Taxation of Partnerships Limited by Shares (SKA): Legislative Objectives, Application Issues and Assessment Under the EU Law

This paper deals with the tax implications of the recent tax law changes in respect to the Polish partnership limited by shares (‘SKA’). Despite a civil legal classification of the SKA as a partnership, the limited partners of SKA are treated similarly to shareholders of a limited liability company. The core of the law amendment was the introduction of taxation on two levels: firstly, the taxation of the income generated by the partnership itself and secondly, the taxation of the dividend paid out to its partners. With respect to the general partners of an SKA, the mechanism of double taxation avoidance was implemented in order to equalize their tax burden with the one borne by partners of other Polish partnerships. However, the application of the new tax provisions shows that this goal cannot always be achieved. The paper aims at a critical analysis of the new tax credit system related to general partners. The study highlights the practical limitations concerning the amended regulations and presents what are the reasons for the ‘defect’ legislation.