The minimum tax is one of the proposals for changes in the Polish tax system. It aims to ensure greater equality in taxation and increase revenues to the state budget. Who will it apply to and when will the minimum tax not apply? We answer these and other questions in this article.
Table of Contents
- Who will be affected by the minimum tax and in what circumstances?
- When will the minimum tax not apply?
- Minimum tax in Poland – how to determine the loss
- Minimum tax in Poland – corporate tax rate
- Minimum tax in Poland – tax base
- Deadline for payment of the minimum tax
Who will be affected by the minimum tax and in what circumstances?
According to the provisions of the Corporate Income Tax Act, the minimum income tax in Poland will apply to:
- Taxpayers who have their registered office or management board on the territory of Poland. They are subject to tax obligations on their entire income regardless of where it is earned,
- Tax capital groups,
- Taxpayers conducting business through foreign entities with workshops located in Poland. This concerns taxpayers who don’t have their registered office or management board in Poland. Therefore, they are subject to tax obligation only on income earned in Poland.
As you can see, the minimum tax in Poland will apply to almost all corporate income taxpayers who:
- incurred a loss from a source of revenue other than capital gains, or
- obtained a share of income from a source of revenue other than capital gains, in revenue other than capital gains in the amount not exceeding 2%.
However, there are circumstances in which taxpayers will not be subject to the obligation to calculate and pay the minimum tax in Poland.
When will the minimum tax not apply?
As it appears from the regulations, the minimum income tax in Poland will not apply, among others, to:
- Taxpayers who start their business in the tax year. This will also apply for the two immediately following consecutive tax years.
- Taxpayers who are financial enterprises. Including, among others credit institutions, banks, credit unions, insurance companies, and investment companies.
- Taxpayers who earn revenues lower by at least 30% compared to the ones earned in the preceding tax year.
- Taxpayers whose shareholders or partners are only natural persons,
- Taxpayers who earn the majority of their revenues other than capital gains in the tax year from operating ships or aircraft in international transport.
- Taxpayers who in the tax year will achieve the majority of revenue other than from capital gains in connection with extracting minerals listed in the appendix to the Geological and Mining Law.
Minimum tax in Poland – how to determine the loss
According to provisions of the CIT Act, when calculating the loss and the share of income in revenue, the following will not be taken into account:
- costs of acquisition of fixed assets when the price of the subject of the transaction or the manner of its determination will result from the provisions of laws or normative acts issued on their basis,
- production costs of fixed assets when the taxpayer in the tax year incurs a loss from a source of revenue other than capital gains from a transaction or achieves a share of income from a source of revenue other than capital gains in revenues other than from capital gains resulting from such a transaction in the amount not exceeding 2%,
- costs of improving fixed assets,
- costs of fixed assets, the purchase, production or improvement of which will be recognized in the taxpayer’s books as depreciation write-offs.
Minimum tax in Poland – corporate tax rate
The tax base for the minimum tax in Poland will consist of the following categories:
- Revenue from sources other than capital gains,
- Part of the costs of financing debt to related entities,
- Deferred income tax resulting from the amortization of intangible assets,
- Certain costs of non-material services.
The rate of the minimum tax in Poland has not changed based on the amendment of the 7th of October 2022. It still amounts to 10% of the tax base.
Minimum tax in Poland – tax base
According to the regulations, the tax base for the minimum tax in Poland will be the sum of:
- the amount of specified revenue,
- debt financing costs,
- the value of deferred income tax and
- other costs, such as consulting or advertising services
Deadline for payment of the minimum tax
As for the payment deadline for the minimum tax, the Corporate Income Tax Act does not specify it. However, it indicates that it will apply from January 2024. Therefore, we should consider it as the tax to be settled and paid for the first time for 2024. Most probably on the date of submitting the annual tax return for 2024.
The minimum tax in Poland raises many doubts among entrepreneurs. Even though the obligation to calculate it is yet to come and will only appear in 2025. Entrepreneurs should therefore analyze their situation today. Consider implementing appropriate solutions and familiarize yourself with new regulations.
Do you need help analyzing your settlements and estimating potential effects of the minimum tax in your company? Contact our specialists.