Polish Deal increased the attractiveness of the limited partnership. This is the form of taxation that a growing group of taxpayers chooses.
The limited partnership is a company which holds the status of corporate tax taxable person, and in its context it is necessary to consider taxation on two levels – CIT and dividend tax.
CIT of the limited partnership
first the level of taxation is corporate income tax (hereinafter CIT), to which the company is liable. According to Article 19 Act dated 15 February 1992 on corporation tax (hereinafter referred to as the Cit Act) two tax rates of 9% and 19%.
From lower 9% the tax rate may be used by a ‘small taxpayer’ whose revenue this year does not exceed 2,000,000 EUR net (without VAT), at the euro rate announced by the National Bank of Poland In the first the working day of the year concerned.
‘Small taxpayer’ is defined under Article 4a(10) the Cit Act as a taxable person at which the value of the sales revenue (including the amount of tax due on goods and services) did not exceed in the previous tax year in the amount expressed in PLN corresponding to the equivalent 2,000,000 EUR; Conversion of the amounts expressed in euro shall be made at the average euro rate announced by the National Bank of Poland to first the working day of October of the tax year.
Other entities not meeting the above conditions are taxed ‘standard’ 19% CIT.
Dividend PIT
second the level of taxation to be described is a dividend tax. Payment of dividends to shareholders is the easiest way to distribute profits to the limited partnership.
In the company occur two types of shareholders: a subcontractor and a shareholder. The Complementary conducts matters of the company and is responsible for the company's obligations with all its assets. The shareholder is not responsible for the company's obligations.
In the context of further consideration, we assume that the associate is a natural person, i.e. he bears full responsibility for the company's obligations. In the case of taxable persons with significant economic activities, such a form of business activity may not be appropriate.
Returning to taxation of dividends paid by a natural person’s associate, the provisions must be analysed Article 30a Act dated 16 July 1991 on income tax on individuals (hereinafter referred to as the pit law). According to Article 30a(1)(4) The pit laws on income (revenue) on dividends are collected on a flat-rate basis 19% tax.
Legislative under Article 30a(6a) provided for a deduction mechanism which says that ‘A flat-rate tax, calculated according to section 1 point 4, the revenue generated by the sub-contractor for the share of profits of the company in question under Article 5a(28) point (c), shall be reduced by the amount corresponding to the product of the subsidiary’s percentage share in the profit of that company and the tax due on the income of that company, calculated in accordance with Article 19 Corporate Income Tax Act, for the tax year from which the profit share income was obtained.’ According to these provisions, the total amount of tax (cit tax on the company plus tax on the dividend) will not be higher than 19%, and in the case of "small taxpayers", this value will be significantly lower.
The attractiveness of this form of taxation is also affected by the lack of taxation of the advance payments in respect of profits, as regulated by the Supreme Administrative Court judgment of 3 December 2020, reference no.
II FSK 2048/18, in which, in the opinion of the court, the advance on profit paid to the subcontractors during the year is not taxed on an ongoing basis and only after an annual tax return has been submitted by the limited partnership CIT-8, (i.e. only when the final tax and the profit of the company are known).
At this point, it is worth considering how the dividend income paid to shareholders should be eligible. In the case of a subcontractor who is a natural person according to Article 17(1)(4) The pit laws will be revenue from cash capital. The eligibility of the source of revenue as a source of cash capital causes that the rules will not apply to the shareholders of the limited partnership Article 30h pit laws on the solidarity tax for income above 1,000,000 PLN.
In conclusion, it can be concluded that, assuming that the subcontractor is a natural person, the maximum combined taxation (cit company plus pit on dividend) will be no more than 19%, in the absence of a profit advance tax and not subject to the rules on the solidarity tax.
ZUS of the limited partnership
Package of changes introduced in the framework Polish Deal also introduces major revolutionary changes in the scope of ZUS contributions. A reference to the Article 8 Act dated 13 October 1998 about the social security system. In the closed catalogue, the shareholders of the joint stock company were not included, thus not subject to health insurance contributions and social security contributions.
As can be seen, a limited partnership is a very attractive solution for business activities where there are no significant risks. Polish Deal and makes her attractive.
If you are interested in such a form of business activity, please contact us. We offer comprehensive services of setting up companies, writing company contracts and carrying out the entire restructuring process (transformation, aports) to change the form of business to a limited partnership.
Author: Przemysław Kujawa, Director of office in Bydgoszcz. Tax adviser listed on the National Board of Tax Advisors. Economist.