Business Rationale

a key element of safe restructuring

Restructuring within capital groups is a natural and essential part of modern business operations. In today’s fast-changing environment, ownership changes, mergers, demergers, and the transfer of functions between companies can be crucial for improving efficiency, reducing costs, achieving strategic goals, or meeting investor and regulatory expectations.

A well-planned restructuring allows businesses to use resources more effectively, strengthen their market position, and prepare for future tax and operational challenges.

In practice, transactions such as mergers, demergers, share exchanges, and in-kind contributions can be tax neutral – provided that the conditions set out in the Corporate Income Tax Act (CIT) are met.

One of the key conditions for tax neutrality (under Article 12(14) of the CIT Act) is that the transaction is carried out for valid economic reasons.
If not, the authorities may presume that the main or one of the main goals is tax avoidance.

This means that the business rationale is not just a formality – it is a requirement for maintaining tax neutrality.

What is a business rationale and what should it include?

A business rationale is a document explaining the goals and reasons behind a restructuring. It should demonstrate that the transaction supports a clear business strategy and serves real economic purposes.

To be effective – whether before the tax authorities or the courts – it should include:

Market analysis – showing trends, risks, or opportunities that influenced the decision to restructure
Economic analysis – e.g., profitability forecasts, due diligence findings, expected revenue growth
Expected synergies – e.g., cost savings, simpler structures, centralized resources
Strategic goals – e.g., preparing for a sale, IPO, international expansion, succession
Operational reasons – e.g., transferring functions, managing regulatory risk, centralizing IP

What do the Courts say?

Failure to provide a reliable and detailed rationale is a one of the reasons for denying tax neutrality or rejecting a tax ruling request.

Recent examples:

Head of the National Revenue Administration, 5 May 2025, ref. DKP16.8082.14.2024
“In the view of the Head of the NRA, obtaining tax benefits within the meaning of Article 3 point 18(a) of the Tax Ordinance, being one of the main purposes of the set of activities, is contrary to the object or purpose of the tax law or its provisions, and the manner of action is artificial (lacking economic justification).”

Supreme Administrative Court, 25 October 2024, case no. II FSK 164/22
“The claimant failed to demonstrate any economic or organizational purpose behind the sale of the proprietary copyright to a word and graphic mark. The claim that the purpose of the transaction was to counteract capital changes and adjust the group structure to a changing environment was found to be unconvincing. It did not in any way explain why such adjustment required the sale of the intellectual property to another company and the immediate conclusion of a license agreement for the same mark.”

Supreme Administrative Court, 11 January 2022, case no. II FSK 1261/21
“Non-tax-related purposes were considered insignificant compared to the tax benefit.”

Provincial Administrative Court in Poznań, 4 June 2024, case no. I SA/Po 246/24
“No arguments were presented to support that the transformation of the limited liability company into a limited partnership was justified by reasons other than obtaining a tax benefit.”

Why act early?

Restructuring involves many stakeholders: management, shareholders, accountants, lawyers, and advisors.

Over time, key information may be lost:

decision-makers change
internal documentation is incomplete
market context is forgotten

As a result, preparing proper justification only after a tax audit begins is often impossible or unconvincing, due to potential gaps in documentation. As a result it does not provide protection against a potential dispute.

That’s why preparing it in advance, at the planning stage, is the best way to reduce tax risk.