Planned changes in the taxation of limited partnerships and general partnerships from 1 January 2021

On 30 September 2020, the Sejm received a governmental bill amending, among others, the Personal Income Tax Act and the Corporate Income Tax Act.

According to the assumptions of the bill, limited partnerships will be subject to corporate income tax. The above change means that a limited partnership will be obliged to pay income tax at a rate of 19% or 9% (after fulfilling the conditions specified in Article 19 of the Corporate Income Tax Act). On the other hand, profit paid to partners of a limited partnership, i.e. limited partners and general partners, will be subject to a flat-rate income tax of 19%. However, the general partner, pursuant to the currently applicable Article 30a sections 6 and 6a of the Personal Income Tax Act, may reduce the lump-sum income tax on dividends by the part of the corporate income tax paid by the limited partnership. The flat-rate tax shall be reduced by an amount corresponding to the product of the general partner’s percentage share in the company’s profit and the tax payable on that company’s income for the tax year from which the income from the share in profit was obtained. The amount of the reduction may not exceed the amount of tax calculated in accordance with section 1 point 4 of the Personal Income Tax Act (i.e. the lump-sum tax on dividends and other revenues from a share in the profits of legal persons).

The legislator did not provide for a similar solution for the limited partner, i.e. the profit paid to the limited partner is subject to flat-rate income tax at a rate of 19%. It should be noted, however, that the bill provides for partial exemption for limited partners. Pursuant to Article 21 section 1 clause 51a of the planned amendment to the Personal Income Tax Act, 50% of the revenues obtained by the limited partner from participation in a limited partnership having its registered office or management board in the territory of Poland, up to PLN 60,000 per year, will not be subject to double taxation. In addition, Article 21 section 40 of the planned amendment to the Personal Income Tax Act indicates that the exemption described above applies to limited partners who are not (directly or through affiliated entities) members of the management board or partners in the company acting as the general partner.

Pursuant to Article 1 section 3 clause 1a of the planned amendment to the Corporate Income Tax Act, also some general partnerships will become corporate income tax payers (they will be subject to double taxation). The amendment applies to companies having their seat or management board in the territory of Poland, if the partners of the general partnership are not exclusively natural persons and at the same time the general partnership does not disclose the data specified by the legislator concerning persons gaining profits from that partnership, or if a change regarding entities entitled to participate in the profit of the general partnership is not conveyed to the tax authority within a specified time.