10% minimum tax for CIT taxpayers from January 2024.
Who will pay it
The new levy will apply to limited liability companies, joint-stock companies, limited partnerships, limited joint-stock partnerships and some general partnerships – those whose partners are not exclusively natural persons or tax capital groups, having Polish tax residence, which meet the conditions described in the regulations.
What is it?
Pursuant to the wording of Article 24ca of the CIT Act, a 10-percent minimum corporate income tax is charged to companies having their registered office or management board in the territory of the Republic of Poland, which are subject to tax liability on all their income, regardless of where they are earned, and tax capital groups which, in in a given tax year, they suffered a loss from a source of income other than capital gains or achieved a share of income from a source of income other than capital gains (defined in the regulations) in income other than capital gains of no more than 2%.
This is a parallel form of taxation alongside the classic corporate income tax. It is therefore possible that in one year the taxpayer will incur a liability for the current CIT tax and the minimum tax. However, the minimum tax amount will be able to be deducted from the classic CIT in returns submitted for the next 3 tax years.
How to calculate
- the tax base is to consist of the sum of 1.5% of revenues from operating activities – i.e. other than capital gains and “excessive” costs of debt financing and intangible services incurred for the benefit of related entities. The tax base will exclude, among others, expenses for the acquisition of fixed assets, leasing fees for fixed assets as well as revenues and costs directly related to them.
- it will be possible to choose a simplified method of determining the tax base constituting an amount corresponding to 3% of the value of revenues obtained in the tax year from sources of revenue other than capital gains. However, the taxpayer must inform the competent tax authority about the choice of such simplification in the tax return submitted for the tax year in which this choice was made.
Method of payment
No advance payments are made for the minimum tax, as in the case of classic CIT.
The calculation is made once a year, so it must be paid by the deadline for submitting the annual return for a given year. Taxpayers will pay the first minimum tax in 2025 when they record a tax loss or do not exceed a two percent share of income in revenues.
Who won't pay
- taxpayers of personal income tax (i.e. PIT), not only those taxed in the form of a lump sum or according to a scale or with a flat tax and for this purpose keeping a tax book of income and expenses), also in a situation where they were obliged to keep complete accounting books
- companies whose partners are only PIT taxpayers (civil partnership, general partnership which is subject to PIT due to the nature of its shareholders, partnership
- entities without the status of a company within the meaning of the CIT Act, operating on the basis of separate acts – cooperatives, foundations, associations)
- so-called small CIT taxpayers whose annual gross sales revenues do not exceed EUR 2 million
- taxpayers starting their business – in the year of commencement and in the following 2 years of activity
The exemption from the minimum tax applies to enterprises whose revenues are at least 30% lower than in the previous year, which are declared bankrupt, liquidated or are subject to restructuring proceedings, or which are a party to the cooperation agreement referred to in Art. 20s § 1 of the Tax Ordinance.
Summary
The regulations entered into force on January 1, 2024 and there is no indication that they will be changed or relaxed again. Each CIT taxpayer will therefore be obliged to analyze whether he or she is included in the group of entities subject to minimum tax. Unfortunately, the regulations governing this tax are complicated, which may cause a number of problems in their interpretation. Especially since the minimum tax is to be calculated in a different way than for the purposes of classic CIT.
FAQ
The minimum 10% CIT tax applies to limited liability companies, joint-stock companies, limited partnerships, limited joint-stock partnerships, as well as some general partnerships – those whose partners are not exclusively natural persons, and tax capital groups. These entities must have Polish tax residence and meet the conditions described in the regulations.
The new tax is a parallel form of taxation in relation to the classic CIT. It applies to companies that in a given tax year suffered a loss or achieved a small share of income from sources other than capital gains. The minimum tax amount can be deducted from the classic CIT in returns for the next three tax years, which means that companies may ultimately pay less CIT in the future.
The tax is calculated based on the sum of 1.5% of operating revenues and the costs of debt financing and intangible services incurred for the benefit of related entities. Expenditures on the acquisition of fixed assets and related leasing fees are excluded from the tax base. There is also an option to choose a simplified method of determining the tax base, equal to 3% of the value of revenues from sources other than capital gains, which must be reported in the tax return.
The minimum tax does not require advance payments. It is calculated once a year and is paid by the deadline for submitting the annual tax return for a given year. The first payment of the minimum CIT tax will be made in 2025 for taxpayers who recorded a tax loss in 2024 or did not exceed a two percent share of income in revenues.
Personal income tax payers, including those taxed with a lump sum, scale or flat tax, as well as companies whose partners are exclusively PIT taxpayers are exempt from the obligation to pay tax. In addition, the exemption covers the so-called small CIT taxpayers (annual gross revenues below EUR 2 million), taxpayers starting their business (in the year of commencement and in the two subsequent years), enterprises with revenues at least 30% lower than in the previous year, entities in bankruptcy, liquidation, restructuring or being a party to cooperation agreements.
