A sole trader converting the business into a spółka z ograniczoną odpowiedzialnością (sp. z o.o.), the Polish limited liability company, usually asks one question: what does this cost in tax? On the conversion date, as a rule, nothing — and that is the least important part of the answer. A conversion is not a taxable event; it is a change of regime. From the date of registration the same business generates income in the hands of a different taxpayer, under different rules, and the route by which money reaches the owner now requires a legal title that did not exist before. The decisions that determine the consequences are taken before the conversion date.
The Commercial Companies Code route and two paths to a company
The conversion of a sole trader is a separate institution of the Commercial Companies Code (Kodeks spółek handlowych, the CCC), not a variant of a contribution in kind — and that distinction drives every tax consequence that follows.
The basis is Article 551 § 5 (art. 551 § 5) of the CCC, and the procedure is governed by Articles 584(1)–584(13) (art. 584(1)–584(13)) of the CCC: a conversion plan in the form of a notarial deed; annexes comprising the draft conversion statement, the draft articles of association, a valuation of assets and liabilities and financial statements prepared for the purposes of the conversion; an opinion of a statutory auditor appointed by the registry court; and finally registration of the company and removal of the sole trader from the CEIDG business register (Article 584(5) of the CCC). The conversion date is the date of registration, not the date the deed is signed or the application filed (Article 584(1) of the CCC). If the sole trader does not keep accounting books, the statements prepared for the conversion are based on a summary of the entries in the tax revenue and expense ledger (podatkowa księga przychodów i rozchodów), other registers and a physical inventory (Article 584(7) § 3 of the CCC).
The Director of the National Revenue Information Service (Dyrektor Krajowej Informacji Skarbowej, the Director of the KIS) captured the nature of the transaction in an individual tax ruling of 11 July 2025, no. 0114-KDIP1-1.4012.249.2025.2.EW: "the conversion (…) does not result in the liquidation of the business activity you carry on, but only in a change of the form in which that activity will continue to be carried on" (translation by the author).
Settle the choice between the Commercial Companies Code route and a contribution in kind of the enterprise at the outset. Both routes end in a sp. z o.o., but they differ in when the assets pass, what becomes of administrative decisions, how far succession reaches and whether the lump-sum corporate income tax (Estonian CIT) is available.
| Criterion | Conversion under the Commercial Companies Code | Contribution in kind of the enterprise to a company | Legal basis |
|---|---|---|---|
| Nature of the transaction | Change of legal form of the same enterprise | Contribution in kind in exchange for shares | Article 551 § 5 and Article 584(1) of the CCC; Article 158 of the CCC |
| Transfer of assets | By operation of law, on registration of the company | Transfer of individual assets, each in the form required for it | Article 584(1) of the CCC; Articles 55(1) and 75(1) of the Civil Code |
| Tax succession | Succession to the sole trader's rights; liabilities stay with the natural person | No general succession on a contribution to a capital company | Article 93a § 4 and § 5 of the Tax Ordinance |
| Permits and licences | The company remains their holder unless a statute or the decision provides otherwise | No general rule on the transfer of administrative decisions | Article 584(2) § 2 of the CCC |
| Examination of asset values | The plan must be examined by an auditor appointed by the court | In a sp. z o.o. there is no statutory examination of the contribution; in a spółka akcyjna (S.A.), the Polish joint-stock company, the founders' report is examined | Article 584(5)(1) and Article 584(8) of the CCC; Articles 158 and 175 of the CCC; Article 312 of the CCC |
| VAT | Outside the scope of the tax — neither a supply of goods nor a supply of services | Outside the scope of the Act, with the adjustment continued by the acquirer | Article 5(1)(1) and Articles 7 and 8 of the VAT Act; Article 6(1) and Article 91(9) of the VAT Act |
| Initial value | The value from the sole trader's schedule and registers, with the method and the charges carried over | Values carried over from the contributor's registers for assets recorded there | Article 16g(1)(4b) and Article 16h(3d) in conjunction with Article 16h(3) of the CIT Act; Article 16g(9) and (10a) and Article 16h(3) and (3a) of the CIT Act |
| Lump-sum corporate income tax | The list of exclusions does not mention the conversion of a sole trader | A company to which an enterprise worth more than EUR 10,000 has been contributed is excluded in the year of its formation and in the following year, for not less than 24 months | Article 28k(1) of the CIT Act; Article 28k(1)(5)(c) of the CIT Act |
| PCC | The articles of association of the converted company; the base is the share capital, the rate is 0.5% | Formation of the company and the capital increase are assessed separately; the exclusion covers an enterprise of a capital company | Article 1(1)(1)(k), Article 6(9) and Article 7(1)(9) of the PCC Act; Article 2(6) of the PCC Act |
| Liability for the past | The natural person is jointly and severally liable with the company for 3 years | The acquirer is jointly and severally liable with the transferor up to the value of the enterprise | Article 584(13) of the CCC and Article 112b of the Tax Ordinance; Article 55(4) of the Civil Code and Article 112 of the Tax Ordinance |
Succession: broad under the Code, narrow under the Tax Ordinance
The company takes over all the sole trader's civil-law rights and obligations, but in tax law it succeeds only to his rights — not to his liabilities.
Under the Commercial Companies Code the company holds all the rights and obligations of the sole trader and remains the holder of permits, licences and reliefs (Article 584(2) § 1 and § 2 of the CCC). Article 93a § 4 (art. 93a § 4) of the Tax Ordinance (Ordynacja podatkowa) narrows this considerably: the company succeeds to those rights of the sole trader provided for in tax law that relate to the business carried on, except for rights that cannot be continued under the rules on the taxation of capital companies.
The authority explained the difference directly in the ruling cited above, no. 0114-KDIP1-1.4012.249.2025.2.EW: "as a result of the conversion of a sole trader who is a natural person into a single-member capital company, full tax succession does not occur, because it does not cover liabilities, only rights".
Three consequences follow. VAT and PIT arrears from before the registration date remain liabilities of the natural person. Entitlements that a capital company by its nature cannot exercise expire with the former legal form. Administrative decisions pass only within the limits of Article 584(2) § 2 of the CCC — so review every permit, licence and grant decision individually before you sign the conversion plan.
The sole trader's PIT position on the conversion date
The conversion itself creates no revenue, but it closes the sole trader's tax accounts and fixes values that will operate for years.
As at the conversion date you draw up a schedule of assets (Article 24(3f) (art. 24 ust. 3f) of the Personal Income Tax Act (ustawa o podatku dochodowym od osób fizycznych, the PIT Act)), account for revenue and costs up to the day preceding the registration date and — where the tax revenue and expense ledger is kept — assess the stocktaking obligations and the effect of the stocktaking difference on income. The schedule is not a formality: it fixes the tax-deductible cost on a future disposal of the shares (Article 22(1ł) of the PIT Act) and the value of the assets on the company's side. The undepreciated value of fixed assets is not lost — it passes into the company's registers and continues to be written off.
Funds generated before the conversion are a separate issue. If they are to reach the owner after the registration date, decide before that date whether they remain part of the company's capital or constitute a liability of the company to the natural person. The fact that the income was already taxed under PIT does not exempt the later payment out of the company — what governs is the legal title to the payment, not the description on the transfer or the analytics of the supplementary capital account.
CIT in the company: initial value, depreciation, losses
The company carries over the sole trader's tax values, but it does not take over his loss and it does not step the assets up to market value.
The value of the assets is determined from the schedule drawn up under the PIT rules as at the conversion date (Article 15(1w) (art. 15 ust. 1w) of the Corporate Income Tax Act (ustawa o podatku dochodowym od osób prawnych, the CIT Act)), and on a disposal for consideration the deductible cost is the initial value recorded in the company's registers under Article 16g(1)(4b), less the total depreciation charges (Article 15(1x) of the CIT Act). The company continues the depreciation method and takes into account the charges made by the sole trader (Article 16h(3d) in conjunction with Article 16h(3) of the CIT Act). The loss of the sole trader being converted is not taken into account in determining the company's income; the exception covers only the conversion of one company into another company (Article 7(3)(4) of the CIT Act). The 9% rate is unavailable in the year in which the company starts business and in the year immediately following (Article 19(1a)(2) of the CIT Act).
The carry-over also extends to items accounted for over time. In an individual tax ruling of the Director of the KIS of 30 May 2025, no. 0114-KDIP2-2.4010.169.2025.1.RK/AS, the authority held that "the converted company may include in its tax-deductible costs (…) costs/expenses incurred by the sole trader (…) before the conversion date, recorded in that sole trader's accounting registers, but which fall to be accounted for (deducted) as a tax-deductible cost for corporate income tax purposes only after the conversion date".
Agree a single schedule of accounting, tax and register values with the accounting team before the plan is drawn up — a discrepancy that surfaces after registration means correcting the tax accounts of both parties.
VAT and the transition around the registration date
The conversion is neutral for VAT, but the few days around the registration date produce more documentation errors than any other part of the project.
A change of legal form is neither a supply of goods for consideration nor a supply of services for consideration, and does not fall within Article 5(1) (art. 5 ust. 1) of the VAT Act (ustawa o podatku od towarów i usług). Nor is it a cessation of taxable activity, so no obligation arises to take the physical inventory under Article 14(5) of that Act, and no obligation arises to tax goods that were not supplied on after their acquisition. The conditions for an input tax adjustment under Articles 90a and 91 of the VAT Act are likewise not met. All of these points were decided in the ruling cited above, no. 0114-KDIP1-1.4012.249.2025.2.EW.
The problem lies elsewhere. The company receives its own tax identification number (NIP), so from the registration date it documents sales under its own details, while earlier events have to be classified by the date of the transaction and by the entity that carried it out. Purchase invoices must identify the actual purchaser; an error in naming a party to the transaction is corrected by the issuer by way of a corrective invoice (Article 106j of the VAT Act) — Article 106k, on corrective notes, has been repealed as at the state of the law adopted here. Before the registration date, prepare the VAT-R and NIP-8 filings, the bank accounts together with their notification to the white list of VAT taxpayers, the cash registers, the authorisations in KSeF (the National e-Invoicing System) and the UPL-1 and PPS-1 powers of attorney.
PCC on the articles of association of the converted company
The conversion is neutral for income tax purposes, but it is not free — the company's articles of association are subject to the tax on civil law transactions.
What is taxed is the articles of association of the converted company (Article 1(1)(1)(k) (art. 1 ust. 1 pkt 1 lit. k) of the Tax on Civil Law Transactions Act (ustawa o podatku od czynności cywilnoprawnych, the PCC Act)); the base is the share capital, less the deductions in Article 6(9) of that Act; and the rate is 0.5% (Article 7(1)(9)). Any excess of asset value allocated to supplementary capital does not increase the base, and the notary acts as remitter of the tax. The prosta spółka akcyjna (P.S.A.), the Polish simple joint-stock company, does not fall within the definition of a capital company in Article 1a(2) of the PCC Act, so this rule does not apply directly to its articles of association or to its share capital.
The amount of the share capital is therefore a decision with a tax dimension, taken when the draft articles of association are prepared. Budget for PCC alongside the notarial fee, the court fees and the auditor's remuneration.
Estonian CIT: the dispute over the status of a taxpayer starting business activity
This is the only area of a conversion where the position of the tax authority and that of the courts have diverged far enough that the outcome now depends on whether you hold a ruling of your own.
Article 28j(2) of the CIT Act is what matters: for a taxpayer starting business activity, the revenue-structure condition is treated as met in the first year, and the employment condition does not apply in the year business starts or in the two following years, subject to an obligation to increase employment each year from the second year onwards. Article 28o(1)(1) of that Act provides a 10% rate for a small taxpayer and for a taxpayer starting business activity. What the provisions do not say also matters: the list of exclusions in Article 28k(1) of the CIT Act does not mention the conversion of a sole trader into a capital company.
Practice went in two opposite directions one day apart. In an individual tax ruling of the Director of the KIS of 16 June 2025, no. 0111-KDIB1-3.4010.302.2025.1.ZK, the authority held the taxpayer's position to be incorrect: "a sp. z o.o. that has arisen from the conversion of a sole trader's business is not a taxpayer starting business activity. Accordingly, Article 28j(2) will not apply to your Company". The same authority decided the opposite way in a ruling of 15 June 2025, no. 0111-KDIB1-2.4010.591.2023.11.MK, issued following the judgment of the Provincial Administrative Court in Wrocław (Wojewódzki Sąd Administracyjny) of 4 July 2024, case ref. I SA/Wr 105/24, and the judgment of the Supreme Administrative Court (Naczelny Sąd Administracyjny) of 11 March 2025, case ref. II FSK 1412/24, dismissing the authority's cassation appeal: "I take into account the legal assessment and the procedural directions expressed by the Provincial Administrative Court in Wrocław and by the Supreme Administrative Court (…); I find that the position you presented in the application is correct". The argument underlying that line is that a sole trader does not carry on business activity within the meaning of the CIT Act, and that carrying it on in that sense begins only on the conversion date.
A second route to the 10% rate runs independently of this dispute. In a ruling of 8 December 2025, no. 0111-KDIB1-3.4010.656.2025.2.AN, the Director of the KIS confirmed that "as a small taxpayer the sp. z o.o., having elected taxation under the lump-sum corporate income tax, will be entitled to apply (…) the 10% lump-sum rate referred to in Article 28o(1)(1) of the CIT Act".
In our view the position is as follows. If the company meets the small taxpayer threshold in Article 4a(10) of the CIT Act, it reaches the 10% rate without entering the dispute over the status of an entity starting business activity. If it does not meet that threshold, or if the employment condition in Article 28j(1)(3) matters to it, apply for a ruling before you file the notification electing the lump-sum regime — the deadline in Article 28j(1)(7) expires at the end of the first month of the first year of lump-sum taxation. Whichever route you take, calculate the initial adjustment and any income on conversion under Article 7aa of the CIT Act; how far they apply depends on whether the sole trader determined a net financial result or kept only the tax revenue and expense ledger.
Liability for obligations arising before the conversion
Moving into a company does not end the sole trader's personal liability for the past — it only changes who is liable for obligations arising after the registration date.
The natural person is jointly and severally liable with the company for obligations connected with the business carried on that arose before the conversion date, for three years from that date (Article 584(13) of the CCC). In parallel, the company is liable with all its assets, jointly and severally with the natural person, for the sole trader's tax arrears that arose up to the conversion date (Article 112b of the Tax Ordinance), and the tax authority rules on third-party liability by way of a decision (Article 108 § 1 of the Tax Ordinance).
The two regimes run in opposite directions and both have to be taken into account. Describe the items still open as at the registration date — disputed invoices, audits in progress, JPK corrections — and assign each of them to a specific party before the conversion.
The most common mistake
The most common mistake is to begin the notarial and registration steps before deciding what happens to the leases, loans, grants, permits and account numbers — on the assumption that everything passes automatically.
Article 584(2) § 1 and § 2 of the CCC provides for the continuity of rights and obligations and for the company to remain the holder of permits and licences, but it reserves exceptions arising from a statute or from the decision itself. Commercial contracts, by contrast, are governed by their own terms: leases, loans, factoring agreements and funding agreements regularly contain change of control clauses, prohibitions on assignment, information duties and termination rights triggered by a change in the debtor's legal form. A change of bank accounts requires the new numbers to be notified to the white list before counterparties make their first transfer to the company.
Before the plan is signed, build a matrix of contracts and decisions in four categories: continuing with no action, requiring notification, requiring consent, requiring an amendment. Assign a deadline and an owner to each item, and assemble the documents on which consent depends before the KRS application is filed.
Summary
- Establish the accounting, tax and register values in a single schedule before the plan is drawn up — the schedule under Article 24(3f) of the PIT Act fixes the initial value in the company and the deductible cost on a future disposal of the shares.
- Assume that tax succession covers rights and not liabilities, and assign the items still open from before the registration date to the natural person.
- Decide the status of funds generated before the conversion and document the legal title to every later payment.
- If you plan to use the lump-sum corporate income tax, check the small taxpayer threshold first; if you rely on the status of a taxpayer starting business activity, apply for a ruling before the deadline for notifying the election of the lump-sum regime.
- Close out the review of contracts, administrative decisions, bank accounts and system authorisations before the date of registration.
Sources cited
All quotations from Polish-language sources — statutes, tax rulings and court judgments — are given here in the author's translation; the Polish wording is authoritative.
- Individual tax ruling of the Director of the National Revenue Information Service of 15 June 2025, no. 0111-KDIB1-2.4010.591.2023.11.MK — a sp. z o.o. arising from the conversion of a sole trader's business as a taxpayer starting business activity within the meaning of Article 28j(2) of the CIT Act; the taxpayer's position held to be correct. The ruling was issued following a court judgment; the authority dispensed with the legal reasoning for its assessment under Article 14c § 1 of the Tax Ordinance, so the passage quoted comes from the part of the document giving effect to the judgments. Date of issue per the document metadata: 15 June 2025; date of publication: 26 June 2025. https://eureka.mf.gov.pl/informacje/podglad/644477
- Individual tax ruling of the Director of the National Revenue Information Service of 16 June 2025, no. 0111-KDIB1-3.4010.302.2025.1.ZK — the opposite position: a company arising from a conversion is not a taxpayer starting business activity; the taxpayer's position held to be incorrect. https://eureka.mf.gov.pl/informacje/podglad/644090
- Individual tax ruling of the Director of the National Revenue Information Service of 11 July 2025, no. 0114-KDIP1-1.4012.249.2025.2.EW — no VAT on the conversion, no physical inventory under Article 14(5) of the VAT Act, no input tax adjustment, and the scope of succession under Article 93a § 4 of the Tax Ordinance. https://eureka.mf.gov.pl/informacje/podglad/648323
- Individual tax ruling of the Director of the National Revenue Information Service of 30 May 2025, no. 0114-KDIP2-2.4010.169.2025.1.RK/AS — deduction in the company of costs incurred by the sole trader before the conversion date, and the value of assets under Article 15(1w) and (1x) of the CIT Act. https://eureka.mf.gov.pl/informacje/podglad/643018
- Individual tax ruling of the Director of the National Revenue Information Service of 8 December 2025, no. 0111-KDIB1-3.4010.656.2025.2.AN — the 10% lump-sum rate for a company arising from a conversion, based on small taxpayer status under Article 4a(10) of the CIT Act. https://eureka.mf.gov.pl/informacje/podglad/670684
- Judgment of the Supreme Administrative Court of 11 March 2025, case ref. II FSK 1412/24 — dismissal of the cassation appeal of the Director of the KIS against the judgment setting aside the ruling on the status of a taxpayer starting business activity. The case reference, the date and the content of the decision are confirmed in the document of ruling no. 0111-KDIB1-2.4010.591.2023.11.MK, which gives effect to that judgment.
- Judgment of the Provincial Administrative Court in Wrocław of 4 July 2024, case ref. I SA/Wr 105/24 — setting aside ruling no. 0111-KDIB1-2.4010.591.2023.1.MK. The case reference and the date are confirmed in the document of ruling no. 0111-KDIB1-2.4010.591.2023.11.MK.
E-book reference
A full account of the procedure for converting a sole trader — together with a list of documents, a working timetable around the registration date, a schedule of tax values and a comparison with a contribution in kind and a sale of the business — is set out in the e-book JDG → spółka z o.o. Procedura, podatki i pierwsze rozliczenia (Sole trader to sp. z o.o.: procedure, taxes and first settlements; Zbyszko Pora, JTWPOLAND) from the Biblioteka Restrukturyzacji series. The PDF is available free of charge in the e-book section; the publication is in Polish.
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Get in touch →Legal basis: Act of 15 September 2000 — Commercial Companies Code (Dz.U. z 2024 r. poz. 18, as amended): Article 551 § 5, Articles 584(1)–584(13), in particular Articles 584(2), 584(5), 584(6), 584(7) § 3, 584(8), 584(12) and 584(13); Articles 158, 175 and 312.; Act of 29 August 1997 — Tax Ordinance (Dz.U. z 2026 r. poz. 622, as amended): Article 93a § 4 and § 5, Article 93e, Article 108 § 1, Articles 112 and 112b, Article 14b et seq., Article 119a et seq.; Act of 15 February 1992 on corporate income tax (Dz.U. z 2026 r. poz. 554, as amended): Article 4a(10), Article 7(3)(4), Article 7aa, Article 15(1w) and (1x), Article 15(4)–(4e), Article 16g(1)(4b), Article 16g(9) and (10a), Article 16h(3), (3a) and (3d), Article 19(1a)(2), Articles 28j, 28k and 28o.; Act of 26 July 1991 on personal income tax (Dz.U. z 2026 r. poz. 592, as amended): Article 22(1ł), Article 24(3f), Article 24(5), Article 30a(1)(4), Article 30b.; Act of 11 March 2004 on the tax on goods and services (Dz.U. z 2025 r. poz. 775, as amended): Article 5(1)(1), Article 6(1), Articles 7 and 8, Article 14(5), Articles 90a and 91, Article 96, Articles 106e and 106j.; Act of 9 September 2000 on the tax on civil law transactions (Dz.U. z 2026 r. poz. 191): Article 1(1)(1)(k), Article 1a(2), Article 2(6), Article 6(1)(8)(a) and Article 6(9), Article 7(1)(9).; Act of 23 April 1964 — Civil Code (Dz.U. z 2026 r. poz. 795): Articles 55(1), 55(4) and 75(1).; Act of 29 September 1994 on accounting (Dz.U. z 2026 r. poz. 522, as amended): Article 2, Article 10, Article 12(1) and (2).