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21 September 2017

Tax relief for CEFs in the context of income of controlled foreign companies - interpretation of tax authorities | SSW Tax Alert

Since 1 January 2017 new CIT regulations are in place, which provide for an exemption for income generated by closed-end investment funds (CEF), excluding the income categories indicated in the CIT Act such as:

  • income from participation in companies / organisational units without legal personality;
  • income from interest on loans extended to companies / organisational units without legal personality; or
  • income from interest on equity shares in such entities.

In this context we wish to bring to your attention the interpretation of the new regulations presented by the Director of the National Tax Information (KIS) as regards income generated by entities which are controlled foreign companies (CFC) with respect to a CEF.

According to the position of the Director of KIS, the income of such foreign companies allocated to CEFs as CIT payers are not covered by the tax exemption.

In our view the position of the Director of KIS is controversial and is not supported by legal regulations. Nevertheless, it is possible that the Director of KIS will uphold the presented interpretation in his individual tax rulings.

We wish to point out that to date, this controversial interpretation presented by the Director of KIS has not been subject to inspection by administrative courts.

For this reason, we encourage you to review the portfolios controlled or managed by your funds to verify whether the CEF portfolios include entities which may potentially or already constitute CFCs.

Should you be interested in or have any doubts regarding the above issues, we offer full support in the identification of potential tax risks and definition of methods to mitigate them.


Patrycja Goździowska, Partner, Tax Advisor

Tomasz Wickel, Partner, Attorney at Law, Tax Advisor

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