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Taxation of limited partnerships from 2021

 A distinctive feature of the limited partnership until recently was the specific taxation, which allowed reducing the double taxation. From 1 January 2021, limited partnerships will be corporate income tax (CIT) taxpayers. What does it mean?

 Unlike limited companies, partnerships and limited partnerships could have avoided the so-called double taxation of the income previously earned by the company. Until 2021, the income of the limited partnership was taxed only at the level of its partners. The introduction of new rules from 2021 will result in the income earned by a limited partnership being taxed at both the level of the company itself and its partners. Therefore, the limited partnership will pay CIT on the same terms as currently apply to the limited liability company, the joint stock company and  limited joint-stock partnership. The limited partnership will pay corporate income tax at the basic rate of 19% or preferential - 9%. At the same time, the annual revenue eligible for the preferential 9% CIT is increased from EUR 1,2 million to EUR 2 million. The partners, on the other hand, will pay tax on the profits received from the company.

The new amendment will apply to all limited partnerships, regardless of the amount of revenue received, the legal status of its partners, as well as the tax year. It is worth noting that limited partnerships whose tax year does not coincide with the calendar year will be obliged to close their accounts on the day preceding the date of obtaining the status of CIT taxpayer.

It is also possible to postpone the application of the new rules. Namely, partners of a limited partnership will be able to decide to apply the new rules not from 1 January 2021, but only from 1 May 2021, if they inform the tax authority of their decision by the end of 2020. If partners decide to tax under the new rules from 1 May 2021, then it will be necessary to close the accounts of the company on 30 April 2021.