From litigation to certainty? Developments in Poland’s foreign investment fund CIT exemption

Poland's foreign investment fund corporate income tax (CIT) exemption regime has undergone substantial transformation, moving from a period characterized by aggressive tax authority positions and frequent administrative litigation toward a more economically rational and legally compliant framework. Historically, the exemption—available under Poland's Corporate Income Tax Act—was subject to multiple technical conditions relating to fund legal status and regulatory classification, but tax authorities applied these provisions with notable formalism that often denied exemptions based on investment strategy alone.

The most significant dispute centered on real estate investment exposure. Polish tax authorities increasingly contended that funds maintaining real estate investment capabilities—either direct real estate holdings or indirect exposure through company shareholdings—fell outside the exemption's intended scope, irrespective of whether all other statutory requirements were satisfied. This categorical exclusion created substantial uncertainty for international institutional investors, as real estate exposure is standard within most diversified fund mandates. Institutional investors faced repeated exemption denials and were forced to pursue administrative court challenges to establish their tax positions, a costly and time-consuming process.

Recent developments suggest this adversarial dynamic is shifting. Over the past two years, a convergence of administrative court judgments, legislative action, and tax rulings has produced a more balanced approach grounded in economic substance rather than formalistic rule application. Critically, amendments enacted for January 1, 2026 expansion expanded tax exemptions to foreign investment funds originating from non-EU/EEA jurisdictions, substantially broadening the investor universe eligible for relief. Additionally, a February 27, 2025 Court of Justice of the European Union (CJEU) judgment in Case C-18/23 struck down Poland's discriminatory treatment of internally-managed versus externally-managed investment funds, requiring legislative alignment with EU non-discrimination principles.

These combined reforms—the expanded geographic scope, the CJEU-mandated elimination of management structure discrimination, and the apparent tax authority shift toward substance-based analysis of real estate exposure—materially enhance Poland's competitive position for attracting institutional capital, particularly from family offices and alternative investment managers with real estate allocations. The movement from litigation to administrative certainty reduces compliance costs and improves tax efficiency for cross-border fund structures, making Poland a more viable jurisdiction for international investment strategies that include real estate components.