The Sejm is currently working intensively on the draft Act amending the Personal Income Tax Act, the Corporate Income Tax Act, the Flat-rate Income Tax Act on certain revenues from individuals and certain other laws (hereinafter: Project). The most exciting change is the taxation of a limited partnership and of an open company with corporate income tax.
It is worth noting that not all publicly owned companies will be subject to corporate income tax, but only, as quoted in the draft: ‘public companies established or managed in the territory of the Republic of Poland, if the shareholders of the public company are not exclusively natural persons and the public company will not submit:
(a) prior to the beginning of the financial year, information on corporate tax taxable persons and individuals tax taxable persons having, directly or through non-taxable entities, the right to participate in the profit of that company, ... or
(b) update the information referred to in point (a) within the time limit 14 the days from the date of the changes in the composition of taxable persons to the head of the tax office responsible for the registered office of the public company and to the head of the tax office applicable to any taxable person making income from that company.’ Therefore, in order not to become a corporation tax taxpayer, the public company will have to disclose the identity of all shareholders of the company (both natural and legal persons) to the competent Chief Executive of the Tax Office.
The question may be asked, what is the purpose of the amendments? Although the answers can be guessed, we can also find them in the justification for the Project. The limited company is a good ‘optimization tool’, for example in the case of a subsidiary of such a company being a capital company.
In the current state of the law, only income is taxed, which was created through a limited partnership. An additional benefit of such a solution is the limited liability of the shareholder for the company's obligations. The changes in the Project are intended to undo the above practices.
It is a little consolation that, according to the amendments introduced to the draft, the company will be able to decide that the provisions on corporation tax will apply to it from 1 May 2021 If the company decides to take such a step and the last day of its financial year is the period from 31 December 2020 to 31 March 2021, it may not close the accounts on that date and continue the financial year until 30 April 2021 Of course, this solution is only a temporary delay of the inevitable.
In view of the above planned changes, the possibility of converting a limited partnership into an open company is becoming increasingly popular. Such transformation consists of several steps:
- drawing up a conversion plan;
- adopting a resolution on the adoption of the conversion plan;
- the submission by the partners of a declaration of participation in a converted company;
- the registration of a converted public company in the Register of Entrepreneurs of the National Court Register;
- to submit an application for an announcement in the Court and Economic Monitor on the conversion of the limited partnership into an open company.
Although this seems simple, it should be borne in mind that the recast plan should contain the relevant content and annexes, resolutions should also be adopted in the legal manner. The relevant documents should also be prepared and submitted to the National Court Register. Therefore, the best solution is to carry out the above mentioned transformation with the assistance of professional advisers.
Therefore, you can count on the help of our group of specialists working in Russell Bedford Poland. We offer not only current advisory assistance, but also professional services to transform companies, not only as described above.
If the changes described above and planned in the Project concern your business, please contact us. We provide qualified assistance.
Written by Michał Zdanowski, tax consultant at Russell Bedford Poland. Graduate of the Faculty of Law and Administration of the University of Warsaw, Graduate of the Postgraduate Tax and Tax Law Studies of the University of Warsaw, Graduate of the Postgraduate Accounting and Finance Studies of the Warsaw School of Economics.
During his studies, he gained experience in law and tax law firms. Since September 2013 He is associated with Russell Bedford Poland. Specialises in documenting transactions between related parties.