Consequences of disposal of an organized part of the enterprise
The definition of an organized part of an enterprise can be found in Art. 2 point 27e of the Act on tax on goods and services and art. 5a point 4 of the Personal Income Tax Act.This concept should be understood as organizationally and financially separated in an existing enterprise set of tangible and intangible components, including liabilities, intended for the implementation of specific tasks of an economic nature. Moreover, the set of these components could also constitute an independent enterprise performing the given activities. What are the consequences of selling an organized part of the enterprise?
Code concept of an organized part of an enterprise
In turn, to be able to use the definition of an enterprise, refer to Art. 55 of the Civil Code, which states that: “an enterprise is an organized group of intangible and tangible assets intended for running a business.
It includes in particular:
1) the designation individualising the enterprise or its separate parts (name of the enterprise);
2) ownership of real estate or movable property, including equipment, materials, goods and products, and other rights in rem to real estate or movable property;
3) rights arising from rental and lease agreements for real estate or movable property and the right to use real estate or movable property arising from other legal relationships;
4) claims, rights in securities and cash;
5) concessions, licenses and permits;
6) patents and other industrial property rights;
7) proprietary copyrights and property related rights;
8) business secrets;
9) books and documents related to running a business. "
In practice, an organizational separation may be the creation of internal units in the structure of the enterprise, such as a department, department, plant or branch.
On the other hand, the financial separation is evidenced by the fact that it is possible to assign revenues and costs, as well as receivables and liabilities, to an organized part of an enterprise.
Good to know!
Liabilities do not constitute an element of the enterprise under civil law. On the other hand, in the light of tax laws, they are part of an organized part of the enterprise. Conceptual discrepancies may have significant consequences in the valuation of an enterprise or its organized part.
Effects of disposal of an organized part of an enterprise in taxes
Pursuant to Art. 6 point 1 of the VAT Act, the provisions of this legal act do not apply to the sale of an enterprise or an organized part of an enterprise. It should be recognized that this type of transaction is not subject to tax on the basis of value added tax.
There is also the question of explaining the "disposal", which may be manifested in activities such as sale, donation, exchange or contribution in kind.
On the other hand, in terms of personal income tax, there are no separate provisions on taxation of the sale of an enterprise or an organized part of an enterprise, as is the case in the VAT Act. In practice, the sale should be treated as a contract the subject of which are individual assets related to the entrepreneur's business. Then art. 14 (2) (1) of that act, according to which such an event should be classified as income from business activity.
In turn, the disposal of an organized part of an enterprise may be subject to inheritance and donation tax. Generally, donations made on the territory of the Republic of Poland are subject to the provisions of this Act, while excluding income tax.