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In everyday business, the question often arises of how best to acquire or expand other entities. Many firms, including our clients at TaxCoach, wonder whether buying shares in an existing company or acquiring an organised part of an enterprise (ZCP) is more advantageous. This matters because the choice may have different tax, legal and accounting consequences. Below we discuss the main differences to help you make an informed decision.
Many entities consider different forms of acquisition or investment. The most common question is: should they buy shares in an existing company or an organised part of an enterprise (ZCP)? It is worth analysing each option and its tax and legal consequences.
Buying company shares
a) What does it involve?
Buying shares, or stock in the case of a joint-stock company, means acquiring an ownership stake in an existing company. The buyer becomes a shareholder and takes over all the rights and obligations of the previous owner of those shares.
b) Tax consequences
Cost of acquiring shares
The acquisition itself is not a tax-deductible cost while the shares are held.
The cost is recognised only when the shares are sold or upon their liquidation, paid disposal or the termination of the company's legal existence.
Company liquidation
If the company is liquidated and the buyer receives assets worth more than the acquisition expenditure, a flat 19% capital gains tax is payable on the excess.
If the value of the liquidated company's assets does not exceed the expenditure on the shares, there is a loss that can be deducted, for example, from other capital gains from securities trading.
No depreciation of shares
Shares cannot be depreciated. Their value is not a current tax cost and can only be settled on sale or potentially liquidation.
c) Further considerations
Buying shares means taking over the company's entire history, including potential liabilities and risks.
There are fewer formalities to transfer agreements, employees and contracts, because the company retains its legal identity (KRS, NIP and REGON).
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Buying an organised part of an enterprise (ZCP)
a) What is a ZCP?
Under the regulations, it is an organisationally and financially separate collection of components, including fixed assets, intangible assets, contracts and human resources, capable of operating as a business in its own right.
b) Tax consequences
Ability to depreciate assets
Components acquired within a ZCP, whether fixed assets or intangible assets and rights, are depreciated at the relevant rates.
It is also possible to amortise goodwill, the difference between the purchase price and the market value of assets. The minimum amortisation period is five years, or 60 months.
Current tax costs
Depreciation reduces the tax base on an ongoing basis.
This option is unavailable when buying shares, often a significant difference in favour of ZCP.
Other tax settlements
There is no flat capital gains tax of the kind applicable to a dividend or company liquidation.
c) Further considerations
Customer and business partner agreements must be transferred by assignment, creating additional formalities.
Employees under employment contracts transfer to the new employer by operation of law (Article 23(1) of the Labour Code).
The buyer takes over selected assets and liabilities, rather than the entire legal and financial baggage involved in buying shares.
What should you consider when choosing?
Purpose of the investment
If the priority is quickly acquiring the company and its brand together with its history and agreements, buying shares may be simpler.
If the investor wants only a particular business part, such as a customer base, assets, employees or brand, a ZCP offers more flexibility.
Tax considerations
Buying shares does not allow ongoing depreciation of their value as a cost.
Buying a ZCP permits depreciation charges to be recognised and tax liabilities reduced while operating the business.
Formalities and liability
Buying a ZCP requires assignments of contracts and other documentation.
Buying shares is quicker organisationally but involves taking over the whole company with all its risks and without the tax benefits of ZCP depreciation.
Company liquidation
If the company is liquidated after shares are purchased, 19% tax is paid on the value of assets above the acquisition expenditure.
Summary: which pays off more?
There is no single answer: the choice depends on the business context.
Buying shares is a quick route to acquiring the entire company, but there is no ongoing depreciation and the acquisition cost is settled only on sale or liquidation.
Buying a ZCP requires additional formalities, including contract assignments, but allows full depreciation of intangible assets and rights, including goodwill, giving real tax benefits during business operations.
If you found this article interesting, explore our accounting services and read how we can help you:
Summary
In many cases, it is worth consulting both a tax adviser and a lawyer to choose the acquisition model best suited to your business goals and circumstances.
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