Grammatical ambiguity of the legal definition of “hidden profits” in the lump-sum taxation on incomes of companies. Commentary on the Judgment of the Voivodeship Administrative Court in Poznan of 23 January 2025, I SA/Po 497/24.

Abstract

The commentary addresses the interpretation of the legal definition of “hidden profits” under the so-called Estonian CIT regime, focusing on the consequences arising from the use of the phrase “in particular.” In its judgment, the Voivodeship Administrative Court in Poznan, seeking to organize divergent positions in the case law, argued that the mere use of this phrase implies that each benefit listed thereafter always constitutes a “hidden profit.” The commentary critically challenges this position. A syntactic analysis of the definition reveals its grammatical ambiguity, which prevents the dispute from being resolved solely through linguistic interpretation. Overlooking this ambiguity may result in the taxation of benefits lacking both the element of economic gain and a distribution function, such as the disputed disbursement of a loan granted on arm’s length terms. The commentary also includes proposals for redrafting the provision to enable a syntactically clear definition of “hidden profits,” depending on the legislator’s intended purpose.