2025-05-19
Changing the legal form of a company can be an effective and legal tool for tax optimization
More and more entrepreneurs are considering transforming their general partnership (“spółka jawna”) into a limited partnership (“spółka komandytowa”) in Poland. Although both types of entities are subject to Polish CIT, the latter offers certain tax deductions on the partner-level. But could this change be seen as a tax avoidance scheme?
More and more entrepreneurs are considering transforming their general partnership (“spółka jawna”) into a limited partnership (“spółka komandytowa”) in Poland. Although both types of entities are subject to Polish CIT, the latter offers certain tax deductions on the partner-level. But could this change be seen as a tax avoidance scheme?
A recent ruling from the Head of the National Revenue Administration (reference DKP16.8082.12.2024, dated April 16, 2025) clarifies this issue. It confirms that changing the company’s legal form—even if motivated mainly by tax reasons—is not unlawful as long as it is driven by real and justified business purposes.
In the case analyzed, a general partnership subject to Polish corporate income tax (CIT) planned a transformation where several individuals and one legal entity would become general partners in the new limited partnership, with another legal entity acting as the limited partner. The reasons behind this change included facilitating family succession, unification of the legal form/structure across the groups, and reducing operational and tax costs.
The Head of the Revenue Administration pointed out that the tax benefits, such as lowering personal income tax arise from mechanisms provided by law (art. 30a(6a-6e) of the PIT Act and art. 22(1a-1e) of the CIT Act). This is not a violation of regulations but a legal tax optimization, constitutionally protected as the freedom to conduct business.
Importantly, the transformation is neither artificial nor abusive; it is economically justified and therefore does not constitute tax avoidance. The Head emphasized that taxpayers have the right to choose the business structure that enables legal tax optimization. Carrying out business activities in a form resulting in the highest possible tax burden was not the intended purpose of the changes introduced by the Polish lawmakers.
Takeaway?
If carefully planned and supported by genuine business reasons, changing the legal form of a company can be an effective and legal tool for tax optimization.
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