On 28 October 2020, Sejm adopted a draft bill introducing changes to the corporate income tax law, personal income tax law and certain other acts. According to the draft limited partnerships having their seat or management board on the territory of Poland will become CIT taxpayers.
According to a draft introducing changes to the corporate income tax law, personal income tax law and certain other acts, limited partnerships having their seat or management board on the territory of Poland will become CIT taxpayers.
As a result the current model of single taxation of limited partners will be changed. If the provisions enter into force, the profits made by the limited partners will be double-taxed - once when a limited partnership makes a profit and for a second time when the profit will be paid to the limited partner.
In order to minimize the tax burden for the smallest entities, the draft provides for the exemption of 50% of the revenues from participation in the profits of limited partners of such companies to the limit of PLN 60 000. The exemption will not apply to limited partners associated with the general partner.1
The general partner will be allowed to deduct from the income tax, calculated on income from the profits of a limited partnership, the amount of tax paid by such limited partnership, encumbering proportionally to the profit of the general partner obtained from the share in a partnership. As a result, the general partner will be taxed in a similar way to partners in tax transparent companies (the companies which are not CIT taxpayers).
The draft does not clarify how income of foreign partners to polish partnerships will be taxed. In particular it does not explicitly state whether dividend and interest exemption will be applicable to payments made by a partnership. Therefore, in each case wording of respective double tax-treaty should be analyzed.
According to the transitional regulations limited partnership will become CIT taxpayers from 1 January 2021. However, they may decide that the new rules will apply to them from 1 May 2021. The limited partnerships will be obliged to close their accounts by the day before the limited partnership becomes a CIT taxpayer. The current provisions will remain applicable to the income of partners in limited partnerships obtained before the company has become a CIT taxpayer.
Consequently, the provisions adopted by the Sejm will allow limited partnerships to choose whether to become taxpayers from 1 January 2021 or 1 May 2021.
1The exemption will not apply to the limited partner who:
1) has directly or indirectly at least 5% of shares in a company with legal personality or in company in a process of formation which is a general partner in that limited partnership, or
2) is a member of the Board in:
- a) a company with legal personality or a company in a process of formation which is a general partner in that limited partnership, or
- b) a company which has directly or indirectly at least 5% of shares in a company with legal personality or a company in a process of formation which is a general partner in that limited partnership, or
3) according to Article 11a(1)(4) is a related entity with a member of the Board or with a partner who has directly or indirectly at least 5% of shares in a company with legal personality or in a company in a process of formation which is a general partner in that limited partnership.
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