analytical burden on a single determination: whether the lender, in granting the specific loan at issue, acts qua taxable person within the meaning of Article 15(1) and (2) VATA. The characterization of the transaction itself — as a supply of financial services — is, for all practical purposes, uncontested.

III. The Loan as a Supply of Services: An Uncontested Premise

It is well established under Polish tax law that the grant of an interest-bearing loan constitutes a supply of services within the meaning of Article 8(1) VATA. The lender’s obligation to make capital available to the borrower for a defined period, in exchange for remuneration in the form of interest, satisfies the statutory definition of a service rendered for consideration. The Polish Classification of Products and Services (PKWiU) classifies such activity under Division 64 (“Financial services, excluding insurance and pension funds”).

The analytical difficulty, therefore, does not reside in the objective characterization of the transaction. It resides, rather, in the subjective characterization of the lender: specifically, whether the lender acts in the capacity of a taxable person carrying on an economic activity within the meaning of Article 15(2) VATA.

IV. The Decisive Criterion: Acting in the Capacity of a VAT-Taxable Person

A. Legal Persons: The Absence of a “Private Sphere”

For legal persons — including limited liability companies, joint-stock companies, foundations, and associations engaged in economic activity — the jurisprudence has consistently held that they do not possess a “private patrimony” analogous to that recognized for natural persons. Every act undertaken by a legal person belongs, ipso facto, to its professional sphere and bears a nexus to its economic activity.

This principle was articulated with particular clarity in the SAC’s judgment of 15 December 2022 (Case No. I FSK 1634/19), in which the Court held:

“There can be no doubt that the transfer of monetary funds to a borrower, for a specified period, in exchange for remuneration (interest) received at established settlement intervals, constitutes the utilization of those funds on a continuous basis and for gainful purposes. Where a loan — even one of a sporadic character — is granted from the lender’s own resources by an entity carrying on an economic activity, that entity acts in the capacity of a VAT-taxable person.”

The significance of this ruling lies in the breadth of circumstances that the Court deemed insufficient to displace the presumption of taxable activity. The appellant company had advanced a series of arguments — that the loans were incidental in nature, extended exclusively to related parties, funded from a transient cash surplus, granted without any organized lending infrastructure, issued without commission or credit assessment procedures, and motivated solely by the financing needs of affiliated companies rather than by profit-seeking. The SAC rejected each of these contentions seriatim.

The Court’s reasoning rested on two mutually reinforcing grounds. First, the transfer of capital for a defined period at interest constitutes, by its very nature, the continuous and gainful exploitation of intangible assets — a paradigmatic instance of economic activity under Article 15(2) VATA. Second, the lender’s failure to exclude the possibility of future lending activity indicated that loan-granting was structurally embedded in the company’s operations rather than extrinsic to them. The Court further observed that intragroup lending, far from being a mere incidental deployment of surplus funds, serves the strategic function of stabilizing affiliated entities, strengthening the lender’s position within the corporate group, and thereby consolidating its market standing — all of which reinforce its characterization as an element of ongoing economic activity.

B. The CJEU’s Ruling in Case C-77/01 (EDM v. Fazenda Pública)

The SAC’s approach in I FSK 1634/19 is fully consonant with the CJEU’s earlier ruling of 29 April 2004 in Case C-77/01, Empresa de Desenvolvimento Mineiro SGPS SA (EDM) v. Fazenda Pública, which remains the leading authority on the VAT treatment of intercompany lending by holding companies.

In EDM, the Court held that the annual grant of interest-bearing loans by a holding company to its subsidiaries constitutes an economic activity carried out by a taxable person acting as such, within the meaning of Articles 2(1) and 4(2) of the Sixth VAT Directive (now Articles 2 and 9 of Directive 2006/112/EC). The Court’s reasoning proceeded in three steps.

First, the interest received by the holding company as remuneration for loans extended to its subsidiaries cannot be excluded from the scope of VAT, because such interest does not arise from the mere holding of assets but rather constitutes consideration for the provision of capital to a third party (paragraph 65 of the judgment). Second, invoking its earlier holding in Case C-306/94, the Court determined that a holding company provides such services in the capacity of a VAT-taxable person, insofar as it carries out “transactions forming the direct, permanent, and necessary extension of [its] taxable activity” (paragraph 66). Third, and critically, when an undertaking deploys assets forming part of its business patrimony for the provision of services constituting economic activity — such as the grant of interest-bearing loans — it acts for commercial purposes, because such transactions are “characterized, in particular, by the endeavor to maximize returns on invested capital.” This characterization obtains regardless of whether the loans are granted as financial support to subsidiaries, as investment of budgetary surpluses, or for any other purpose (paragraphs 67–68).

The Court’s holding in EDM thus forecloses any attempt to argue that the purpose or motive behind a loan — be it group treasury management, financial stabilization, or the opportunistic deployment of idle cash — is capable of displacing its characterization as an economic activity for VAT purposes.

C. Natural Persons: The Residual Scope of CTT

A materially different analysis applies to natural persons who do not carry on an economic activity or who grant loans outside the scope of any such activity. A natural person managing private wealth who extends an occasional loan to a family member or acquaintance does not, as a general proposition, act in the capacity of a VAT-taxable person. Such a loan falls outside the scope of VAT and is accordingly subject to CTT.

The boundary, however, is not immutable. Where a natural person grants loans in an organized and continuous manner — for instance, by regularly extending interest-bearing loans to multiple borrowers — the tax authority may determine that the person is carrying on an unregistered economic activity within the meaning of Article 15(2) VATA, thereby bringing the transactions within the scope of VAT.

Given the inherent uncertainty in borderline cases, it is prudent for taxpayers to consider seeking an individual tax ruling (interpretacja indywidualna) from the Director of the National Tax Information Service, which affords legal protection against adverse assessment in the event of a subsequent dispute with the tax authority.

V. A Critical Assessment: The Doctrinal Fragility of the Automatic VAT Presumption

A. The Structural Incoherence with Article 151 of the Code of Commercial Partnerships and Companies

The prevailing jurisprudential position — that every interest-bearing loan extended by a legal person necessarily constitutes an economic activity for VAT purposes — rests on a premise that is fundamentally unsynchronized with the foundational provision governing the limited liability company under Polish corporate law. Article 151(1) of the Code of Commercial Partnerships and Companies (Kodeks spółek handlowych, hereinafter “CCC”) provides, in unambiguous terms, that a limited liability company “may be formed by one or more persons for any lawful purpose, unless a statute provides otherwise.”

The doctrinal significance of this provision cannot be overstated. As Kidyba has persuasively demonstrated, the limited liability company may be established for: (i) gainful purposes (cele zarobkowe); (ii) economic purposes that are not gainful in character (not for profit); or (iii) purposes that are entirely non-economic (non profit) (A. Kidyba, Spółka z ograniczoną odpowiedzialnością, 2002, pp. 7, 9). Wiśniewski carries this analysis further still, arguing that the statutory reference to “any lawful purpose” in Article 151(1) CCC is, in normative terms, effectively devoid of independent regulatory content — it merely expresses the legislature’s abandonment of any general regimentation of the permissible objectives of the limited liability company form (A.W. Wiśniewski, in: A. Opalski (ed.), Kodeks spółek handlowych, Vol. IIA, 2018, Art. 151, Nb 13). Ryszkowski confirms that a limited liability company that does not pursue gainful activity is under no obligation to operate an enterprise, and cannot be regarded as an entrepreneur within the meaning of Article 43¹ of the Civil Code (K. Ryszkowski, in: R. Wrzecionek (ed.), Kodeks spółek handlowych, Vol. I, 2025, Art. 151).

The implications for VAT analysis are immediate and far-reaching. The automatic classification endorsed by the SAC in I FSK 1634/19 — whereby the corporate form of the lender, without more, determines the VAT characterization of a loan — conflates the legal personality of the entity with an irrebuttable presumption of gainful economic activity. Yet this is precisely the presumption that Article 151(1) CCC structurally refuses to make. If the Polish legislature has expressly designed the limited liability company as a vehicle that need not pursue economic or gainful objectives, it is doctrinally incongruent to hold, on the VAT plane, that every act of such a company ipso facto constitutes economic activity within the meaning of Article 15(2) VATA. The syllogism collapses at its major premise: a legal person is not, by virtue of its corporate form alone, an entity that necessarily acts “for gainful purposes on a continuous basis.”

One might object that the SAC’s reasoning addresses a narrower question — whether a specific transaction (the interest-bearing loan) bears the hallmarks of economic activity — rather than the general character of the entity. But even on this narrower reading, the Court’s logic is circular: the loan is classified as economic activity because the lender is a legal person, and legal persons are deemed to act within their economic activity because they lack a private sphere. The corporate law framework, however, demonstrates that the absence of a “private patrimony” does not entail the presence of a gainful economic purpose. A non-profit limited liability company — entirely lawful under Article 151(1) CCC — lacks a private sphere yet pursues no gainful activity whatsoever. The transfer of surplus funds by such an entity to an affiliated charitable foundation, even if formalized as an interest-bearing loan (for transfer pricing compliance), cannot coherently be characterized as a transaction “aimed at maximizing returns on invested capital” within the meaning of EDM.

B. The Survival of the Incidental Transaction Doctrine for Legal Persons

The second, related weakness in the prevailing approach concerns the effective negation of the incidental (ancillary) transaction doctrine as applied to legal persons. If one accepts the SAC’s premise that every transaction undertaken by a legal person falls within the scope of its economic activity, the concept of an “incidental” financial transaction — expressly recognized by the CJEU in EDM and implemented in Article 90(6) VATA — is rendered doctrinally incoherent, or at best confined to an impossibly narrow residual domain.

The CJEU’s framework in EDM itself presupposes the possibility that a taxable person carrying on an economic activity may undertake financial transactions that are not structurally embedded in that activity but rather incidental to it. The decisive criterion, as the Court held, is whether the transaction “involves only very limited use of assets or services subject to value added tax” (operative part, point 1). This is a qualitative test directed at the degree of integration of the financial transaction into the taxpayer’s operational infrastructure — not a binary test of whether the entity possesses legal personality.

The SAC’s reasoning in I FSK 1634/19 effectively elides this distinction. By holding that a legal person’s utilization of a temporary cash surplus for the purpose of extending interest-bearing loans to affiliated entities constitutes, per se, continuous and gainful exploitation of intangible assets, the Court effectively precludes the incidental transaction classification at the threshold — before the qualitative assessment mandated by EDM can even commence. The Court’s observation that the appellant “did not exclude the possibility of future lending activity” further illustrates the asymmetry: the mere failure to disclaim future engagement in a given type of transaction is treated as affirmative evidence that the transaction is structurally integrated into the entity’s economic operations.

This approach is difficult to reconcile with the CJEU’s own admonition in EDM that the scale of income from financial transactions — and, a fortiori, the frequency or recurrence of such transactions — is not determinative of whether they are incidental. The qualitative criterion of resource absorption remains available in principle; the SAC’s reasoning, however, ensures that it is virtually never reached in practice for legal persons. The result is a de facto irrebuttable presumption that converts a nuanced, fact-specific inquiry into a categorical rule based on the lender’s corporate form.

A more doctrinally coherent approach would recognize that even a legal person — including one that indisputably carries on an economic activity as its principal undertaking — may engage in financial transactions that are genuinely peripheral to its core operations, absorbing negligible VAT-bearing resources, and that the incidental transaction doctrine under Article 90(6) VATA must retain practical application irrespective of the lender’s legal form. Such an approach would bring the Polish jurisprudence into closer alignment with the CJEU’s own analytical framework in EDM, which the SAC purports to follow but, in this critical respect, materially departs from.

VI. Summary of Operative Criteria

A. Conditions for VAT Treatment

A loan is subject to VAT — specifically, it qualifies as a financial service exempt from VAT under Article 43(1)(38) VATA — where the following conditions are cumulatively satisfied:

1. Status as a taxable person. The lender carries on an economic activity within the meaning of Article 15(2) VATA.
2. Acting in the capacity of a taxable person. In granting the loan, the lender acts within the scope of that economic activity. For legal persons, this condition is, in practical terms, invariably met. For natural persons, it requires a factual assessment of whether the transaction transcends the management of private assets.
3. Consideration. The loan is granted for remuneration, typically in the form of interest. Gratuitous loans raise distinct issues under Article 8(2) VATA, which are beyond the scope of this analysis.

The consequences of VAT treatment are twofold. The loan is exempt from VAT and thereby excluded from CTT. However, the interest income enters the denominator of the fraction used to calculate the taxpayer’s input VAT deduction ratio under Article 90 VATA — unless the transaction qualifies as an ancillary (incidental) transaction within the meaning of Article 90(6) VATA.

B. Conditions for CTT Treatment

A loan is subject to CTT, at a rate of 0.5% of the loan principal, where:

1. The lender does not act in the capacity of a VAT-taxable person with respect to the transaction — typically because the lender is a natural person not carrying on an economic activity.
2. Neither party benefits from a VAT exemption in connection with the specific transaction.

The CTT obligation arises upon the conclusion of the loan agreement and falls on the borrower, who must file a CTT-3 declaration within fourteen days of the date on which the tax obligation crystallizes.

Certain statutory exemptions merit attention, notably: loans granted by entrepreneurs who lack a registered office or place of management within the territory of Poland (Article 9(10)(a) of the CTT Act); and loans between members of the immediate family (Article 9(10)(b)), which are exempt up to PLN 36,120, and above that threshold where the transfer is documented by bank remittance and reported to the competent tax office.

VI. The “Ancillary Transactions” Doctrine and Its Impact on the VAT Deduction Ratio

Even where a loan is properly characterized as a VAT-exempt supply of services, its adverse impact on the lender’s VAT position may be substantially attenuated if the transaction qualifies as “ancillary” within the meaning of Article 90(6) VATA — the domestic implementation of Article 174(2) of Directive 2006/112/EC (formerly Article 19(2) of the Sixth VAT Directive).

The CJEU’s guidance in EDM on this point is particularly instructive. The Court held that financial transactions may be regarded as ancillary where they “involve only very limited use of assets or services subject to value added tax.” Critically, the scale of income generated by such transactions is not, of itself, determinative — although it may constitute an indication that the transactions should not be treated as ancillary. Indeed, the Court explicitly stated that the mere fact that income from financial transactions exceeds the revenue produced by the undertaking’s declared principal activity does not per se preclude their classification as ancillary (paragraph 1 of the operative part).

The assessment is thus qualitative rather than quantitative: the decisive criterion is the degree to which the lending activity absorbs the taxable person’s VAT-bearing resources (goods, services, staff time, infrastructure), not the nominal value of the interest income generated. This determination is inherently fact-specific and falls, in the final instance, to the national court — or, in practice, to the taxpayer, subject to the risk of challenge during a tax audit.

VIII. A Decision Framework for Practitioners

The foregoing analysis may be distilled into a sequential decision framework:

Step 1. Does the lender carry on an economic activity within the meaning of Article 15(2) VATA?

• If no → CTT applies (0.5% of the loan principal, subject to applicable exemptions).
• If yes → proceed to Step 2.

Step 2. Does the lender, in granting the loan, act in the capacity of a VAT-taxable person — i.e., does the transaction bear a sufficient nexus to the lender’s economic activity?

• If yes (presumptively so for all legal persons) → proceed to Step 3.
• If no (possible only for natural persons acting within the private sphere) → CTT applies.

Step 3. The loan constitutes a VAT-exempt financial service under Article 43(1)(38) VATA → CTT is excluded. The taxpayer must then assess the transaction’s impact on the input VAT deduction ratio under Article 90 VATA and determine whether it qualifies as ancillary within the meaning of Article 90(6) VATA.

IX. Intercompany Loans: Additional Compliance Dimensions

Loans extended within corporate groups warrant heightened scrutiny, as they implicate not only the VAT/CTT analysis set forth above but also the transfer pricing regime under Articles 11a–11t of the Polish Corporate Income Tax Act. The interest rate must conform to the arm’s-length standard; failure to satisfy this requirement exposes the lender or borrower to an adjustment of taxable income by the tax authority.

In the case of cross-border structures — for example, loans granted by a Cyprus holding company or an entity established in Dubai or the United Arab Emirates — the analysis extends further still. The taxpayer must consider the applicability of the general anti-avoidance rule (GAAR), the controlled foreign company (CFC) rules, and the economic substance requirements applicable to the foreign entity. Each of these regulatory layers may independently affect the tax treatment of the loan and, a fortiori, the VAT/CTT characterization of the underlying transaction.

X. The Family Foundation as Lender

It bears noting that the Polish family foundation (fundacja rodzinna) — as a legal person carrying on permissible business activity — may grant loans to its beneficiaries or to entities in which it holds equity interests. The VAT/CTT characterization of such loans follows the same principles articulated above: because the family foundation, as a legal person, lacks a private sphere, an interest-bearing loan extended by it constitutes, as a matter of principle, a VAT-exempt supply of financial services.

XI. Conclusion

Three principal conclusions emerge from the foregoing analysis.

First, for legal persons — and most acutely for limited liability companies and joint-stock companies — the grant of an interest-bearing loan constitutes a VAT-exempt service regardless of its frequency, the identity of the borrower, the source of funding, or the lender’s subjective intent. Following the SAC’s ruling in I FSK 1634/19, read in conjunction with the CJEU’s holding in EDM, any attempt to characterize such a loan as falling outside the scope of VAT — and thereby within the scope of CTT — carries a prohibitively high level of fiscal risk.

Second, the impact on the input VAT deduction ratio demands careful tax planning. For entities whose principal activity generates a full right to deduct input VAT, a single loan of substantial nominal value may materially distort the deduction ratio — unless the taxpayer can demonstrate the ancillary character of the transaction under Article 90(6) VATA. The controlling criterion, as established in EDM, is the extent to which the transaction absorbs VAT-bearing resources, not the magnitude of the interest income.

Third, as the critical analysis in Part V demonstrates, the SAC’s automatic presumption that every interest-bearing loan extended by a legal person constitutes VAT-taxable economic activity is intellectually vulnerable on at least two grounds: its structural incoherence with Article 151(1) CCC — which expressly permits the formation of limited liability companies for non-gainful purposes — and its effective negation of the incidental transaction doctrine that the CJEU itself established in EDM. These are not merely academic objections; they go to the internal consistency of the syllogism on which the prevailing classification rests. However, it would be imprudent to disregard the practical reality that the SAC’s position represents settled jurisprudence, endorsed by the tax administration and reinforced by a consistent line of individual tax rulings. A taxpayer seeking to depart from this classification — for instance, by treating a loan extended by a non-profit limited liability company as falling outside the scope of VAT — would need to be prepared for protracted tax litigation, potentially extending through two instances of administrative court review. The doctrinal arguments are available and, in the author’s view, meritorious; but their vindication requires a deliberate strategic decision to engage in dispute, with attendant costs, delays, and an uncertain outcome. Until the SAC revisits this question — ideally in the context of a non-profit entity whose corporate purpose manifestly excludes gainful activity — the automatic VAT presumption will continue to function as the operative rule.

Fourth, the only scenario in which CTT unambiguously applies to a loan agreement is where the lender is a natural person acting entirely outside the scope of any economic activity — the paradigmatic case being an occasional, private loan between family members or acquaintances.

Where the proper characterization of a transaction remains uncertain, taxpayers are well advised to obtain professional tax advisory services or to commission a formal tax opinion addressing the specific circumstances of the contemplated transaction.

Legal basis: Articles 5, 8, 15, 43(1)(38), and 90 of the Act of 11 March 2004 on the Tax on Goods and Services (consolidated text: Journal of Laws of 2024, item 361); Articles 1(1)(1)(b), 2(4), 7(1)(4), and 9(10) of the Act of 9 September 2000 on the Tax on Civil Law Transactions (consolidated text: Journal of Laws of 2024, item 295); CJEU, Judgment of 29 April 2004, Case C-77/01, Empresa de Desenvolvimento Mineiro SGPS SA (EDM) v. Fazenda Pública; Supreme Administrative Court, Judgment of 15 December 2022, Case No. I FSK 1634/19.

This article is intended for informational purposes only and does not constitute legal or tax advice. Readers are encouraged to consult a qualified tax adviser or legal counsel in connection with any specific transaction.

Robert Nogacki

Robert Nogacki – licensed legal counsel (radca prawny, WA-9026), Founder of Kancelaria Prawna Skarbiec.

There are lawyers who practice law. And there are those who deal with problems for which the law has no ready answer. For over twenty years, Kancelaria Skarbiec has worked at the intersection of tax law, corporate structures, and the deeply human reluctance to give the state more than the state is owed. We advise entrepreneurs from over a dozen countries – from those on the Forbes list to those whose bank account was just seized by the tax authority and who do not know what to do tomorrow morning.

One of the most frequently cited experts on tax law in Polish media – he writes for Rzeczpospolita, Dziennik Gazeta Prawna, and Parkiet not because it looks good on a résumé, but because certain things cannot be explained in a court filing and someone needs to say them out loud. Author of AI Decoding Satoshi Nakamoto: Artificial Intelligence on the Trail of Bitcoin’s Creator. Co-author of the award-winning book Bezpieczeństwo współczesnej firmy (Security of a Modern Company).

Kancelaria Skarbiec holds top positions in the tax law firm rankings of Dziennik Gazeta Prawna. Four-time winner of the European Medal, recipient of the title International Tax Planning Law Firm of the Year in Poland.

He specializes in tax disputes with fiscal authorities, international tax planning, crypto-asset regulation, and asset protection. Since 2006, he has led the WGI case – one of the longest-running criminal proceedings in the history of the Polish financial market – because there are things you do not leave half-done, even if they take two decades. He believes the law is too serious to be treated only seriously – and that the best legal advice is the kind that ensures the client never has to stand before a court.