Termination of business

The liquidation of economic activities depends on the legal form in which it is carried out.

A number of formal obligations, including the termination of contracts with employees, the deregistration of employees and entrepreneurs from the ZUS system, the provision of a place of storage of financial and accounting documentation, the deregistration for tax purposes, the preparation of financial reporting.

Before the liquidation of economic activity, the entrepreneur should consider the possibility of suspending it, provided that it is expected to continue in the future.

1. Suspension and termination of activities

1.1. Selection of the moment of termination

The entrepreneur should take into account the contracts concluded with the counterparties – periods of notice, contractual penalties for termination of the contract, etc. If he/she employs employees, he/she should also take into account the possibility to terminate their employment contracts at such a time as to expire on the last day of the company's operation.

1.2. Discontinuation of business activities carried out in the name

For the purposes of economic liquidation carried out in its own name, commonly known as one-person economic activity, it is necessary to register with the CEIDG register conducted by the Minister of Entrepreneurship and Technology. An application for deletion of an alert shall be made on the form CEIDG-1.

The entrepreneur shall be able to submit an application in electronic, paper or telephone form. This document can be signed using a qualified signature or trusted profile. A paper-based business liquidation form shall be submitted to the office of the city or municipality responsible for the establishment of the business.

Another way to apply for the removal of an entrepreneur is to send him a registered letter. In such a case, a notarial declaration of signature on the application shall be provided. Entrepreneurs were also allowed to submit an application via a website where the document is covered by a unique code.

In such a case, you must appear in person at the office of the municipality or city and, on the basis of the information given, sign it.

An unusual form of business termination is the deregistration of the company through the Help Center hotline (tel. 801,055,088 or 22,765 6732). After the consultant fills out the application, the entrepreneur's phone number is SMSed with the code to go to the competent municipal or city office to sign the document.

There is no personal order in the legislation to get out of the register of entrepreneurs. This may be done by the appointed representative, provided that the taxable person has notified him and has determined the scope of his power of attorney through the form CEIDG-1.

In the form CEIDG-1 in order to end the business, note point 5 in the part ‘01. Type of application’:

The errors in the paper applications submitted are corrected by calling on the trader to correct or supplement them within the time limit 7 the days, under the rigor of rejection of the application. In the case of requests submitted electronically on irregularities, they shall inform the communication of the information system.

The removal of the trader from the CEIDG register shall take place either when the data are entered in the CEIDG or at the latest on the day following the submission of the correct application. Whether an entity has been deleted can be checked in the web search engine: https://prod.ceidg.gov en/CEIDG/CEIDG.Public.UI/Search.aspx.

Data from the CEIDG register shall be transmitted to the US, ZUS, KRUS, statistical office, bodies keeping records of regulated activities. As a result, the number of registration obligations resulting from the operation of the so-called one the window is reduced.

Example

Mr. Roman as an attorney has lost his right to pursue a profession. The decision to ban the profession has passed 15 November 2020 On that date, Mr. Roman will be removed from business records.

1.3. The liquidation of a civil partnership

The provisions of the Act of 23 April 1964 Civil Code[1] ((c) regulate the liquidation of a civil partnership. It is assumed that a civil partnership concluded for an indefinite period may be terminated by each of the partners, unless the termination takes place for important reasons. By Article 869(1) k.c.

a partner may also withdraw from a civil partnership if he or she terminates the partnership agreement 3 months before the end of the accounting year. The articles of association may regulate the period of notice separately, but the extreme term, e.g. 10-year.

Where only a civil partnership exists two partners, termination by one of these results in the dissolution of the civil partnership. The provisions of k.c. also provide for the possibility for the shareholder to terminate the partnership agreement without retaining notice for important reasons.

The legislator has not normatively indicated the grounds for "important reasons". Therefore, for each entity these reasons may be different and consequently subject to an individual assessment of the other shareholders of the company.

In the event of any dispute between the shareholders as to the recognition of the given reason for the termination of the civil partnership agreement without notice, the court shall decide the doubts.

Judgment

Provision Article 869(2) k.c., which is mandatory, provides for a denunciation which can be described as ‘extraordinary’. It is characterized by the fact that it can only occur for important reasons. In addition, it does not require a period of notice and therefore takes effect immediately.

The right to terminate the contract under this procedure shall be granted to each shareholder and may be exercised at any time when the company exists. In addition, this right cannot be excluded or limited in any way in a partnership agreement or joint venture resolution. In the light Article 869(2) in fine k.c.

the objection against it is invalid[2].

Judgment

Important Reasons under Article 869(2) k.c., in the event of the occurrence of which the partner may terminate his or her participation without remaining on notice, is a loss of confidence in the partners, in particular due to their unfair conduct[3].

With regard to the termination of the civil partnership contract, it should be indicated that the appropriate form of notice (oral or written) should specify the contract and, if it does not provide for written form, it is recommended that it be concluded in this form for evidence purposes.

A document form is considered to be a situation where it is possible to identify the sender, and therefore the sending of an e-mail, fax or SMS should be considered a correct form. Communication via social media is also acceptable.

However, it should be borne in mind that, for the purposes of maintaining the time limit, it will be incumbent on the shareholder who declares the contract to demonstrate that all parties have been properly informed of this fact.

The declaration of termination of the civil partnership agreement should be provided to all its other partners and shall be deemed effective from the date on which all other partners have become acquainted with it.

Where the property held by a civil partnership is the subject of the property, it is recommended to terminate the company's contract with a notarially certified signature. A statement in this form may give rise to disclosure of changes in the legal status of the property or its burden[4].

The dissolution of the civil partnership and the cessation of its business activities do not exempt from liability for debts of former partners. All shareholders of the company are jointly and severally responsible for the obligations arising during the duration of the civil partnership (Article 864 k.c.).

The creditor shall be entitled to claim claims on each of the partners together, on several of them or on one. The property of the civil partnership at the time of its dissolution becomes joint ownership in fractional parts according to Article 875 k.c.

It is only possible to repay the contributions to the partners after payment of the commitments.

The remaining surplus shall be shared between the shareholders in relation to the profits of the company, unless the partners have regulated the distribution of the assets remaining as a result of the liquidation in a separate manner from those indicated in the legislation.

The abolition of co-ownership is possible after the contract has been concluded before the notary or the court has given its ruling. Only in terms of components to which no specific form is required, partners may conclude a written agreement on the distribution of the components of the liquidated company.

1.4. The liquidation of a passenger company entered in the KRS

The liquidation of a passenger company is a proceeding in the event of a situation leading to the dissolution of the company in accordance with Article 58 Act on 15 September 2000 Commercial Companies Code 5 (Further: k.s.h.), i.e.:

• 1) the reason provided for in the articles of association,
• 2) a unanimous resolution of all partners,
• 3) announcement of bankruptcy of the company,
• 4) the death or bankruptcy of the partner,
• 5) termination of the partnership agreement by the shareholder or creditor of the shareholder,
• 6) the final judgment of the court.

Where the contract of a partnership has been concluded by means of a model contract, it can be terminated by a unanimous resolution of all shareholders taken using a model made available in the electronic system. Such a resolution shall be effective when the electronic signature form is provided.

The liquidation of a passenger company entered in the KRS is carried out by the liquidators of the company, which are, in principle, all partners, unless only some of them or persons outside their group are appointed to this function. Based on Article 71(1) k.s.h.

the registration court may, for important reasons, at the request of a partner or another person having legal interest, appoint liquidators only for some of the partners, as well as other persons.

The role of liquidators is to terminate the company's current interests, to collect claims, to repay liabilities and to liquidate the company's assets. It is also up to them to notify the competent registry court of the completion of the liquidation and of the request to remove the company from the register (Article 84(1) k.s.h.). This entry is of a declaratory character.

A particular form of termination of the company's activities is the unanimous agreement of the shareholders. The winding-up procedure is not mandatory in a public, partnership and limited partnership. The shareholders must then adopt a resolution to carry out the liquidation in a different way.

The condition for omission of the winding-up procedure is that the company's agreement authorises such action.

The agreement should specify the settlement of the obligations in force and the methods and distribution of the remaining assets, for example by determining whether the company will be taken over by one of the partners and the amount of repayment of the other partners.

Example

Ms. Anna, a limited partnership consultant, made an agreement with her partners to withdraw from the company. The other partners will assume all of her rights and obligations, in return Ms Anna will receive a fixed remuneration equivalent to half of last year's profits achieved.

Disposal of the liquidation assets shall therefore take place at the time of the adoption of the resolution by the shareholders.

As per content Article 83 k.s.h., if the assets of the company are not sufficient to pay off the shares and debts, the shortfall shall be shared between the shareholders in accordance with the terms of the contract and, in their absence, in relation to which the partners participate in the loss.

In the event of insolvency one its share of the shortfall is shared between the other partners in the same ratio.

Example

The partners of the partnership are two Tax advisers: Mr Adam and Mr Krzysztof. As a result of the winding-up procedure, outstanding liabilities of 12,000 PLN. The partnership agreement provides that Mr. Adam has 75% share in profits and losses, and Mr Krzysztof – 25%. In order to cover the liabilities of the liquidated entity, Mr. Adam will have to pay the amount 9,000 PLN, Mr Krzysztof – 3,000 PLN.

1.5. The liquidation of the commercial (capital) company

The liquidation of the capital company precedes the liquidation process. Capital companies are limited liability companies and public limited liability companies. The main objective of the liquidation is to end the company's current interests, to collect claims, to meet liabilities and to liquidate the company's assets.

The dissolution of a capital company may be due to:

• 1) the reasons provided for directly in the contract (statute) of the company,
• 2) by a resolution of shareholders to terminate the company or to transfer the registered office of the company abroad,
• 3) announcement of bankruptcy of the company,
• 4) other reasons for specific regulations.

Judgment

Personal conflicts between the shareholders of the company may constitute an important reason for its resolution, but the existence of such a conflict does not automatically provide a basis for such far-reaching action, unless the existing conflicts significantly and permanently affect the functioning of the company, the relations of the company or the powers of shareholders. It is pointed out that the implementation of this procedure is justified only if these obstacles to the company's activities cannot be removed by other means of protection than by winding up the company and dividing its assets[6].

In practice, the most common reason for the termination of the company's agreement is the resolution of shareholders on the liquidation of the company. It shall be valid by law if it has been taken by two thirds votes in the company with the o.o.

and, respectively, three quarters votes in a public limited liability company, unless the articles of association set a higher limit. In order for the resolution of the shareholders of the limited liability company on its dissolution to be valid, it should be recorded in the minutes drawn up by the notary.

The opening of the liquidation takes place on the date of the resolution of the shareholders to terminate the company, the decision to terminate the company by the court or the existence of another reason for its dissolution[7].

The liquidated company is obliged to use in the name the term ‘in liquidation’. The liquidators responsible for carrying out the liquidation process are essentially the partners of the liquidated entity, both the articles of association or the provisions of the shareholders may make changes in this respect. one of the first obligations of the liquidator shall be notified to the court of registration amendments specifying:

• 1) opening of liquidation,
• 2) the names and addresses of the liquidators,
• 3) the way in which the company is represented by liquidators and any changes in this respect, even if there is no change in the existing representation of the company,
• 4) repeal of the liquidation.

It is also up to the liquidators to draw up a balance sheet for the opening of the liquidation. The liquidation balance sheet shall take all assets at their disposal value[8]. This balance should be approved by the Assembly of Associates.

Example

The Company of O.o. in its possession holds fixed assets whose book value is 0 PLN. The sale value, determined as the amount for which liquidators may dispose of the individual assets of the company in liquidation, was determined at 30,000 PLN. This value should be shown in the liquidation balance sheet of the company.

Liquidators are obliged to call on creditors to submit their claims within the time limit 3 months from the date of the company's termination notice.

In the case of a public limited liability company, this obligation shall include twice the notice of termination of the company and the opening of the liquidation and a request for creditors to submit their claims within the time limit 6 months after the last announcement.

Notices in the case of a public limited liability company may not be made in excess of one month or less 2 weeks. In the process of winding up the company, actions taken by liquidators are aimed at the completion of pending cases.

The sums needed to satisfy or secure known creditors to the company who have not applied or whose claims are not due or disputed must be placed in a judicial deposit. In the course of the liquidation of the capital company, the distribution of profits to shareholders is unacceptable until all liabilities are met.

In the case of public limited liability companies where the capital is insufficient to cover its liabilities, the liquidator shall be responsible for collecting from the shareholders the amount of debt required to cover the liabilities.

After completion of the process of meeting (or securing) creditors, there may be a division between the shareholders of the remaining assets (in the form of cash and assets which have not been cashed in) in relation to the shareholders' shares.

The breakdown cannot be made before the end 6 months from the date of publication of the opening of the winding-up and the call for creditors. A division is possible if the liquidation report has been approved by the Assembly of Associates.

The liquidators should announce this report at the company's premises and submit it to the registry court, at the same time as submitting a request to remove the company from the register.

The company ceases to be legal when the company is removed from the register. The books and documents of the dissolved company should be returned to the person indicated in the articles of association or to the resolution of the shareholders. In the absence of such an indication, the keeper shall be designated by the registry court.

1. VAT taxation in the liquidation of the company’s activities and the cessation of activities by a natural person
2. 1. Liquidation Remanent

According to Article 14 Act on 11 March 2004 on tax on goods and services 9 (Next: the VAT Act). the obligation to draw up an inventory by the nature of the goods concerns taxable persons in the case of:

1. the dissolution of a company governed by civil or commercial law without legal personality, or
2. the cessation by a taxable person who is a natural person or an undertaking in succession and who is a registered VAT taxable person of carrying out taxable activities under separate provisions to notify the competent authority of the cessation of business activities, or
3. the cessation by the taxable person, natural person or undertaking in succession, of carrying out taxable activities by at least 10 months (this does not apply to taxable persons who have suspended their activities under the provisions on suspension of their activities), or
4. the expiry of the succession board or the power to appoint a succession manager, where the succession board has not been established and the notification in question has been made; under Article 12(1c) Act on 13 October 1995 the rules on the registration and identification of taxable persons and payers 10 (Further: u.z.e.i.p.p.). VAT payers are exempt from the obligation to draw up an inventory by nature. The supply of assets remaining in the dissolved company is in principle a taxable activity on the basis of Article 14(1)(1)(2) the VAT Act According to the established jurisprudence line, the taxable assets are both self-produced goods and goods which, after acquisition, were not the subject of delivery. It is therefore by nature necessary to include fixed assets in the inventory. Definition of goods contained under Article 2(6) the VAT Act indicates that these are things and their parts, as well as all forms of energy. Legislator in Content Article 14(1) the VAT Act, Using the concept of ‘goods’, he also included fixed assets in liquidation. The confirmation can also be found in the individual interpretation of IS in Katowice from 18 July 2011 11 .

Example

At the same time, it should be stressed that taxation will be subject only to goods for which the right to reduce the amount of tax due by the amount of input tax would be granted. The inventory shall by nature not contain goods which cannot be traded, e.g. a register office[13].

Example

Company X owns the property, when acquired the property was exempt from taxation. As a consequence, the property will be displayed as one of the items with an AW rate.

Exemption from taxation as a supply of goods in the VAT Act is:

• 1) delivery of an undertaking or an organised part of an undertaking,
• 2) the transfer of cash as part of the company's dissolution.

The tax base will be the value of goods to be included in the inventory, determined in accordance with Article 29a(2) the VAT Act The taxable amount of the goods included in the inventory will therefore be the purchase price of the goods or similar goods and, where there is no purchase price, the manufacturing costs determined at the time when they were included in the inventory.

In practice, it is assumed that this price does not refer to the historical purchase price, but to the values currently in force on the market, taking into account changes in its value (e.g. due to consumption, technological developments, etc.).

Judgment

Provincial Administrative Court in Łódź in judgment of 29 October 2019 14 presented the following position. Regulation Article 14 the VAT Act was introduced in particular because of the implementation of the principles of universal taxation and taxation of consumption.

It should be noted that in the event of cessation of business activity there is in principle the consumption of goods remaining after the activity. These goods do not serve taxed activities.

The principle of tax neutrality cannot therefore apply to them, since the entity having these goods, by ceasing its activities, ceases to be a VAT taxable person. Furthermore, in view of the taxation of consumption, the goods remaining after the liquidation of the business are subject to VAT.

Otherwise, it would be a simple way to avoid taxation of consumption.

It should be noted that when deciding to liquidate economic activities, it is not prohibited to dispose of assets. The price set in the sales transaction is not as strict as in the case of the physical inventory.

In practice, this is the case with ingredients that are late or cannot be used by the taxpayer privately or in any other planned economic activity.

The ability to shape the price of goods results from the sound Article 29a the VAT Act In Content Article 29a(1) the VAT Act the legislator has indicated that the taxable amount is all that constitutes the payment which the supplier of the supply of goods or services has received or is to receive from the buyer, the customer or the person third, including subsidies, subsidies and other subsidies of a similar nature which directly affect the price of goods or services supplied by the taxable person.

The use of the term ‘all that constitutes payment’ indicates that it is the parties to the civil law contract who set the prices at which they enter into transactions themselves.

In addition, Article 29a(10)(1) the VAT Act provides that the taxable amount shall be reduced by the amounts granted after the sale of discounts and price reductions.

As indicated by the Director of IS in Poznań in an individual interpretation of 5 July 2016 15 , an active VAT taxable person ‘has the right to freely arrange his business so that his business is economically viable’. However, a reduction in the prices of goods which is intended to circumvent the law is unacceptable. Therefore, when selling assets for a symbolic gold, the taxpayer should follow the principle of rationality.

2.2. Declaration obligations

Information on the inventory by nature, together with the valuation, shall be annexed to the last VAT return submitted by the taxable person for the period covering the cessation of economic activity. The amount of tax resulting from the census shall, by nature, be included in the VAT return and in the JPK records, respectively.

In the absence of ingredients to be included in the inventory, it is considered sufficient instead of the inventory to include information on non ingredients to be included in the inventory by nature, indicating that their value is 0 PLN.

In the last declaration submitted by the active VAT payer, adjustments to the deduction of input tax resulting from Article 91(7) the VAT Act Provision Article 91(7) the VAT Act provides that adjustments to the input tax must also be made where the taxable person has had the right to reduce the amount of tax due by the total amount of input tax on the goods or services he uses and has made such a reduction, or has not had such a right, and subsequently has changed the right to reduce the amount of tax due by the amount of input tax on that commodity or service. In the case of goods and services which, under income tax rules, are credited by the taxable person to:

• 1) fixed assets and WNiP subject to depreciation and
• 2) land and perpetual land use rights, if included in fixed assets or WNiP of the buyer, excluding those whose initial value does not exceed 15,000 PLN
• – an adjustment shall be made on each subsequent amendment to the right to deduct.

For fixed assets and CHPs whose value exceeds 15,000 PLN, correction shall be made within 5 successively consecutive tax years from the year in which those assets were put into service and, in the case of real estate and perpetual land use rights, during the period 10 years from the year in which they were put into service.

The annual adjustment for the tax year is 1/5 the value of the deducted input tax. This adjustment shall be made in the tax return for first the accounting period of the year following the tax year for which the adjustment is made.

Example

Spółka z o.o. acquired the property In 2013 According to the authorities, in the event of liquidation, a change in the use of a fixed asset is required to make a correction of the VAT deducted on, inter alia, acquisition of fixed assets. The initial value of the property exceeds 15,000 PLN, the correction period is therefore 10 years.

The liquidation of sp. z o.o. In 2020, i.e. 3 years before expiry 10-year the correction period will require the deduction of VAT on purchased real estate once for the entire remaining adjustment period corresponding to 3/10 the amount of VAT deducted.

The tax should be paid on a general basis, i.e. for taxpayers making a declaration VAT-7 – by 25. on the day of the month following that for which the settlement is made.

The fact that VAT activities are terminated should be notified by the taxable person by submitting a VAT-Z return (notification of cessation of activities subject to tax on goods and services), which results from the wording of the Article 96(6) the VAT Act The time limit for submitting the application shall be 7 the days counted from the date on which the VAT operations are completed.

Removing VAT taxable persons from the register is a material and technical activity which does not require a decision.

1. 3. Exemption from VAT of the supply of goods to natural persons and members of a civil partnership or a commercial company not having legal personality

In the case of natural persons, members of civil, public, partnership or limited liability companies, the supply of goods subject to census shall be subject to VAT exemption for a period of time.

12 months after cessation of taxable activities, as provided for in Article 14(7) the VAT Act This provision means that the sale of assets by the taxable person during the period 12 months after the end of his business activity, he benefits from VAT exemption. This was confirmed by the NSA in its judgment of 28 February 2013

Judgment

Persons who were partners in a civil company and after its dissolution shared goods from the company's warehouse can sell them without charging the tax on goods and services. They shall be exempt by 12 months from the date of termination of the company[16].

2.4. Credit for registration money — obligation to reimburse it

According to Article 111(4) the VAT Act taxable persons who are required to register at the register office shall have the right to deduct from the tax the amount due for the purchase of each of the register offices at the amount of 90% its purchase price (excluding tax), but not more than 700 PLN, and where that amount is higher in the accounting period than the amount of tax due, they shall be entitled to reimburse their difference to the bank account of the taxpayer in a bank established in the territory of the country or in the account of the taxpayer in the SKK of which it is a member, or to deduct from the tax due that difference for subsequent periods of account, provided that the purchase of the register offices takes place no later than the time limit 6 months after the start of that record.

Taxable persons who during the period 3 years from the date on which the sales records start to be kept, they are obliged to reimburse the amounts deducted for the purchase of register offices.

Where a period of three years has elapsed, the taxpayer shall not be subject to additional obligations in connection with the holding of register offices.

1. 5. Repayment of VAT to former shareholders of a civil or commercial company not having legal personality

The former shareholders of a civil partnership or a commercial company not having legal personality (clear, limited, partnership) shall have the right to reimburse the difference in tax shown in the tax return for the period during which those persons or companies were, respectively, taxable persons registered as active VAT payers.

The reimbursement to former shareholders shall be made on the basis of a VAT return lodged, to which the articles of association shall be annexed at the date of its dissolution and a list of the bank accounts of former shareholders to which the excess of the input tax due is to be reimbursed.

The refund shall be made in the proportion indicated in the contract determining the right to participate in the profits of the company. Where the contract does not specify the rights to share profits, those rights shall be deemed to be equal.

1. 6. Liquidation of the capital company and reimbursement of excess input tax over due

The liquidation of a capital company on the basis of VAT is to charge the tax due (by the liquidated company) on the assets issued to shareholders, subject to an earlier right to deduct input tax on the goods carried out or produced.

The legal basis for the calculation, declaration and settlement of VAT in the liquidation process of the company is the content Article 7(2) the VAT Act According to him, by delivery of the goods in question under Article 5(1)(1), The transfer by the taxable person of goods belonging to his undertaking, in particular any other donation, shall also be understood free of charge — if the taxable person has been entitled, in whole or in part, to reduce the amount of tax due by the amount of input tax due on the acquisition, import or manufacture of those goods or their components.

Therefore, the transfer of assets to a liquidated capital company constitutes a supply of goods to a former shareholder of that entity. This is confirmed by the NSA ruling of 19 March 2014

Judgment

Therefore, it cannot be doubted that the transfer of assets to the shareholder by the capital company as a result of the liquidation, after the creditors have been satisfied, and before it has been removed from the KRS, meets certain conditions. Under Article 7(2), if it is the taxable person’s intended use of goods for purposes other than his business[17].

The liquidated capital company is required to show the tax due in the last declaration lodged VAT-7 and JPK-VAT. The declaration of liquidation of the capital company must also take into account:

• 1) possible adjustments to the amount of input tax (Article 91(7) the VAT Act) or 2) adjustments resulting from non-compliance with the allowance obligations of the registrant (Article 111(4) the VAT Act).
• 2) adjustments resulting from non-compliance with the allowance obligations of the registrant (Article 111(4) the VAT Act).

In order to remove the capital company as a VAT taxable person at the time of completion of the liquidation, the company should submit a VAT-Z declaration. It should do so to the head of the US competent for the taxable person on the last day of carrying out operations subject to VAT.

The notification of cessation of tax activities should be submitted within the time limit 7 days from the date of cessation of those activities.

With regard to the reimbursement of the excess input tax due, it should be pointed out that the company loses its legal personality after being removed from the KRS register and cannot therefore be a party to the recovery procedure. Nor do the provisions authorise the collection of excess VAT on former shareholders.

It is therefore appropriate to submit a request for deletion from the KRS register upon receipt of the refund. This is confirmed by the NSA in its judgment of 20 October 2016

Judgment

In the light Article 133(1) Act on 29 August 1997 - Tax Ordinance 18 (hereinafter: o.p.), the liquidator established to carry out the supplementary liquidation procedure of the assets remaining after the company which has already been removed from the register of economic operators of the National Court Register, is a party to the tax proceedings and is not entitled to apply to the authority with a claim for reimbursement of the excess tax on goods and services, as shown in the declaration of the liquidated company[19].

Example

Omega sp. z o.o. was put into liquidation In May 2020 For June 2020 has lodged a VAT return, indicating the amount to be reimbursed within the time limit 180 days. Let's assume that the cancellation of the company from the KRS will occur on 31 January 2021 In the event that the recovery and the actual recovery operations do not take place by the date on which the company in KRS was removed, i.e. 31 January 2021, the company will not be entitled to reimbursement.

2.7. Tax on civil law acts

The liquidation of the company is not a PCC taxed activity. This is not affected by the fact that, as a result of the liquidation, the partners will receive any assets or form of such assets (monetary or non-monetary).

1. Taxing income tax on the liquidation of the company's activities and the cessation of activities by a natural person
2. 1. Taxing income tax on the liquidation of a natural person’s business

At the date of the liquidation of the business activity, the natural person is required to draw up a physical inventory and a list of assets. The scope of the list of assets determines Article 24(3a) u.p.d.o.f. It shall specify all the assets of the company, i.e.:

• 1) fixed assets,
• 2) equipment components,
• 3) commercial goods,
• 4) finished products,
• 5) materials,
• 6) semi-finished products
• – which remained in the company at the date of liquidation.

The list shall contain at least the following data:

• 1) order number,
• 2) identification (name) of the asset,
• 3) the date of acquisition of the asset,
• 4) the amount of expenditure incurred in the acquisition of the asset, and
• 5) the amount of expenditure incurred for the acquisition of an asset included in the cost of obtaining revenue,
• 6) the initial value of the asset, its depreciation method and the sum of depreciation premiums.

Income tax payers who keep a tax income and income book are also obliged to draw up a physical inventory. According to section 24 Regulations of the Minister of Finance from 23 December 2019 on the keeping of a tax revenue and expense account 20 (hereafter: rp.k.p.r.) taxpayers are obliged to enter in the register of the census by nature (hereinafter referred to as ‘the natural record’):

• 1) commercial goods,
• 2) basic and auxiliary materials,
• 3) semi-finished products,
• 4) production in progress,
• 5) finished products,
• 6) shortages and waste.

The inventory shall contain by nature at least the following data:

• 1) name of the owner of the plant (company name),
• 2) the date of the inventory,
• 3) the following item number of the physical inventory sheet,
• 4) details of the goods and other ingredients mentioned above,
• 5) unit of measurement,
• 6) the quantity found at the time of the census,
• 7) price in gold and cents per unit of measurement,
• 8) the value resulting from the multiplication of the quantity of goods by its unit price,
• 9) the value resulting from the multiplication of the quantity of other ingredients by their unit price,
• 10) the total value of the inventory by nature and the clause ‘The list is completed in position...’,
• 11) the names of the persons drawing up the inventory and the signature of the owner of the establishment (shareholders).

List does not include fixed assets and equipment — these two the items differ from the list of assets. The inventory should be assessed at market prices (not at historical acquisition prices). Valuation and entry in the book must be made within 14 days after the end of the census by nature.

The obligation to draw up a list of assets also on taxable persons of flat-rate income tax on certain income generated by individuals. Defines it Article 20(6) Act on 20 November 1998 a flat-rate income tax on certain income generated by individuals 21 (Further: u.z.p.d.)

It should be pointed out that the purpose of the legislator ordering taxable persons to provide this information is to:

• 1) in the case of a list of assets, the possibility to verify the tax settlements for the disposal of assets remaining after liquidated business activities,
• 2) in the field of physical inventory, the establishment of income taking into account inventory differences.

The assets remaining at the disposal of the taxable person disposing of the economic activity have no effect on the PIT until their sale. The need to tax the sale of the assets previously part of the company depends on the time between the termination of the business and the sale. If the assets are disposed of before expiry 6 years from the month following the month in which the activity was wound down are income or income (depending on the form of taxation of the economic activity previously carried out by the taxpayer). Consequently, the assets sold in the case of a taxable person who engaged in a taxable activity:

• 1) on a tax scale, they will be taxed at a rate of 17% or 32%,
• 2) linear tax – will be taxed at the rate 19%,
• 3) flat-rate income tax – will be taxed at the rate 3% or 10%.

The sale of assets after the expiry of the aforementioned period remains without implication in the PIT.

The necessary taxation of sold assets or the absence of taxation shall be governed by the following legal provisions: Article 14(2)(17) and Article 14(3)(12) Act on 26 July 1991 on personal income tax 22 (and, respectively, Article 12(1)(5) point (f) and section 10 u.z.p.d.

Also include Article 24(3b) u.p.d.o.f., according to which revenue generated from the sale of assets resulting from the liquidated business activity is subject to income costs. The tax cost for the disposal of the component will therefore be the expenditure incurred on the components disposed of in any form, e.g.

in a form not accounted for at the time of depreciation of the fixed measure. If for disposal of assets before expiry 6 years (calculated according to the rules indicated above) the taxpayer achieved income, then he is obliged to self-calculate tax and pay to the US within the time limit 20.

on the day of the following month, advances on income tax. Sales revenue and costs should be classified as a source of business revenue.

Example

Mr Jan, a civil partnership partner, as a result of its liquidation, received In April 2019 on the property of a private passenger car whose initial value was 70,000 PLN, a depreciation deductions made — 60,000 PLN. In December 2020 Mr. John's neighbor offered to buy him a car for the amount 15,000 PLN.

The transaction was concluded in the form of a purchase-sale agreement. Mr. John's income on the car sale transaction is 5,000 PLN (15,000 PLN – 10,000 PLN Uncounted depreciation). As Mr.

Jan was taxed on a linear tax, an advance on income tax in the amount of 950 PLN will be obliged to pay to 20 January 2021 The revenue achieved will be the income from the business activity which Mr. John will show in the composite annual statement PIT-36L for 2020

Simultaneously under Article 44(15) U.p.d.o.f. the legislator has established the principle that the tax payers above may not pay an advance on income tax if the tax due on income generated from the beginning of the year, less the amount of advance payments paid since the beginning of the year, does not exceed 1,000 PLN.

However, if the tax due on income generated since the beginning of the year, less the amount of advance payments made since the beginning of the year, exceeds 1,000 PLN, that payment is subject to the difference between the tax due on income from the beginning of the year and the sum of advances paid from the beginning of the year.

3.2. Taxation of a liquidated company with income tax

The legislature makes the effects of income tax on shareholders of a liquidated company dependent on the subject matter of the liquidated assets received, as stated in u.p.d.o.f.

15 February 1992 on corporate income tax[23], Next: the Corporate Income Tax Act), which defines separately the effects of the transfer of assets in monetary and non-monetary form. It should be noted that the receipt of cash is not subject to income tax, regardless of the termination of the company, i.e.

to carry out the liquidation or termination of operations in another way. Of the non-recognition of cash received in connection with the winding-up of a state company Article 14(3)(10) U.p.d.o.f.

and Article 12(4)(3a) point (a) the Corporate Income Tax Act The payment of money to the shareholder to cover the capital share and the share of the company's assets is not eligible as income. The NSA similarly commented in the judgment of 19 December 2019

Judgment

Exemption provided for under Article 14(3)(10) and 12 point (b) u.p.d.o.f. is intended only to eliminate double taxation of shareholders of a partnership for business activities carried out in this form. The tax neutrality of the winding-up or winding-up of a non-legal entity should therefore not constitute a way for an untaxed transfer of income generated previously by other entities[24].

Judgment

Alfa s.k. adopted a resolution on the liquidation of its shareholders. As a result of the liquidation of the limited partnership, Mr Adam received a contribution of 10,000 PLN in cash, 80,000 PLN in cash, plotter and assignment of loan receivables.

As indicated above, the cash received in connection with the liquidation of a passenger company is not taxable. The fixed assets received (ploter) and the assignment of loans will also be exempt from taxation until they are disposed of.

The legislator defined that the cash also means the value of a claim previously accounted for as receivable, less due VAT, and of a loan receivable granted by a company that is not a legal person, with the exception of interest receivable on late payment and interest receivable on such loan, if the claims were repaid to the recipient. These claims do not constitute tax revenue until they are disposed of, which is confirmed, among others, by the NSA ruling from 19 July 2019

Judgment

In the event of a shareholder receiving cash as a result of the winding-up of the limited partnership, their value does not constitute income, although in principle they should be classified as a source of non-agricultural business (Article 5b(2) in the case of other assets (to which receivables not complying with the requirements of the Article 14(8) u.p.d.o.f.) – their value will be the income of the shareholder only when the asset obtained as a result of the liquidation of the company is disposed of, subject to the circumstances in question under Article 14(3)(12) point (b) u.p.d.o.f. 25 .

On the other hand, when assets are issued as part of the liquidation assets, they constitute taxable income at the time of disposal, according to Article 14(2)(17) u.p.d.o.f.

and Article 12(4)(3b) point (a) the Corporate Income Tax Act It should be indicated that the non-monetary assets include both the goods and the property and the undertaking.

Consequently, if non-monetary measures from the liquidated company are disposed of by the shareholder before the expiry of the 6 years first on the day of the month following the liquidation of the company or if their disposal takes place in the course of their business activity, the divestment partner shall be obliged to demonstrate the income from the business in question before the end of that period.

The income from the sale of assets other than cash by a shareholder of a company which is not a legal person due to the withdrawal or liquidation of such a company shall be the difference between the income obtained from their disposal and the expenditure incurred for their acquisition or production, not included in any form in the cost of obtaining income from the shareholder or company, which is such Article 24(3d) u.p.d.o.f.

The tax cost at the disposal of the component will therefore be the expenditure incurred on the components disposed of in any form, e.g. in a form not accounted for at the time of depreciation of the fixed measure.

If the assets received by the shareholder are used by him in his business activity, he is obliged to continue the depreciation methods originally applied by the company.

The shareholders of the liquidated passenger company are obliged to draw up a list of assets at the date of liquidation. As ordered Article 24(3a) The list of property components shall contain:

• 1) order number,
• 2) the term (name) of the component,
• 3) the date of its acquisition,
• 4) the amount of expenditure incurred for their acquisition and the amount of expenditure incurred for the acquisition of that component included in the cost of obtaining revenue,
• 5) initial value, depreciation method, sum of depreciation premiums,
• 6) the amount of cash paid out to shareholders due for participation in a company which is not a legal person at the date of occurrence or liquidation.

Judgment

Since a personal (discipline) company with organisational and property separation is a separate organisational and property structure from its shareholders, it should be assumed that it has all the necessary data to draw up the relevant list of assets; the outgoing member of the public company, as an entity not entitled to dispose of the company's assets, is not competent to take action in this respect.[26].

The purpose of the list is to enable the tax authorities to subsequently verify whether the assets received for the liquidation of the business activity, the liquidation of the company or the withdrawal of a shareholder from such a company have been disposed of and whether the taxpayers have fulfilled the specific obligations associated with it.

3.3. Taxation of income tax on the liquidation of a capital company

According to the wording Article 8(6) the Corporate Income Tax Act, if the separate provisions require the closure of the accounts (balance sheet) before the expiry of the tax year adopted by the taxpayer, the period from the first day of the month following the end of the preceding tax year until the closing date of the accounts.

In this case, the period from the opening of the accounts to the end of the tax year adopted by the taxpayer shall be considered to be the following tax year. The closure of the tax year requires a tax return.

In connection with the liquidation of the capital company resulting from the closure, opening and liquidation of the accounts, the company is required to determine the tax income or tax loss. The determination of the tax base shall be made on a basis appropriate for the keeping of accounts.

The fact that a capital company has started the liquidation process does not affect the position of the company as a taxpayer of income tax CIT or PIT (for example in connection with the remuneration payments made under employment contracts).

The value of the property received in connection with the liquidation of a legal person is the income from the participation in the profits of legal persons (according to Article 24(5)(3) U.p.d.o.f. and Article 7b(1)(1) point (e) the Corporate Income Tax Act).

However, only the value of this property in part exceeding the cost of acquisition or acquisition of shares shall be taxed. The moment of taxation shall be determined when the assets of the liquidated shareholder or shareholder are transferred.

Example

As a result of the winding-up procedure, the shareholder received a share of the profits in the amount of 150,000 PLN. The cost of acquiring the shareholder shares was 10,000 PLN. The amount of income tax will be subject to tax 140,000 PLN. According to Article 30a(1)(4) u.p.d.o.f. corporate profit participation tax is paid in a flat-rate form, at a rate of 19%.

The components of the liquidation assets (fixed assets, CPVs, stocks and goods) received by the shareholders of the capital companies shall be valued at the initial value not higher than the market value. This is due to Article 22g(1)(5) U.p.d.o.f.

and Article 16g(1)(5) the Corporate Income Tax Act For market value, according to Article 12(5) the Corporate Income Tax Act, the value of the goods or rights received as determined on the basis of market prices applied to goods or rights of the same type and species, taking into account in particular their state and degree of consumption, and the time and place where they are obtained.

Concurrent under Article 22g(14b) U.p.d.o.f. or Article 16g(10b) the Corporate Income Tax Act the legislator orders that the valuation of the assets be continued (means the fixed assets received by the shareholders of the liquidated company and the WNiP which were part of the undertaking or an organised part of the undertaking or commercialised intellectual property) in accordance with the rules in force in the liquidated company[27].

4. Summary

one with the undoubted commercial advantages of passenger companies, compared to capital companies, is a relatively simple and rapid liquidation process. The liquidation obligations and, consequently, the tax implications depend on both the liquidated entity and its legal form. The liquidation, as a process, is spread over time, which should be taken into account at the decision-making stage of the termination of the entity.

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Legal basis

• Article 869(875) k.c.
• Article 58(71)(83)(274)(461) k.s.h.,
• section 24-26 rp.k.p.r.
• Article 14(2)(17), Article 14(3)(10), Article 14(3)(12), Article 22g(1)(5), Article 22g(14b), Article 24(3a)(3b)(3d), Article 24(5)(3), Article 44(15) u.p.d.o.f.,
• Article 7b(1)(1) point (e), Article 8(6), Article 12(4)(3a) point (a), Article 12(4)(3b) point (a), Article 12(5), Article 16g(1)(5), Article 16g(10b) the Corporate Income Tax Act,
• Article 12(1)(5) point (f) and section 10, Article 20(6) U.z.D.,
• Article 5(7)(14)(29a), Article 91(7), Article 96(6), Article 111(4) the VAT Act

The article comes from the book C.H. Beck Publishing House “The Tax and Balance Sheet Closing of the Year 2020” under the ed. prof. nazw. dr hab. Artur Hołda, https://www.ksiegarnia.beck.pl/19591-podatkowe-i-bilansowe-zamkniecie-roku-2020-artur-holda