Taxes in a Simple Joint Stock Company – how much will the company pay and how much will the partners pay?

Taxes in a Simple Joint Stock Company – how much will the company pay and how much will the partners pay? When deciding to set up or transform a business, entrepreneurs must take into account a whole range of facts which determine the legal regulations in terms of advantages, but also limitations of a given form of functioning of a company. The key issue in this respect will be to pay attention to the topics related to taxation of the chosen legal form, including the Simple Joint Stock Company. Simple Joint Stock Company – what tax is applicable to the company? A Simple Joint Stock Company, being a capital company, is subject to standard corporate income tax, i.e. to CIT (Corporate Income Tax). CIT mainly applies to limited liability companies (limited liability company, limited joint-stock partnership, joint-stock company and Simple Joint-Stock Company), but also to limited partnerships.

CIT rates in a Simple Joint Stock Company According to the provisions of the Corporate Income Tax Act, there are two CIT rates – a standard rate of 19%, as well as a lower rate of 9% – the reduced rate applies to small taxpayers, i.e. companies whose annual revenue for the preceding financial year did not exceed EUR 2 million. The EUR 2 million limit is treated as a gross amount, i.e. it also includes the value of value added tax (VAT) indicated on the company’s sales invoices. If the company conducts small-scale business activity, it is possible and very beneficial to use the preferential CIT rate of 9%, but it is crucial to note that this rate applies only to income from the company’s operating activity – for income from capital gains, the standard 19% CIT rate will apply.

Taxation of income of partners of a Simple Shareholding Company The case is not so simple when it comes to taxing the income of shareholders of a Simple Joint Stock Company. Pursuant to Article 30c of the Personal Income Tax (PIT) Act, dividends will be taxed with a flat-rate income tax of 19% of the income earned, but this applies only to shareholders as natural persons. This is so important because shareholders of a Simple Joint Stock Company may also be legal persons, not only natural persons. However, there is a provision in the Corporate Income Tax Act that dividends paid by the Company to other legal persons may be exempt from tax. The condition of such exemption is the possession of at least 10% of shares in the share capital of the Simple Joint Stock Company and a declaration that the legal person will hold these shares for at least 2 years. Summary A Simple Joint Stock Company as a fairly newly introduced form of conducting business activity enables many legal conveniences for shareholders, at the same time not imposing additional tax restrictions – the issue of taxation is very similar to that of a limited liability company and a limited partnership.