Draft amendments to the PIT and CIT laws; CIT taxation of a limited partnership and abolition of the abolition allowance

The proposed amendment assumes that limited partnerships and those general partnerships where income tax payers participating in the profits of such general partnerships are not disclosed, which results in the possibility of these entities evading income tax. Thus, the profits of a limited partnership would be taxed in the same way as for example limited liability company.

It is also planned to liquidate the so called „Liquidation”. abolition relief, i.e. Article 27g of the PIT Act. An abolition relief is a mechanism whereby a taxpayer who earns income abroad and has a tax residence in Poland can equalise the amount of tax due under the pro-rata credit method (the so-called „tax credit”) with the tax that would have been due if the exemption method with progression had applied in the situation. It is particularly advantageous in a situation where a taxpayer – a resident of the Republic of Poland only earns income abroad, then, according to the method of exemption with progression, he is exempt from paying income tax in Poland.

The amendment also assumes, among others Extension of the documentation obligation to prepare transfer pricing documentation with tax havens, elimination of unrealistic decrease in depreciation values and the obligation to make public the so-called „transfer pricing” tax policy.

The planned changes are to enter into force at the beginning of 2021.