The Supreme Administrative Court (SAC) has again ruled in favour of energy-intensive businesses.
In case no. II FSK 1245/25, judgment of 26 June 2026, the court held that payments made to energy-intensive businesses to compensate them for indirect carbon emission costs qualify as public grants exempt from corporate income tax. This support, financed from the Indirect Emission Cost Compensation Fund, is designed to partially mitigate the adverse impact of rising electricity costs on energy-intensive industries.
This is another of a series of favourable SAC rulings, including case no. II FSK 1007/25 (judgment of 17 February 2026), and case no. II FSK 847/23 (judgment of 8 April 2026).
The discussed case involved a manufacturer using energy-intensive processes. The company initially treated the compensation payments it received as taxable income. However, after a time it concluded that they should instead be treated as public grants and as such exempt under Article 17(1)(47) of the Corporate Income Tax Act (CITA). The tax authorities disagreed, claiming that these compensation payments are not public grants because they are not used to fund public projects but merely to provide a partial reimbursement of expenses already incurred by the grantee. That decision was subject to judicial review but the court held for the authorities.
However, the lower court’s unfavourable judgment was reversed on appeal by SAC. The top court decided that, for corporate income tax purposes, grants should not be defined by reference to the Public Finance Act. With Article 17(1)(47) CITA not making any such reference, the term “grant” should be construed linguistically according to its colloquial meaning. Crucially, SAC considered that a grant constitutes a type of non-refundable support through the use of public monies. The court also emphasised the purpose of the compensation scheme, i.e. to provide real assistance to companies paying high electricity bills. If it were taxed, part of it would effectively flow back to the government as tax, undermining the whole idea behind the programme.
This case is important not just for the particular company. It may be relevant for all energy-intensive businesses that received similar compensation, which they treated as subject to corporate income tax. The emerging favourable line of court authority, including the commented case, might provide a basis for potentially claiming a tax refund (applies to companies that previously paid tax on such support) or for changing the treatment going forward. However, any such approach should be based on a case-by-case analysis of such matters as the source of funding, the support basis, and the way the compensation was accounted for and reported for tax purposes.
If you would like to check if the compensation payments you received are eligible for tax exemption and there are options for a tax refund, please feel free to contact your WTS&SAJA consultant.
This blog post is provided for general information purposes to keep you up-to-date with changes in tax law, tax rulings by authorities, case law of courts and interesting commentaries. Doradztwo Podatkowe WTS&SAJA shall not be held legally liable for any acts or omissions resulting from reliance on such information.