The Polish F SA case and the relevance of tax comparability
Last year, the Court of Justice ruled on the Polish F SA case (C-18/23). Polish investment funds qualified for the domestic tax exemption, which referred to their regulatory framework. Under Polish tax law, only externally managed funds could benefit from a tax exemption. This condition was automatically fulfilled by domestic funds due to their regulatory framework. Foreign funds are not necessarily internally managed, due to a different regulatory framework. Accordingly, the Court of Justice found a restriction of cross-border situations under the free movement of capital. The Court of Justice also held that such funds are comparable in light of the purpose of the tax exemption, which is to prevent double taxation of collective investments, and that the management structure is irrelevant to this assessment.
The judgment clarifies existing case law on the tax treatment of investment funds by rejecting all three points raised in the Advocate General’s opinion. Notably, the Court of Justice clearly separates the purpose of the regulatory framework (investor protection) from the purpose of the tax law (prevention of double taxation). As a result, we argue that funds established under the UCITS or AIFM Directives in one Member State are most often comparable to those established under the same framework in another Member State. National discretions in the regulatory framework (e.g., management form, legal form) should not affect comparability for tax purposes. This establishes a broad spectrum of comparability, which may currently not be followed in national practice.
