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Conversion of a limited liability company into a limited partnership in view of the transfer tax


There is still a controversy about transfer tax on the conversion of a Polish limited liability company into a limited partnership. This is because according to Article 2(6)(b) of the Transfer Tax Act the conversion of a capital company into another capital company is excluded from taxation.


Limited partnership in Polish and EU law

The controversies over the transfer tax consequences of the conversion of a company into a partnership arise mainly from differences between Polish law and Community law as regards the classification of the limited partnership. Pursuant to Polish legislation, a limited partnership is a partnership (Article 1a(1)(1) of the Transfer Tax Act and Article 4(1)(1) of the Polish Code of Commercial Companies). Pursuant to Community law, a limited partnership for the purposes of capital duty (such as transfer tax) should be treated as a capital company (Article 3(1)(b) and (c) and Article (3)2 of Directive 69/335/EEC and Article 2(1)(b) and (c) and Article 2 of Directive 2008/7/EC). 

Polish tax authorities take the view that limited partnerships should be treated for transfer tax purposes as partnerships and, as a consequence, the aforementioned inclusion will not apply to the conversion of a capital company into a partnership.

Limited partnership vs capital company

Tax authorities stuck to their approach also after the judgment issued by the Provincial Administrative Court (PAC) in Warsaw on 29 January 2016 (file no. VIII SA/Wa 363/15), which says that the conversion of a limited liability company into a limited partnership is not subject to transfer tax. The court stated that, for the purposes of Directive 2008/7/EC, a capital company means any company, firm, enterprise, association or legal person that meets the following requirements jointly:


  1. operates for profit;
  2. its members have the right to dispose of their shares to third parties without prior authorisation;
  3. its members are only responsible for its debts up to the amount represented by their shares. 

In the PAC's opinion, the Polish limited partnership meets all of the above-mentioned conditions. Consequently, this effectively excludes restructuring processes involving limited partnerships from transfer tax.  

The Supreme Administrative Court (SAC) considered the transfer tax obligation with respect to the transformation of a capital company into a general partnership. According to the resolution of the seven-judge panel of the SAC of 15 May 2017 (file no. II FPS 1/17), transfer tax in terms of Article 1(3)(3) read together with Article 1(1)(1)(k) of the Transfer Tax Act of 9 September 2000 (Journal of Laws of 2007, No. 68, Item 450 as amended) applies to legal transactions involving the conversion of a joint-stock company (S.A.) into a general partnership.

As this resolution is binding on administrative courts, the subsequent administrative court rulings have followed suit. For example, the PAC in Poznan found in its judgment of 28 June 2017 (file no. I SA/Po 84/17) that “(...) in view of the aforementioned considerations it should be concluded that the ruling authority has correctly assumed that, contrary to what the claimant has contended, a limited partnership is actually not a capital company in the meaning of Directive 2008/7/EC and, therefore, the Company’s transformation into a limited partnership will be subject to transfer tax (...)”.

Consequently, the currently prevailing opinion is that limited partnerships are not capital companies in terms of Directive 2008/7/EC. This is in accord with the PAC resolution and is shared by both the Head of the National Tax Information Service (e.g. advance tax ruling of 7 August 2017 no. 0111-KDIB4.4014.187.2017.1.PM) and administrative courts. Transformation of a limited liability company into a limited partnership is therefore not excluded from transfer tax.

Transfer tax must be paid on the proceeds which arise from the transformation of a capital company (limited liability company or joint stock company) into a limited partnership and which correspond to the portion of the contribution made to the limited partnership in the amount of the difference between the value of the total contributed assets and their previously taxed value (value of the capital of the limited liability company or joint-stock company previously subject to transfer tax).


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Maciej Wilczkiewicz

Tax adviser (Poland)

Associate Partner

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