Financial statements from limited partnerships in 2020 and 2021

On Sunday, 29 November 2020, the president undersigned an act of law introducing an income tax from legal entities named limited partnerships. The changes do not only affect tax issues, but they also impact financial reporting.  

Basically, limited partnerships will become CIT payers as soon as from 1 January 2021 with the assumption that they cannot however decide about postponing the application of the new regulations until 1 May 2021. In that case, a limited partnership will be obliged to close its financial records.

The legislator has allowed the combination of the ongoing year with four months of 2021 to be included in one financial year if the last day of the limited partnership’s financial year falls in the period from 31 December 2020 to 31 March 2021.

The decision about leaving the records open as at 31 December 2020 is an optional decision. This means that limited partnerships will have to decide if as at 31 December 2020 their records are to be closed and next if they are to be opened again as at 1 January 2021 and closed as at 30 April 2021, or if the partnerships prolong their financial year up to the period of 16 months.

One should emphasize that irrespective of this choice information will have to be obtained from financial records for business partners of natural persons as regards revenues and tax-deductible costs separately for the period from 1 January 2020 to 31 December 2020 and, later, for the period from 1 January 2021 to 30 April 2021 for the purpose of the correct settlement of PIT due from limited partners (natural persons). It would seem that the prolongation of financial year may be a simpler solution, but in fact it will cause the obligation to renegotiate the agreement with an expert auditor and, at times, the necessity to perform some stock-taking actions again. It will also give rise to the problem of comparability of the reported data in time.