Income derived from limited partnerships and general partnerships exempt from CIT

by Agnieszka Gliwińska

22 December 2021

The Minister for Finance issued on 15 December 2021 a general tax ruling (file no. DD5.8203.2.2021) in which he cleared doubts concerning CIT-exemption of income earned from participation in profits of:

• Polish limited partnerships and
• Polish general partnerships, which are CIT payers.

The ruling concerns CIT-taxable companies being limited partners in a limited partnership and partners in a general partnership. The Minister ruled that the CIT exemption regulated in Article 22(4) of the CIT Act applies also to profits distributed to those partners.
 
The exemption applies to income from participation in profits of a limited partnership or general partnership earned since the day when these partnerships became subject to CIT.
 
To enjoy the CIT exemption, the conditions described in the provision must be met. As one of the conditions raised doubts too – the method of calculation of the 2-year period of holding "not less than 10% of company's shares" – the Minister has cleared that too.
 
According to the ruling, when assessing whether or not the conditions are met, the period preceding the day when the limited partnership or general partnership obtained the status of a CIT payer should also be included in the calculation. And if the limited partnership has been transformed into a general partnership or a general partnership into a limited partnership – also the period preceding the transformation should be taken into account.
 
The Minister confirmed that the exemption does not apply to general partners. In such a case, the CIT Act provides for another mechanism to eliminate "double" taxation of the income of such a partner, as stipulated in Article 22(1a–1e) of the Act.
 
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