Acquisition or redemption of own share is an institute of corporate law, which enables the shareholder to transfer it to the company whose share is being transferred. Transactions with own shares have been a hot topic in recent years, on which the opinions of the tax profession and the Financial Administration often contradict each other.
Until the entry into force of the Amendment to the Personal Income Tax Act on 1 January 2020, income from the sale of a share to a company was defined as capital gain and as such also taxed. The Amendment to the Personal Income Tax Act regulates these transactions diametrically differently than they were regulated before the change in legislation. The change in legislation followed the actions of the Tax Authorities, which in recent years reclassified the sale of shares to the company as a hidden profit distribution and taxed according to the rules on dividends taxation, instead of the rules on capital gains taxation. Thus, in accordance with the current legislation, transactions with own shares are generally taxed according to the rules on dividends taxation, except for transactions with listed own shares. However, such an arrangement calls into question the principle of equality, since the sale of a shares to a company is treated differently from the sale of a shares to a third party, despite comparable circumstances affecting the transaction itself.