A tax loss in a Polish sp. z o.o. (limited liability company) can be offset against income from the same source over the next 5 tax years. You can choose between two methods: deducting up to 50% of the loss per year or a one-off deduction of up to PLN 5,000,000. At the 9% CIT rate, every PLN 100,000 of loss deducted saves you PLN 9,000 in tax.
What is a tax loss in a Polish sp. z o.o.?
A tax loss arises when the tax-deductible costs in a given tax year exceed the revenue from the same source. It is the difference between costs and revenue — strictly in tax terms, not accounting terms.
A tax loss does not mean your company is in financial trouble. It often results from investments, one-off development expenses or the start-up phase. A company can have a positive accounting result (balance sheet profit) and a tax loss at the same time — because not all accounting costs qualify as tax-deductible costs.
Two sources of income in CIT since 2018
Since 1 January 2018, the Polish CIT Act divides income into two sources: capital gains and other income. A loss from one source can only be offset against income from the same source. You cannot offset capital gains losses against operating income — or the other way around.
In practice, most small sp. z o.o. companies generate revenue solely from business operations (the “other income” source). Capital gains are mainly relevant for companies holding shares in other entities, selling stock or receiving dividends.
What are the two methods for offsetting a tax loss under Polish CIT?
The CIT Act (Article 7(5)) provides two methods for carrying forward a loss. The taxpayer chooses which method to apply — separately for each year’s loss. You can also combine methods for losses from different years.
Method 1: Spread over 5 years (up to 50% per year)
You deduct the loss from income over the next 5 consecutive tax years. In any single year, the deduction cannot exceed 50% of that loss. The minimum full recovery period is 2 years (2 × 50%).
Example: Your company incurred a loss of PLN 200,000 in 2024. In 2025 it generated income of PLN 300,000. You can deduct a maximum of PLN 100,000 (50% of PLN 200,000). The remaining PLN 100,000 can be deducted in one of the following years — no later than 2029.
Method 2: One-off deduction up to PLN 5,000,000
You deduct the entire loss (up to PLN 5,000,000) in a single tax year within the 5-year window. If the loss exceeds PLN 5 million, the surplus is carried forward under the 50%-per-year cap.
This method works best when the loss does not exceed PLN 5 million and the company expects high income in one of the following years. You offset the entire amount at once — no need to split it.
Comparison of the two methods
| Feature | Method 1: up to 50% per year | Method 2: one-off up to PLN 5m |
|---|---|---|
| Legal basis | Article 7(5)(1) CIT Act | Article 7(5)(2) CIT Act |
| Maximum deduction per year | 50% of the loss | Full loss (up to PLN 5m) |
| Recovery period | Minimum 2 years, maximum 5 | 1 year (if loss ≤ PLN 5m) |
| Loss exceeding PLN 5m | 50% per year for up to 5 years | PLN 5m one-off + surplus at max 50%/year |
| Condition | Income from the same source | Income from the same source |
| Best for | Large losses (over PLN 5m), steady income | Losses up to PLN 5m, high income in one year |
Source: Article 7(5) of the Act of 15 February 1992 on Corporate Income Tax (Journal of Laws 2025, item 278). A practical guide is available at biznes.gov.pl.
From our experience at Progress Holding, roughly 80% of small sp. z o.o. companies carry losses below PLN 500,000. In such cases, the one-off method is simpler and faster — you capture the full tax saving in a single year.
How much will you actually save?
The tax saving depends on the CIT rate: 9% for small taxpayers (gross revenue up to PLN 8,569,000 in 2024) or 19% for all others. Each zloty of loss deducted lowers the tax base — and therefore the tax due.
Savings at different loss amounts
| Loss amount | Saving at 9% CIT | Saving at 19% CIT |
|---|---|---|
| PLN 50,000 | PLN 4,500 | PLN 9,500 |
| PLN 100,000 | PLN 9,000 | PLN 19,000 |
| PLN 200,000 | PLN 18,000 | PLN 38,000 |
| PLN 500,000 | PLN 45,000 | PLN 95,000 |
| PLN 1,000,000 | PLN 90,000 | PLN 190,000 |
| PLN 5,000,000 | PLN 450,000 | PLN 950,000 |
These are not theoretical figures. If your company incurred a PLN 200,000 loss and pays 9% CIT, carrying that loss forward saves PLN 18,000 in tax. At 19% the saving rises to PLN 38,000.
When can you start deducting the loss — do you have to wait for the CIT-8 return?
You do not need to wait until you file your annual CIT-8 return. You can deduct the prior year’s loss when calculating your very first CIT advance payment — for example, the January payment due by 20 February.
This has been confirmed by the Director of the National Tax Information Service in an individual ruling of 20 March 2023 (ref. 0111-KDIB1-2.4010.69.2023.1.EJ): filing the CIT-8 is not a prerequisite for deducting the loss. It is enough that you know the amount based on your own accounting records.
At Progress Holding we start deducting prior-year losses from the January CIT advance for our clients. This means the company pays lower advance payments throughout the year — not only when the annual return is filed.
Can you combine losses from multiple years?
Yes. In a single tax year you can deduct losses incurred in different years — provided you respect the limits for each loss separately. Losses from different years are treated as separate items, each with its own 5-year expiry date.
Example: In 2025 you are filing your annual CIT. You have an unused loss of PLN 80,000 from 2022 and PLN 120,000 from 2024. From your 2025 income you can deduct up to PLN 40,000 of the 2022 loss (50%) and the full PLN 120,000 from 2024 (one-off, since it is below PLN 5 million). In total, you reduce the tax base by PLN 160,000.
For each year’s loss you choose the deduction method independently. The 2022 loss may be spread at 50% per year, while the 2024 loss can be deducted in full. It is your decision, and the law gives you full flexibility here.
What happens if you don’t use the loss within 5 years?
Any undeducted loss expires permanently after 5 tax years. If you incurred a loss in 2020, the last year to deduct it is 2025. Once the CIT-8 for 2025 is filed, the unused portion of the 2020 loss is gone for good.
There is no possibility of carrying a loss back to prior years. Polish tax law only allows losses to be offset against future income.
We have prepared hundreds of annual CIT filings at Progress Holding and the most common reason clients lose the right to a deduction is the lack of planning. The company fails to generate sufficient income for several years, and by the time it does, the 5-year window has closed. That is why we prepare a loss carry-forward schedule for every client and monitor it year by year.
How does a tax loss affect the switch to Estonian CIT?
Switching to Estonian CIT (lump-sum tax on corporate income) means losing the right to deduct prior-year losses for the duration of this regime. This is one of the most frequently overlooked aspects of the decision.
Exception: Article 7(7) of the CIT Act
If your company had undeducted losses before switching to Estonian CIT, it can offset those losses against income from the two final tax years before the change. The condition is that you must apply Estonian CIT for at least 4 full tax years. If you exit earlier, you will need to amend your returns and repay the tax with interest.
At Progress Holding we always review undeducted losses before advising a client on the switch to Estonian CIT. For a company with a large accumulated loss, forfeiting the right to deduct it can cost more than the potential benefits of the lump-sum regime.
When is it better to delay switching to Estonian CIT?
- When the undeducted loss exceeds PLN 100,000 and the company expects to generate income in the coming years.
- When the 5-year deadline for the loss has not yet expired — you still have time to use it.
- When the company had no income in the two years before the planned switch — in that case Article 7(7) offers no benefit.
How to report the loss in the CIT-8 return?
Prior-year losses are reported in the annual CIT-8 return by reducing the income from the relevant source. You enter the deduction amount in the appropriate field, separately for “capital gains” and “other income”.
Key technical points:
- You deduct the loss from income — not from revenue.
- The deduction cannot exceed the income from that source (you cannot create a “new” loss through the deduction).
- If you incur a new loss in the current year, you cannot deduct prior-year losses because there is no income to offset. The new loss becomes a separate item for future carry-forward.
- The CIT-8 for 2025 is due by 31 March 2026 (for a tax year equal to the calendar year).
What we see in practice — the Progress Holding perspective
Based on over 500 annual CIT filings prepared at Progress Holding, we have identified three mistakes that small sp. z o.o. companies make most often when carrying forward losses.
Mistake 1: Forgetting the loss from the first year of operations
Around 65% of newly established sp. z o.o. companies incur a loss in their first tax year — mainly due to start-up costs with no revenue. Many owners simply “forget” about this loss when they change accountants or fail to maintain a tax history. At Progress Holding we always check for prior-year losses when we take over a new client.
Mistake 2: No carry-forward strategy
Companies deduct losses “automatically” without considering when the 5-year deadline expires or which method is more beneficial. The result: they lose the right to deduct because they never planned which year to use it. For every client we create a loss carry-forward schedule aligned with income projections.
Mistake 3: Switching to Estonian CIT without reviewing losses
Companies switch to Estonian CIT without checking whether they have undeducted losses. In extreme cases, they forfeit the right to deduct losses of PLN 200,000–500,000. At the 19% CIT rate, that is a wasted saving of PLN 38,000 to PLN 95,000.
Our 4-step process
- Historical audit — we verify prior-year losses, their source and expiry date.
- Method selection — for each loss we choose the optimal method (50% per year vs one-off up to PLN 5m).
- Carry-forward schedule — we plan deductions based on projected income and deadlines.
- Ongoing monitoring — we deduct losses from monthly or quarterly CIT advance payments, without waiting for the CIT-8.
Accounting services for an sp. z o.o. at Progress Holding start from PLN 799 net per month, and the preparation of annual financial statements and the CIT-8 return starts from PLN 1,500 net. The current price list is available at progressholding.pl.
Frequently asked questions
Can I offset the sp. z o.o. loss against my personal income (PIT)?
No. A tax loss of a sp. z o.o. is settled exclusively within the company’s CIT. It does not pass through to the shareholders and does not reduce their personal income. The company and its shareholders are separate taxpayers.
Can a loss from 2020 still be deducted in 2025?
Yes. 2025 is the last year in which you can deduct a loss incurred in 2020. The 5-year period expires at the end of 2025. After filing the CIT-8 for 2025, any unused portion of the 2020 loss will be permanently forfeited.
Can I deduct 100% of the loss in one year?
Yes — provided the loss does not exceed PLN 5,000,000 and you have sufficient income from the same source. You use the one-off method under Article 7(5)(2) of the CIT Act. If the loss exceeds PLN 5 million, you can deduct up to PLN 5 million at once and carry forward the remainder under the 50%-per-year cap.
What if I have losses from both capital gains and other income?
You settle them separately. A capital-gains loss can only reduce capital-gains income. An other-income loss can only reduce other income. You cannot cross-offset them.
Does a tax loss transfer to the legal successor of the company?
As a rule — no. In the case of a merger or demerger, the right to deduct the loss does not transfer to the acquiring entity. The exception is a transformation (change of legal form without changing the entity), where the right to carry forward the loss is preserved.
Can I deduct losses under Estonian CIT?
No — while you are on Estonian CIT, you cannot deduct prior-year losses on an ongoing basis. However, you may use Article 7(7) of the CIT Act to offset undeducted losses against income from the two final tax years before you switched. The condition is that you must remain on Estonian CIT for at least 4 years.
Carrying forward a tax loss is one of the most effective legal tools to reduce CIT in a Polish sp. z o.o. Properly planned deductions can save your company tens of thousands of zlotys. Do not let an undeducted loss expire because of poor planning or lack of awareness.
Need an audit of your tax losses or professional accounting support? Contact us at Progress Holding: +48 603 232 418 or office@progressholding.pl. We serve over 500 companies and have been helping businesses file their CIT correctly and on time for over 20 years.
