Liquidating a limited liability company is a multi-stage process that requires not only completing legal formalities but, above all, precise settlements with the tax authorities. Before the company can be finally deleted from the National Court Register (KRS), it must settle its liabilities and distribute any remaining assets to its partners.
At each of these stages, tax traps lurk, including CIT, PIT, VAT, and PCC. The situation is further complicated by conflicting court rulings. What should you watch out for to ensure your business closure doesn't result in a tax audit?
Tax schedule for company liquidation
Tax consequences plague entrepreneurs from the moment they decide to close their business until they file their final returns. The process can be divided into four key phases:
- Opening of liquidation: This occurs on the date the resolution to liquidate the company is adopted. This involves the obligation to prepare a financial statement as of that date and report the liquidation to the tax office.
- Termination of operations: Liquidators liquidate the company's assets. The sale of goods, machinery, or real estate generates the obligation to pay current income tax and VAT.
- Distribution of assets among partners: Whatever remains after creditors are paid goes to the shareholders. The transfer of these funds or assets is taxable as income to the partners.
- Closing the accounts: The final stage in which the financial statements are prepared as at the date of completion of the liquidation and the final tax returns are filed.
Corporate Income Tax (CIT) – the “Hidden Reserves” Trap
A company in liquidation is still a corporate income taxpayer. Therefore, it must pay tax on income earned from the sale of assets (e.g., real estate, equipment, or goods) during the liquidation process.
The most controversial situation, however, arises when a company does not sell its assets but transfers them in kind to its partners (e.g., by transferring real estate or receivables). Court case law has divided the two views.
Profiscal line: Income is always generated
In its judgment of 30 July 2025 (reference number II FSK 1422/22), the Supreme Administrative Court sided with the tax authorities. The court found that, pursuant to Article 14a, Section 1 of the Corporate Income Tax Act, the transfer of assets (in this case, receivables) to a shareholder as part of liquidation generates taxable income for the company. The purpose of the regulations is to tax so-called hidden reserves, i.e., increases in the value of assets, and to avoid optimization.
Pro-company line: It all depends on the company agreement
The Supreme Administrative Court presented a completely different, taxpayer-favorable position in its judgment of December 18, 2024 (reference number II FSK 423/23). The court stated that revenue for a company only arises when it settles an obligation with a non-cash benefit that was originally to be paid in cash.
If the partnership agreement clearly stipulated from the outset that the post-liquidation assets would be distributed in kind among the partners, the partners' claim was never monetary in nature. In such a scenario, the partnership would not recognize income.
Tax on the partner's side, exception for family foundations
The assets that go to the partner constitute his capital gains income.
Partners who are family foundations enjoy an exceptionally favorable situation. According to the interpretation of the Director of the National Tax Information Office of December 12, 2024 (0111-KDIB1-2.4010.639.2024.1.BD), the receipt of assets by a family foundation resulting from the liquidation of a limited liability company is treated as permitted business activity. This means that this income benefits from the corporate income tax exemption (pursuant to Article 6, Section 1, Item 25 of the Corporate Income Tax Act).
VAT and PCC – what else do you need to remember?
Income tax settlements aren't the end of the story. Liquidators must analyze operations for sales and property taxes.
VAT
If the company was an active VAT payer, liquidation imposes on it the obligation to settle this tax in two situations:
- When selling assets during liquidation.
- When transferring the remaining assets to the partners (this is treated as a free delivery of goods).
This requires a detailed analysis of rates, potential exemptions, and any necessary adjustments to input VAT deducted from past purchases of these components. At the end of the business, a VAT-Z form must be submitted to deregister the company from the VAT register.
PCC tax
The obligation to pay civil law transaction tax (PCC) occurs less frequently but is very expensive. It can arise, for example, during the division of property, when the settlement involves a contractual transfer of ownership of real estate or shares in other companies. In such cases, the rate is 1% or 2% of the market value of the transferred asset.
This article is for informational purposes only and does not constitute legal advice.
The law is current as of July 6, 2026.
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