The first reading of the Bill on the amendment of the Personal Income Tax Act and the Corporate Income Tax Act, which was submitted to the Sejm on 31 October 2016, took place in the Sejm on 4 November 2016. Among others, the Bill seeks to modify the principles of taxation for investment funds, including the annulment of the existing CIT exemption for revenues generated by closed-end investment funds (FIZ). After the first reading, the Bill was passed for a work in the Public Finance Committee.

As stipulated in the Bill, the existing CIT exemption for entities such as investment funds and similar collective investment institutions (i.e. foreign funds) will be replaced with tax exemptions for revenues generated by opened-end investment funds and specialized opened-end investment funds that meet specific criteria (FIO and SFIO) from:

  • Interest.
  • Dividend and other revenues from participation in the profits of legal persons.
  • Transfer of receivables, foreign currencies, shares (shares of stock) and other securities, including any derivative financial instruments and the exercising of any rights vested therein.

As a result of the new exemption formula envisaged for such entities as FIO and SFIO, with the simultaneous annulment of the existing tax exemption for all the funds, the revenues of a FIZ and those of a SFIO that operate based on the principles proper to a FIZ will become subject to CIT at the rate of 19%. The 19% CIT will also apply to the revenues of foreign collective investment institutions the characteristics of which will correspond to the features of FIZ.

The amendments are scheduled to take effect as of 1 January 2017. The Bill does not provide for any transition periods. Hence, the modified rules of taxation will cover all the investment funds that operate in Poland, notwithstanding their date of origin.

On the session of the Public Finance Committee, on 4 November 2016, the discussion took place, during which the Financial Supervision Authority, the National Bank of Poland and the government were asked to state their positions in relation to the Bill. The resumption of the Commission of Public Finance is scheduled for 14 November 2016.

At the current stage, it is possible that the Bill will be modified and FIZes used solely as investment vehicles will still benefit from CIT exemption, in opposition to FIZes created to reap tax benefits, which would be subject to taxation on the basis of the above principles.

Due to the fact that the abovementioned principles of taxation may be subject to change as the Bill progresses further through Parliament, we will monitor developments as they arise.

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