On 31 October 2016, a Bill on the amendment to the Personal Income Tax Act and the Corporate Income tax Act was submitted to the Sejm. The Bill provides, among others, for modified principles of taxation for investment funds, including the annulment of the existing CIT exemption for revenues generated by closed-end investment funds (FIZ). The Bill is now being considered further at the parliamentary stage.
As stipulated in the bill, the existing CIT exemption for entities such as investment funds and similar collective investment institutions (i.e. foreign funds) will be replaced with tax exemptions for revenues generated by opened-end investment funds and specialized opened-end investment funds that meet specific criteria (FIO and SFIO) from:
- Dividend and other revenues from participation in profits of legal persons
- Transfer of receivables, foreign currencies, shares (shares of stock) and other securities, including any derivative financial instruments and the exercising of any rights vested therein
As a result of the new exemption formula envisaged for such entities as FIO and SFIO, with the simultaneous annulment of the existing tax exemption for all the funds, the revenues of FIZ and those SFIO that operate based on the principles proper for FIZ will become subject to CIT at the rate of 19%. The 19% CIT will also apply to the revenues of foreign collective investment institutions the characteristics of which will correspond to the features of FIZ.
The amendments are scheduled to take effect as of 1 January 2017. The Bill does not provide for any transition period regulations. Hence, the modified rules of taxation will cover all the investment funds that operate in Poland, notwithstanding their date of origin.
Due to the fact that the abovementioned principles of taxation may be subject to change at the parliamentary stage, we will monitor its progress. In particular, it is possible that the Bill will be modified and FIZ used solely as investment vehicles will still benefit from CIT exemption, in opposition to FIZ created to reap tax benefits, which would be subject to taxation on the basis of the above principles.