Merger Methods
Tax Ordinance Act
Tax Identity Number
Income Tax
Goods and Services Tax
Stamp Duty


The taxation of mergers and acquisitions is regulated by the following legislation:

  • Tax Ordinance Act of August 29 1997;
  • Tax Identity Act of October 13 1995;
  • Corporate Income Tax Act of February 15 1992; and
  • double taxation avoidance acts.

Merger Methods

According to the Commercial Code, there are two main methods by which companies may merge. The first method consists of transferring assets from the company taken over to the acquiring company, in return for the shares issued by the acquiring company to shareholders of the company taken over. The second way of merging occurs when a new company is established - capital is covered by the merging of company assets and in return, shares are issued by a new company to shareholders of the companies being merged. The tax consequences for both methods are similar.

Tax Ordinance Act

According to the provisions of the Tax Ordinance Act, legal entities following on from mergers shall take over all rights and duties envisaged in tax provisions for each of the entities involved, unless separate provisions provide otherwise. This rule is applicable to the rights and duties arising from administrative decisions issued in accordance with tax provisions. Consequently, acquiring companies become successors of all tax rights and duties.

Tax Identity Number

In the case of mergers where assets are transferred in return for shares, the tax identity number issued to the company taken over shall expire. If the merger results in changes to the acquiring company's identification data, that company shall be obliged to complete a revised identity application. In the case of mergers involving the establishment of a new company, tax identity numbers issued to merged companies shall expire, and a new company is obliged to lodge an identity application.

Income Tax

The shareholder of the company taken over
After a merger, if there is a difference between (i) expenses for acquisition of shares of the company taken over and (ii) the value of shares allotted by the acquiring company - the difference constituting the income shall not be liable to income tax at the time of the merger. Expenditures will be considered as the revenue earning cost by the shareholder of the company taken over, while establishing the income from selling shares of the acquiring company. This rule may not apply under certain double tax treaties where the shareholder is a foreign entity.

Example: The shareholder of the company taken over had acquired shares to the value of 100. As a result of the merger, that shareholder was granted shares equal to 120. He then sells his acquiring company shares for 130. At the time of the merger the shareholder's income of 20 is not subject to income tax. However, when he sells the acquiring company shares for 130, the income of 30 is subject to income tax.

The acquiring company
The surplus value of the assets of the company taken over (over the value of shares granted to the shareholders of the company taken over) shall not be considered as revenue for the acquiring company. An exception to this is when assets taken over as a result of remitting shares of the company taken over are owned by the acquiring company.

Example: The assets of the company taken over equals 120. However, as a result of merger the shareholder of the company taken over is granted with shares equal to 100. According to tax regulations, the surplus 20 does not constitute taxable revenue for the acquiring company.

Tax losses
The acquiring company is not entitled to account for the loss of the company taken over in the event of a merger.

Depreciation write-offs
The initial value of fixed assets and intangible assets is assessed according to the records of the fixed assets and intangible assets of the company taken over. After the merger, the company shall make deprecialtion write-offs with due regard to value of depreciation write-offs made by the company taken over and according to the depreciation method and depreciation rates accepted by the company taken over.

Goods and Services Tax

Regulations on goods and services tax and excise duty do not include separate provisions for company mergers. According to general tax ordinance rules, the acquiring company shall be entitled to reduce the amount of output tax by the amount of the input tax charged by the company taken over during the acquisition of goods and services.

Stamp Duty

Generally, company mergers shall not be liable to the stamp duty. However, the obligation of stamp duty payment does arise when mergers affect the increase of the acquiring company's share capital. Stamp duty is then calculated at degressive tax rates varying from 2% to 0.1%.


For further information on this topic please contact Marcin Hol√≥wka at Beata Gessel & Partners by telephone (+48 22 690 6901) or by fax (+48 22 690 6931) or by e-mail ([email protected]).

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