Ruling description

The Provincial Administrative Court in Gdańsk in its judgment of July 9, 2014 (case no. I SA/Gd 650/14) and the Provincial Administrative Court in Bydgoszcz in its judgment of July 15, 2014 (case no. I SA/Bd 694/14) ruled that there was no reason to claim that a limited joint- stock partnership having at least one natural person (individual) among its partners was required to adopt a financial year that is identical to the calendar year.

Comment

Since the beginning of the year, the tax authorities have consistently held in their tax rulings that limited joint-stock partnerships having at least one natural person among their partners are not permitted to adopt a financial year other than the calendar year. In their opinion,  such  limited  joint-stock  partnerships  ought  to apply  the  amended  Corporate  Income  Tax  regulations as of January 1, 2014 (CIT), whereby they are treated as CIT payers. Apart from being unsupported by the law, the view presented by the tax authorities   runs counter to the applicable transitional  regulation (Article 4 Sections 1 and 2 of the Act, dated November 8, 2013, Amending the Corporate Income Tax, the Personal Income Tax Act and the Tonnage Tax Act). Under the transitional regulation, the amended CIT rules would have  applied  to  the  limited  joint-stock  partnership  under consideration since the beginning of its financial year, that is to say after December 31, 2013. The regulation enabled  limited  joint-stock  partnerships  to  shift  the effective date of the applicability of amended CIT rules to the end of that financial year if their financial year began before 2013 and ended after January 1, 2014 (unless the partnership came into being or changed its financial year after the effective date of the transitional regulation). Numerous limited joint-stock partnerships seized this opportunity and adopted a financial year that was different from the calendar year before the transitional regulation went into effect.

Despite that, the tax authorities chose to ignore the wording of the transitional regulation and issued tax rulings based on the specious reasoning that, since the tax year of any natural person is the same as the calendar year, the financial year of a limited joint-stock partnership having a natural person or natural persons among its partners must also be the same as the calendar year. Such partnerships classify as CIT taxpayers as of January 1, 2014, the authorities opined, regardless of the type of financial year which they chose to adopt in their articles.

The view offered by the tax authorities is pro-fiscal in  the extreme, unsupported by the law and, as such, it was rightly contested in the court judgments referred to above. We expect that courts will remain consistent in similar cases and rule in favor of taxpayers.