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Important ruling for the energy sector – court sets limits on fiscalisation of compensation

VAT does not apply to everything – court sets limits on taxation of compensation for electricity production restrictions

On 26 June 2025, the Provincial Administrative Court in Poznań issued an important judgment, ref. no. I SA/Po 188/25, in which we represented our client from the energy sector, a producer of electricity from renewable energy sources (RES). The ruling concerns the revocation of an individual interpretation issued by the Director of the National Tax Information Office. It thus determines that compensation for the implementation of an order to restrict or suspend electricity production does not constitute a service provided for consideration within the meaning of the VAT Act.

Basis for compensation

The basis for the claim for compensation was the provisions of the Energy Law. According to these provisions, the transmission system operator (TSO) or distribution system operator (DSO) may, in certain situations, issue an order to:

  • disconnect wind or solar power generation units from the grid,
  • restrict the power generated by such units,
  • disconnect electricity storage facilities,
  • change the power drawn or fed into storage facilities.

The purpose of such measures is to balance energy supply and demand and ensure the safe operation of the electricity grid.

Such an instruction – in accordance with the regulations – entitles the operator to compensation. If the system operator orders the redispatching of generation units (i.e. a change in their operation) outside the market rules, it must pay financial compensation. This compensation is paid to the operator of the generation, energy storage or demand response unit concerned by the instruction.

Exception: compensation is not payable to producers who have signed a connection agreement without a guarantee of reliable energy supply.

Amount of compensation

Under the regulations, financial compensation must be at least equal to the higher of the following amounts or a combination thereof, if the application of only the higher amount would result in unjustifiably low or unjustifiably high compensation:

  1. a) the amount of additional operating costs incurred as a result of redispatching, such as additional fuel costs in the case of redispatching leading to an increase in capacity or the costs of providing backup heat in the case of redispatching leading to a reduction in the capacity of energy generation units using high-efficiency cogeneration;
  2. b) the net revenues from the sale of electricity on the day-ahead market that the energy generation, energy storage or demand response unit would have generated if the redispatching order had not been issued; where energy generation, energy storage or demand response units have been granted financial support on the basis of the amount of electricity generated or consumed, the financial support that would have been received if the redispatching order had not been issued shall be considered part of the net revenues.

Argumentation of the GWW team

The court agreed with our argument that the actions resulting from the orders are not contractual in nature, but are a unilateral decision of the TSO, to which the company must comply. The issuance of orders is crucial for maintaining the operational safety of the national power system and balancing electricity supply with demand. The lack of such balance disrupts the operation of the national and European power system, resulting in a risk to its operational safety and the possibility of a local, national or regional system failure. Importantly, the amount of compensation is not known at the time of non-market reallocation. What is more, in order to receive it, the company must take certain steps, i.e. submit an application, grant powers of attorney, and even then, receiving compensation is not certain.

The court clearly stated that:

  • ‘Not every payment of money constitutes consideration within the meaning of VAT’ – this is a fundamental thesis that can also be invoked outside the energy sector, in cases concerning state intervention, subsidies, redistribution and other quasi-public mechanisms;
  • No supply – no VAT;
  • In its justification of the ruling, the Provincial Administrative Court broke down the tax authorities’ argument into three key pillars:
  • no contractual relationship between the parties – the instruction to reallocate is unilateral and results from legal provisions, not from a civil law contract,
  • no specific beneficiary of the service – stopping energy production does not directly benefit a specific entity, but serves the public interest (energy grid stability),
  • the nature of the compensation as damages rather than remuneration – payment is not guaranteed, depends on the fulfilment of a number of formal conditions and is not equivalent in nature.

Effects of the judgment and benefits for businesses

In summary, the court – contrary to the Director of the National Tax Information Service – found that in the case in question, the conditions for recognising the restriction or suspension of energy production as a service subject to VAT were not met.

It is worth noting that this is an unprecedented ruling that may significantly affect the taxation of similar compensation in the energy sector, particularly in the context of the growing importance of renewable sources and the role of the state in managing energy security.The content of the ruling may influence the interpretation of tax regulations in situations where the service is mandatory, results from public law decisions and does not have a clearly defined beneficiary.

The ruling in our client’s case is particularly significant for renewable energy producers, especially photovoltaics, where production restrictions may be more frequent during peak supply periods. The practice of compensation payments by PSE S.A. is becoming increasingly common in such cases.

But its potential scope does not end there. It can be interpreted more broadly as an expression of a tendency towards:

  • a narrow interpretation of ‘provision of services’ for VAT purposes,
  • protection of entities performing obligations under public law,
  • distinction between remuneration and public law compensation.
  • an innovative approach to the assessment of ‘provision’ for VAT purposes,
  • a clear separation of market mechanisms from systemic and public activities,
  • an attempt to protect entrepreneurs implementing the operator’s decisions in the public interest.

The interpretation of the Director of the National Tax Information Service, based on Article 8(1)(2) of the VAT Act, had previously been the typical approach of the tax authority, assuming that any omission in exchange for money constitutes a supply of services. The Provincial Administrative Court clearly showed the limits of this approach. It relied on the case law of the CJEU (cases C-215/94 Mohr and C-384/95 Landboden), emphasising the absence of a consumer and an equivalent as conditions precluding VAT taxation. The judgment in question sets an important benchmark in the discussion on the limits of taxation of services in the context of regulated markets and state intervention. It is not only a judgment on VAT, but also on the relationship between the state, the market and the entrepreneur.

The WSA judgment may become a precedent and an argumentative tool in subsequent proceedings concerning not only the energy sector, but also other areas subject to state regulation and intervention. It shows that VAT is not a tax on everything that involves the movement of money and that the limits of what can be considered a service must be determined with respect for the actual nature of the service provided.

Harmful provision of tax regulations finally to be abolished – commentary by Andrzej Ladziński in Rzeczpospolita

What changes to the tax system are really needed? Andrzej Ladziński, managing partner at GWW and chairman of the National Chamber of Tax Advisers, comments in an interview with Rzeczpospolita on the Ministry of Finance’s proposals to remove the provision allowing tax authorities to initiate criminal tax proceedings for the purpose of suspending the limitation period.

‘The tax administration should not punish entrepreneurs for mistakes that it can easily identify itself in the new digital reality.’

Andrzej Ladziński also emphasises the need to shorten the limitation period for taxes and to reform criminal tax law so that the system does not punish errors that are easy to detect thanks to digitalisation.

The interview can be read on the newspaper’s website: https://lnkd.in/dHAEyW_n

Upcoming difficulties in hiring Ukrainian and Georgian citizens – what employers need to know

Amendments to laws and regulations will introduce significant changes for companies employing citizens of Ukraine and Georgia:

  • Ukraine: from 4 March 2026, the privileged status will end – it will be necessary to obtain a Polish visa or residence permit.
  • Georgia: planned removal from the list of countries covered by simplified employment procedures and visa-free travel.

Impact on employers:

  • Need for prior verification of employee status and document validity.
  • Extended residence legalisation deadlines – in some regions even exceeding one year.
  • Greater risk of staff shortages in key areas of business.

How can we help?

We offer full support in auditing the employment of foreign nationals, preparing procedures and documentation, and representing you before the authorities. This allows our clients to minimise the risk of interruptions in business continuity and avoid costly formal errors.

What changes are planned for the taxation of family foundations in 2026?

At yesterday’s press conference, the Minister of Finance presented a draft outline of family foundation taxation from 2026.
The changes will concern:

  • A 3-year ‘freeze’ period – the sale of contributed assets (shares, stocks) will be exempt from tax only after 3 years;
  • Tax on foreign CFC entities – income of controlled companies will be scrutinised;
  • Taxation of foundations in tax-transparent companies – no more loopholes in the regulations;
  • Short-term rentals – no tax preferences from 2026, with the interpretation dispute to be resolved to the detriment of taxpayers.

Alert regarding the Ministry of Finance briefing available by clicking the button:

ALERT

We are launching a newsletter dedicated to family foundations

The number of changes and the high level of interest in family foundations prompted us to launch a newsletter dedicated exclusively to family foundations.

We publish it with a view to people who already run foundations or are planning to set them up, as well as professionals involved in their day-to-day management who need reliable information on changes and announcements in the area affecting family foundations.

We encourage you to read the first issue, which can be found at this link: Newsletter_Private_Client_2025-07-18

GWW Law Firm has established cooperation with the University of Economics in Krakow

GWW Law Firm has established cooperation with the University of Economics in Krakow – a university with an established scientific and teaching position.

As part of this partnership, GWW has taken patronage of one of the lecture halls, which has been transformed into a Courtroom – a space where theory meets practice. This venue will be used for mock trials, case studies and other forms of legal education that prepare students for the realities of working in the legal and business professions.

The benefits for both parties are multifaceted:

  • Students gain unique opportunities to learn through experience, discovering the practical aspects of a lawyer’s work in realistic conditions.
  • The university develops modern forms of education and strengthens its links with the profession.
  • As a substantive partner, GWW has the opportunity to support young talent, share its experience and co-create a model of legal education that responds to market challenges.

This agreement is a joint investment in the future of the legal profession and in strengthening the relationship between academia and practice.

Tax limitation periods will effectively disappear

The Ministry of Finance has announced draft amendments to the Tax Ordinance and the Fiscal Penal Code, which may radically change the existing rules on the limitation of tax liabilities. On the one hand, there are plans to abandon the suspension of the limitation period as a result of the initiation of criminal tax proceedings. On the other hand, however, it is proposed to abolish the provision prohibiting the initiation of proceedings after the expiry of the limitation period.

This change will enable tax authorities and prosecutors to conduct proceedings and seek payment of the so-called ‘equivalent of tax loss’ even many years after the expiry of the liability – this time through criminal courts.

“This is a very ill-considered concept, as judges adjudicating in criminal cases are not prepared to hear tax cases, which are often extremely complex and difficult. Defendants in such cases could face not only prison sentences, but also fines and additional tax payments, which would be called ‘equivalent to tax losses.’ In short, the state would collect taxes not through classic fiscal proceedings, but indirectly, through criminal courts,” comments Andrzej Ladziński, partner at GWW and chairman of the KRDP.

Find out what risks the draft entails and what entrepreneurs and managers can do to protect themselves from the consequences.

Link to the article with full commentary by Andrzej Ladziński, partner at GWW and chairman of the National Council of Tax Advisers: https://www.pb.pl/przedawnienie-podatku-w-praktyce-zniknie-przedsiebiorcy-nie-beda-spac-spokojnie-1246373

PFR is suing for the return of subsidies? You can defend yourself. A negative recommendation from the CBA is not a sentence.

More and more entrepreneurs are receiving lawsuits from the Polish Development Fund, which is demanding the return of funds granted under the financial shield. These are often based on laconic, negative recommendations from the Central Anti-Corruption Bureau (CBA) stating that there is ‘reasonable suspicion of any kind of abuse’. No evidence, no checks, but a demand for millions to be returned.

If you have received a lawsuit from the PFR, it is not worth delaying an analysis of your legal situation. Effective defence requires knowledge of the specifics of these cases and experience in conducting similar proceedings.

Why is the PFR not always right? Check out the key arguments

Limitation period for claims. PFR files lawsuits in civil courts, claiming that its activities in the implementation of financial shield programmes are not economic activities. Why? This would allow for the application of a 6-year limitation period instead of the 3-year period applicable to claims arising from economic activities. However, many lawsuits are filed after this period, which may result in PFR’s claims being dismissed. In court proceedings, it must be demonstrated that PFR conducts economic activity in the implementation of government financial shield programmes. Assistance in this regard is provided, for example, by the Act of 4 July 2019 on the system of development institutions, the agreement between PFR and the State Treasury (which PFR intentionally submits to the courts in an anonymised version regarding PFR’s remuneration for the implementation of the programmes) and PFR’s individual annual reports for 2020 and 2021, which present the exact amounts of remuneration received by PFR from the State Treasury for running the shield programmes.

Inappropriate changes to the shield regulations. The programme regulations did not originally provide for the possibility of requesting the return of subsidies on the basis of a negative recommendation from the Central Anti-Corruption Bureau (CBA) (only the refusal to grant subsidies in the event of a negative recommendation from the CBA was regulated). Subsequent amendments to the regulations were often not effectively implemented in relation to a significant proportion of beneficiaries due to a failure to follow the appropriate procedure, meaning that the demand for the return of subsidies on the basis of the amended regulations is completely unfounded.

Expenditure of subsidies in accordance with the objectives of the programme. Funds from the shield could be used to cover most of the costs of running a business. Proving that the subsidies were spent in accordance with the objective of the programme eliminates any ‘reasonable suspicion of any kind of abuse’. It is therefore worth submitting evidence of the proper expenditure of the subsidy to the court. A demand for repayment by the PFR in such a situation should be considered by the court as an abuse of the fund’s rights.

The non-binding nature of CBA recommendations. A negative recommendation from the CBA does not automatically oblige the PFR to demand repayment. The PFR should make an individual assessment of the risk of abuse and, first and foremost, identify the cause of that risk. No legal provision provides for PFR to be bound by a negative recommendation issued by the CBA. PFR did not carry out any assessment and, as if automatically, issued a decision to recover the subsidy upon receipt of the CBA’s negative recommendation.

PFR failed to provide evidence of the risk of abuse. Not only did PFR fail to assess the CBA’s recommendation at the stage of issuing the decision on repayment, but even at the stage of filing the lawsuits, PFR did not know what the alleged risk of abuse concerned, as it did not make any factual allegations in this regard in the lawsuits. PFR’s litigation strategy is an attempt to persuade the courts to obtain information about alleged abuses on the part of the defendant companies from the CBA. However, this is a flawed strategy, as evidence is not intended to establish facts that the party itself has not presented (or, as in the case of PFR, is not even aware of).

How can we help you?

Our law firm specialises, among other things, in civil proceedings and issues related to obtaining subsidies. We have experience in court proceedings in which PFR sues entrepreneurs for the return of subsidies, as well as in pursuing claims against PFR for improper settlement of subsidies.

It is worth consulting your options and available legal remedies, as this may be crucial for further proceedings.

Electronic communication with trade unions – upcoming changes

The government plans to facilitate communication between employers, trade unions and employee councils by allowing greater use of electronic forms. The changes are aimed at simplifying procedures and adapting regulations to the realities of digital communication in the workplace.

The amendment to the Labour Code, the Trade Unions Act and the Act on Informing Employees has been included in the list of legislative work of the Council of Ministers (draft UDER 82). The government is to address the drafts in the third and fourth quarters of 2025.

Main assumptions of the changes

The draft provides for the possibility of communication between employers and trade unions and employee councils also in documentary (e.g. e-mail) or electronic form. This includes, among other things:

  • consultations with trade unions on the intention to terminate an employment contract (Article 38 of the Labour Code),
  • the transfer of information on the transfer of a workplace or part thereof to a new employer (Article 261 of the Trade Unions Act),
  • providing data necessary for trade union activities (Article 28 of the Trade Unions Act),
  • submitting requests and providing responses regarding information on management (Article 32(91) of the Trade Unions Act),
  • informing employees about the economic situation, employment and planned organisational changes (Article 13 of the Act on Informing Employees).

Positions of trade unions and employers

Representatives of employee organisations declare their openness to digitisation, but point to the need for voluntary participation and mutual agreement on the forms of communication. Trade union experts emphasise that changing the form of consultation, especially in matters relating to redundancies, should not weaken the protective function of labour law. In their view, the new regulations should allow for the possibility of agreeing on communication rules in collective labour agreements.

On the other hand, representatives of the employer community welcome the direction of the changes. They point out that the electronic form not only speeds up communication processes, but also reduces the administrative burden and facilitates the documentation of consultations. Some experts are calling for even more far-reaching reforms, such as the possibility of concluding employment contracts in electronic form using a trusted or personal signature, which could better meet the needs of the labour market.

What does this mean for employers?

If the bill is passed, employers will gain new opportunities for formal communication with trade unions and employee councils. It is already worth:

  • analyse your internal procedures in terms of their digitisation,
  • identify areas where electronic forms could bring savings
  • and greater efficiency,
  • prepare proposals for agreements with the trade unions, especially if collective agreements are in place in your organisation.

How can we help you?

Our labour law team supports employers in the following areas:

  • implementing new forms of communication with trade unions and employee councils,
  • adapting procedures to planned legislative changes,
  • consulting with employee organisations in accordance with the new requirements,
  • preparing documents and internal policies in line with the proposed legislation.

If you need support in implementing the proposed changes or would like to discuss the possible risks, please contact us.

MDR and share capital increases – when is reporting required?

New General Interpretation of the Ministry of Finance

On 29 July 2025, the Minister of Finance and Economy issued a general interpretation concerning the reporting of tax schemes (MDR) in the case of an increase in the share capital of a capital company where part of the contribution in excess of the nominal value of the shares acquired is allocated to the company’s reserve capital.

When is reporting not required?

The Minister indicated that not every transaction with a premium is subject to MDR reporting. In particular, as indicated by the Minister, a situation where the surplus contribution does not allow for the acquisition of a larger number of shares is not subject to reporting. In practice, however, such increases are not common. The Minister further indicated that an increase in share capital from agio will not be subject to reporting if the objectives of such an increase were other than tax purposes, e.g. resulted from an investment agreement or articles of association.

When is reporting required?

As indicated by the MF, the MDR obligation arises if: the purpose of the premium structure was to deliberately reduce the PCC tax base by not increasing the share capital by the entire value of the cash contribution. In such a situation, the main benefit criterion is met and, in addition, the general identifying feature (e.g. standardised documentation) is fulfilled. In addition, compliance with the definition of a qualified beneficiary and the cross-border nature of the transaction should be verified.

Does the general interpretation really dispel taxpayers’ doubts?

Although the general interpretation of the Minister of Finance and Economy of 29 July 2025 was intended to clarify the rules for reporting tax schemes (MDR) in the context of increasing share capital with a share premium, in our opinion it does not introduce any significant changes to the practice developed so far.

However, although it does not provide complete clarity, it does question the automatic reporting of every share premium.

In practice, taxpayers should examine each case separately and ensure that the transactions carried out are economically justified.