Registered partnerships with their registered office or management in Poland are CIT taxpayers if their partners include legal persons as well as individuals. As a result, tax may apply both at partnership and partner level. A partnership can obtain exemption from CIT if it discloses details of the persons entitled to share in its profits to the tax authority within the applicable deadline.
How should the information be filed?
The information is filed on form CIT-15J with CIT/JW attachments, with both the head of the tax office responsible for the registered partnership’s registered office and the head of the tax office responsible for each taxpayer earning income from it. The form specifies:
1) the full name or business name, residential or registered office address, tax identification number (NIP) and extent of the entitlement to the registered partnership’s profits of:
– a partner who is a taxpayer earning income from the registered partnership;
– a taxpayer who is not a partner but earns income from the registered partnership;
2) the name, address and NIP of any entity that is not an income tax taxpayer through which the taxpayer earns income from the registered partnership, and the extent of the taxpayer’s entitlement to that entity’s profits.
Accordingly, the partnership reports all taxpayers receiving profits directly or indirectly. Their details are entered in CIT/JW attachments. The number of attachments corresponds to the total number of entities deriving profits from the partnership. Section C of CIT/JW contains the details of a taxpayer entitled to the registered partnership’s profits through another entity that is not a CIT taxpayer, such as a limited partnership. If there are more such entities, section D must also be completed. A criticism of this requirement is that obtaining the necessary details may be difficult where partners are legal entities established in a jurisdiction outside Poland, because this information is not public in every country.
The partnership was required to submit its first information return by 1 February 2021, as the statutory deadline of 31 January 2021 fell on a Sunday, reflecting the position on:
– 1 January 2021, for a partnership that began operating before that date;
– the date operations began, for a partnership that started operating between 1 and 31 January 2021.
Moreover, if the composition of taxpayers changed before the information was filed, the first update was due by 1 February 2021, unless the applicable filing deadline fell later.
A registered partnership must update the information within 14 days of any change in the composition of taxpayers. Failure to update it will also result in the partnership becoming a CIT taxpayer.
Registered partnerships starting operations after 31 January 2021 should file the information before the beginning of their first financial year. This is problematic because partnerships begin operating when they are registered in the Polish National Court Register (KRS). Polish law does not recognise a registered partnership ‘in formation’, so before registration there is no entity authorised to file information with the tax authority. In its latest position, the Ministry of Finance proposes filing CIT-15J between registration and the making of contributions and opening of the accounting books. It argues that, under the Accounting Act, the date business begins, and therefore the date the books are opened, is the date of the first event having financial or asset-related consequences.
Partnerships undergoing conversion
In recent months, many limited partnerships have begun converting into registered partnerships. As noted above, a registered partnership formed before 31 January 2021 should have complied with the disclosure requirement. A converted partnership beginning operations after 31 January 2021 may continue its existing financial year. It will become a CIT taxpayer in the financial year following the year of conversion.
The partnership as a CIT taxpayer
If the information is not filed as required, the registered partnership becomes a CIT taxpayer on 1 February 2021, on the date it starts operating, or on the date the composition of taxpayers changes, as applicable. Its first tax year runs from the date it acquires that status to the end of its chosen financial year. Before acquiring that status, it should close its accounting books and prepare financial statements as at the preceding day. It should also separately identify within its basic capital the profits earned while it was not a taxpayer, if those profits have not been distributed among the partners. The partnership retains its status until liquidation or removal from the business register.
The current standard CIT rate is 19% of the tax base for revenue or income other than capital gains. If the partnership’s gross sales revenue, including VAT due, for the previous financial year did not or will not exceed EUR 2,000,000, it will qualify for the 9% CIT rate. Subject to exceptions, the reduced rate is available only to small taxpayers or new taxpayers in their first year of operation.
Finally, another change affects effective filing of CIT-15J information. From 1 January 2021, the jurisdiction of most Polish tax offices changed. The First Mazovian Tax Office in Warsaw handles taxpayers with annual net revenue or turnover exceeding EUR 50 million. Specialised tax offices handle taxpayers with annual net revenue or turnover between EUR 3 million and EUR 50 million, while ordinary tax offices handle smaller entities. Filing with the wrong office may be treated by the tax authority as a failure to meet the disclosure obligation. Before preparing the documents, it is therefore worth checking whether the tax office responsible for the partnership has changed.
