Tax aspects of company transformation

Properly planned transformation of enterprises can bring notable profits:

• transformation may entail reduction of unnecessary costs of running business activity,
• it allows limiting the liability of members for obligations of the enterprise,
• It can also facilitate the implementation of a specific tax strategy.

We assist with

• preparing both the transformation plan and the organizational and legal structure of the new enterprise,
• implementing such a structure,
• providing full support and advice.

Partnerships

• Each partnership can be converted into another partnership or a company (eg. limited liability company or joint stock company). This also applies to transformation into a limited liability partnership, which is a separate taxpayer of corporate income tax (CIT).
• Each partnership can be converted into another partnership or a company (eg. limited liability company or joint stock company). This also applies to transformation into a limited liability partnership, which is a separate taxpayer of corporate income tax (CIT).
• Changing the legal form of a partnership into another partnership does not cause negative tax consequences. Partners still are taxpayers of personal income tax, and the partnership continues to be taxpayer of VAT. Furthermore, there is no need to close the company books.
• It is different when one converts partnership into company, because there is the problem of double taxation. Firstly, corporate income tax on company income, secondly the personal income tax on dividend received by shareholders.

The capital companies

• The transformation of a capital company into a partnership is much more complicated. First of all, the company must close its books and file an annual corporate income tax return.
• On the day of transformation, the company begins a new tax year and opens its books. A company ceases to be subject of income taxes, but their partners are. The result is that it is not possible to take into account loss which company incurred before transformation.
• On the day of transformation, any undivided profit of a company are transferred to the shareholders of a partnership. Such profit is deemed to be share in the profits of a legal person, which is taxed at the rate of 19%.
• It is worth mentioning that the transformation of a limited liability company into a limited partnership may also have an effect under the civil law transactions tax. Although this is a questionable issue, the majority of notaries collect this tax.
• There are no changes on VAT. A partnership is a taxpayer of it in the same way as all other companies. So this is an application of a “full continuation principle”.

Did you decide to open your company in Poland?

Do you represent a large corporation, mid-sized business or its your first business step here?

For each of the above situations, several issues are very important in the entire process of forming a business in Poland.

Is there anything we can help you with?

Should you wish to discuss your company formation issues further, please do not hesitate to contact us. CGO Legal is an experienced legal partner with whom the achievement of your goals will be faster, safer and more comfortable.