CJEU - Recent Developments in Direct Taxation 2025

1. Introduction

The pending Sanofi case (C-434/25) before the Court of Justice of the European Union (CJEU) puts a spotlight on the limits of Member States’ tax sovereignty in the area of corporate reorganizations and the extent to which national anti-avoidance measures may interfere with EU-mandated tax neutrality. The dispute arises from a Polish corporate income tax rule that effectively confines tax-neutral treatment of mergers, demergers and share exchanges to a single restructuring, thus subjecting subsequent transactions of the same type to immediate taxation. In doing so, the provision challenges the core logic of deferred taxation underpinning EU law on corporate restructurings.

The preliminary reference submitted by the Regional Administrative Court (Wojewódzki Sąd Administracyjny, WSA) in Gliwice raises fundamental questions regarding the interpretation of Council Directive 2009/133/EC on mergers, divisions, partial divisions, transfers of assets and exchanges of shares (the Merger Directive), as well as the compatibility of the Polish approach with the free movement of capital under Article 63(1) TFEU. In particular, the case addresses whether EU law permits a Member Stat...