EuGH (Court of Justice of the European Union, CJEU), judgment of 17 September 2026 – C-197/25: In this case, the Court of Justice of the European Union addresses the interpretation of Art. 9 of Directive 2008/7/EC concerning indirect taxes on the raising of capital. The subject matter is the question of whether a Member State may levy an indirect tax on the conversion of a partnership operated for profit into another partnership operated for profit where there is no capital contribution.
Background to the Proceedings before the CJEU
The proceedings originate from a legal dispute in Poland. The parties involved are a company governed by Polish law and the competent Polish tax authority. The point in dispute is the taxation of the conversion of a Polish limited partnership into a Polish general partnership.
Following the conversion, the company had applied for a refund of a tax on civil-law transactions which, in its view, had been overpaid. It argued that the conversion had been taxed unlawfully. In its opinion, there had been no increase in the assets of the partnership.
The tax authority rejected the application. It took the view that the amendment of the partnership agreement had resulted in an increase in assets. The competent Voivodeship Administrative Court confirmed this view. The dispute was subsequently brought before the Supreme Administrative Court of Poland.
Tax Law Framework of Directive 2008/7/EC
Objective of the EU Law Regulation
Directive 2008/7/EC concerns indirect taxes on the raising of capital. Its objective is to limit charges that may impair the free movement of capital or distort conditions of competition within the internal market.
The Directive covers in particular:
- capital contributions to capital companies,
- certain restructurings of capital companies,
- the issue of certain securities and bonds.
Under the structure of the Directive, indirect taxes on transactions involving the raising of capital are to be permitted only under strict conditions.
Definition of a Capital Company
Art. 2(1) of Directive 2008/7/EC specifies which companies, firms, associations or legal persons are directly deemed to be capital companies. These include, among others, certain company forms listed in Annex I.
Art. 2(2) of the Directive extends the scope of application. Accordingly, for the purposes of the Directive, any other company, firm, association or legal person operating for profit is deemed to be a capital company.
This equivalence is intended to prevent economically comparable transactions from being treated differently solely because a different legal form has been chosen.
Significance of Art. 9 of the Directive
Art. 9 of Directive 2008/7/EC permits Member States, for the purposes of charging capital duty, to decide not to regard the entities referred to in Art. 2(2) as capital companies.
The CJEU had to clarify the scope of this power. At its core, the issue was whether a Member State may thereby freely decide to levy an indirect tax on conversions of such entities.
In doing so, the Polish court proceeded on the basis of two premises:
- Poland had exercised the option provided for in Art. 9 of the Directive.
- Both the Polish limited partnership and the Polish general partnership operated for profit.
The CJEU made clear that it is not its task to review these factual and national-law assumptions. That assessment is a matter for the national court.
No General Power to Tax under Art. 9
Limitation to Capital Duty
According to the CJEU’s interpretation, Art. 9 of the Directive concerns only the charging of capital duty. This capital duty is the indirect tax on capital contributions to capital companies.
The Court emphasised that Art. 9 appears in the chapter of the Directive dealing with special provisions relating to capital duty. In addition, the provision expressly uses the wording “for the purposes of charging capital duty”.
It follows from this that Art. 9 does not provide any general possibility to depart from the equivalence under Art. 2(2) of the Directive in the case of other indirect taxes.
Significance for Conversions without a Capital Contribution
A conversion of an entity operating for profit into another entity operating for profit that does not fall within Art. 2(1) of the Directive remains, pursuant to Art. 2(2) of the Directive, equivalent to a conversion of capital companies.
If such a conversion takes place without a capital contribution, it may fall under Art. 5(1)(d)(i) of the Directive. This provision prohibits Member States from levying indirect taxes on the conversion of a capital company into a capital company of a different type.
The Court stated that, in such a case, Art. 9 does not permit any derogation from the equivalence under Art. 2(2) of the Directive.
Assessment of a Capital Contribution Remains a Matter for the National Court
At the same time, the CJEU clarified that the national court must examine whether the specific conversion was linked to a capital contribution. The concept of a capital contribution is governed by Art. 3 of Directive 2008/7/EC.
The Polish court had stated that the contributions to the general partnership resulting from the conversion had been set at the same amount as previously in the limited partnership. In addition, the partners’ contributions had not been altered, and no additional cash contributions or contributions in kind had been made at the time of the conversion.
Subject to verification by the national court, these details, according to the CJEU’s statements, indicated that the conversion was not linked to a capital contribution. In that case, the prohibition of indirect taxes under Art. 5(1)(d)(i) of the Directive would apply, provided that the charges or taxes concerned are not those permitted under Art. 6 of the Directive.
Key Statement of the Decision
The CJEU answered the question to the effect that a Member State, even if it has exercised the power under Art. 9 of Directive 2008/7/EC, may not levy an indirect tax on a conversion where the following conditions are met:
- The conversion concerns an entity operating for profit that does not fall within Art. 2(1) of the Directive.
- That entity is converted into another entity operating for profit which likewise does not fall within Art. 2(1) of the Directive.
- The conversion takes place without a capital contribution.
- It is not a charge or tax permitted under Art. 6 of the Directive.
The CJEU thus limits the scope of Art. 9 of the Directive to capital duty in the narrower sense. The provision does not permit circumvention of the prohibition under EU law on indirect taxes on certain conversions without a capital contribution.
Significance for Company Conversions and Tax Burdens
The decision is significant for tax issues in connection with corporate-law conversions. It makes clear that the classification of a transaction under EU law does not depend solely on the national legal form. What may also be decisive is whether the entities involved operate for profit and whether a capital contribution exists.
For companies, investors and shareholders, the distinction between a capital contribution relevant for tax purposes and a mere change of legal form can be of considerable importance. Particularly in cross-border structures or in conversions within a Member State, requirements under EU law may limit national taxation.
MTR Legal Rechtsanwälte advises companies, investors and high-net-worth individuals on tax-law issues in connection with corporate structures, conversions and capital measures. For legal questions concerning the tax consequences of such transactions, MTR Legal offers sound legal advice in tax law.
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