Dear All,

With reference to our meeting in Amsterdam I hasten to update you with respect to the most recent legislative changes and practical aspects of Polish tax legislation, which we believe may be seen as being of importance also for multinational companies, including your clients.

  1. Modifications of double tax treaties with Cyprus and Luxembourg

    Poland has modified its double tax treaties with Cyprus and Luxembourg. The key amendment relates to the introduction of real estate clauses to those treaties, according to which transactions on shares in companies holding directly or indirectly (through subsidiaries) real properties in Poland are subject to taxation in Poland (note that the amendment to the treaty with Luxembourg has not yet entered into force). Since the majority of real property vehicles in Poland have been controlled through Luxembourg-based holdings we may see the need for a transfer of such holding vehicles to more advantageous jurisdictions, in particular to the Netherlands.
  2. Partnerships limited by shares (pol. spółka komandytowo-akcyjna)

    Partnerships limited by shares are technically transparent vehicles from the CIT perspective. Further, on the grounds of the favorable resolution of the Polish Supreme Administrative Court of 2012, the shareholders of partnerships limited by shares are in practice exempt from CIT taxation in Poland until distribution of dividends. Therefore, as long as such partnerships are re-investing operational profits no CIT levy is incurred by limited partners (shareholders) of partnerships limited by shares. This scheme is currently frequently used by developers for reduction of CIT burden. Further, partnerships limited by shares are also used as vehicles allowing to achieve a tax neutral step up of value of real properties prior to their disposal to third-party investors.
  3. Taxation of partnerships

    According to the most recent proposal of the Polish Ministry of Finance (of February 2013) limited partnerships (pol. spółka komandytowa) and partnerships limited by shares (pol. spółka komandytowo-akcyjna) shall not be considered transparent vehicles from the CIT perspective as of January 2014. In turn, those partnerships are to be qualified as corporations for CIT purposes. Tax transparency shall be upheld in relation to general partnerships and civil law partnerships. Various restructuring models may be considered in order to adapt Polish business formed as limited partnerships and partnerships limited by shares in order to reduce the impact of the proposed CIT law amendments.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.