The Provincial Administrative Court in Poznan in its judgment of 13th February 2014 (I SA/PO 710/13) ruled that if at the time of interest payment the lender is no longer a shareholder of the borrower, the amount paid by the company will be tax deductible without taking into consideration the limitations arising from the rules on thin capitalization.
The case concerned a Polish limited liability company whose shareholder being a Cypriot company granted long- terms loans which amount exceeded the triple of the share capital of the borrower. In that context, the rules on thin capitalization, defined in Article 16 section 1, subsec. 60-61 of the Corporate Income Tax Act come to play. They would result in the limitation of the part of the interest that is tax deductible.
The particularity of the case was the transfer of the shares by the lender to third unrelated party prior to the interest payment date. Therefore the question arose what moment is relevant for the application of the above restrictions.
The Court ruled that the interest payment date is relevant. Hence if at that moment the lender having disposed the shares by that time will not be caught by the above regulation, the limitations resulting from the Act will not apply.
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