Dividends from a limited partnership may be exempt from CIT

In the case considered by the Director of the KIS, a joint-stock company is a limited partner of a limited partnership which obtained the status of a CIT taxpayer on 1 May 2021. The joint-stock company will be paid the profit generated by the limited partnership and an advance on future profit. A doubt has arisen as to whether, in such a case, it will be possible to benefit from the CIT exemption provided for in Article 22(4) of the CIT Act.

– It should be explained that in order to use the said exemption, it is crucial to fulfil the conditions specified in the act. With regard to profits generated and distributed by a limited partnership to a joint-stock company – limited partner from 1 May 2021, application of the exemption will be possible if, firstly, the limited partnership distributing the revenue from the participation constitutes a “company” and has its registered office and management board in Poland. Secondly, the acquirer of the revenue from participation in the profits of the limited partnership will be a limited partner – a company which is subject to income tax in Poland on all its income, regardless of where it is earned. Thirdly, the limited partner – the company will directly hold no less than 10% of shares in the capital of the company, where the term “share” also means: all the rights and obligations of a partner in the company. It should be added at this point that the exemption from taxation of dividends paid also applies in the event that the period of two years of continuous holding of shares (stocks) in a specified amount by a company receiving income (revenues) from a share in the profits of a legal person with its registered office or management board in Poland expires after the date of receipt of such income (revenues). Therefore, to distributions made before 1 May 2023. (where the two-year period calculated from 1 May 2021 has not yet lapsed) tax exemptions will also be conditionally applicable. And the last condition to benefit from the exemption is that the limited partner will not benefit from an exemption from income tax on its entire income, regardless of the source of its generation, which will be confirmed in a written statement obtained by the limited partnership from the entity receiving the dividend – explains Łukasz Kupryjańczyk, tax advisor, partner at Thedy & Partners.

In the analyzed case, these conditions were met, thus income from the payment by the limited partnership to the joint-stock company of profit and an advance on account of the anticipated profit will be eligible for CIT exemption.

Individual interpretation by the Director of the National Tax Information dated 28 September 2021, no. 0111-KDIB1-3.4010.313.2021.1.JKU.