Changes in the taxation of limited partnerships and partnerships limited by shares in Poland

At the meeting of the council of ministers on August 6, 2013, the Polish government has amended the bill on laws of income tax (PIT) and corporate income tax (CIT) is assumed. The draft stipulates that Polish limited partnership (KG) and limited partnerships are to be applied by shares (KGaA) from January 1, 2014 with corporate income tax.

The legal form of limited partnership and the limited partnership, by shares, are often chosen by Polish and foreign investors for tax optimisation.

Previously, these types of companies are not subject to income tax, because the income is at the level of the shareholders, the general partners and limited partners are taxed.

Following the now imminent legislative reform, the companies will be the same taxation corporations (Sp. z o.o. and SA). Thus, they would also be subject to corporation tax. That is, if the shareholders of limited partnerships that create value are just shareholders of corporations, in which there is a distribution of profits, again loaded with personal or corporate income.

A statement by the Information Centre of the Government dated August 6, 2013 – according to limited partnerships and limited partnerships that are committed to shares, from January 1, 2014 to pay tax.

It should be noted that the hitherto current draft states, different taxation principles in relation to partners and limited partners. If the payout is for the benefit of the General Partner, the bias of the corporate tax dividends at the level of the general partner can be reduced by the already paid by the limited partnership share of the corporation. This means a reduction of the corporate income tax for the general partner in the amount of exactly the amount by which the share of the profits of the general partner of the limited partnership has already been reduced by the preceding taxation.

It cannot be excluded that changes in the present bill, yet to be made during the legislative process and now pending in the Polish Parliament. However, so far the readings in Parliament allows for the assumption that the design is likely to be confirmed in the present version. For all investors engaged in economic activities, under the legal form of a limited partnership in Poland, the former legislative history is to be understood as an important signal to initiate measures. This is to prevent the consequences of the resulting double taxation, and possible alternative forms of design of tax structures business thinking.

The said parcel of prospective legislative amendments contains another twenty amendments. This information includes topics such as depreciation, benefits in kind, undivided profits, depreciation on academic achievement, transfer pricing, thin capitalisation, profits of the shareholders of people companies and taxation of interest on accounts, that are associated with the direct economic activity included.

For questions, or for more information, please feel free to contact us at any time.

Poznan, 02.09.2013
Sabina Moczko – Wdowczyk
Tax adviser, registration number 09738