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Taxation of close-end investment funds from 01 January 2017


On 29 November 2016, an amendment to the provisions of the Personal Income Tax Act, Corporate Income Tax Act and the Act – General Tax Code (Journal of Laws of 2016, item 1926; the “Amendment”) was announced. The part of the provisions of the Amendment concerning taxation of close-end investment funds and foreign close-end collective investment schemes comes into force on 01 January 2017.

Under the provisions of the Amendment, from 01 January 2017 onwards, close-end investment funds (CEIF) and foreign close-end collective investment schemes with their registered office in other Member State than Poland or in other country belonging to the European Economic Area (the “Polish and Foreign CEIF”) will be subject to taxation on the basis of income listed in the CIT Act.

As stipulated by the provisions of the Amendment, income (revenue) of the Polish and Foreign CEIF is exempt from CIT, with the exclusion of income (revenue) from:

  1. a share in a company without a legal status or other organisational units without a legal status with their registered office or the Management Board in Poland or other country where the entity is not a legal person and is not subject to taxation in this country on the basis of its entire income (“Transparent Company”),

  2. interest on loans granted to the Transparent Company and from its other liabilities towards the CEIF,

  3. interest on equity interest in the Transparent Company,

  4. donations or other free or partially free benefits provided by the Transparent Company,

  5. interest (discount) on securities issued by the Transparent Companies,

  6. sale of securities issued by the Transparent Companies.

In case of a foreign CEIF, application of the exemption is conditional on the existence of legal grounds for the Polish tax authority’s obtaining information about a foreign CEIF from the tax authority of the country of its registered office. Polish entities paying amounts due on account of interest, royalties and dividends to the foreign CEIF will be able to exempt paid income from CIT, if the foreign CEIF:

  1. presents them with its certificate of residence, and

  2. submits a written declaration that it is the beneficial owner of paid amounts due and meets the conditions of application of the exemptions.

The value of assets received by CEIF, in return for which CEIF will assign units or investment certificates to a fund participant will not be recognised as revenue of CEIF. In turn, the costs of distributions made by CEIF to its fund participant on account of: (1) repurchase of units, (2) redemption of investment certificates, (3) current distributions of profits provided for in the articles of association, will not be deductible expenses.

It should be pointed out that the main purpose of the Amendment is the elimination of structures in which the Polish and Foreign CEIF participate with use of fiscally transparent entities, utilised for tax optimisation of taxpayers’ profits generated from the current business activity. Such an activity is in contradiction with the fundamental purpose of establishing the tax exemption of CEIF, that is exemption from taxation of taxpayers’ investment activity conducted through CEIF.