Polish New Order - minimum income tax

Polish New Order – minimum income tax

Many changes related to taxes have comeintoforceinPolandfromthebeginningofcurrentyear. Among others – corporate income tax – CIT. In this article we will try to figure out who will pay the tax, what the taxable base will consist of, and who will be exempted from paying.

This is the first time when CIT is paid by the companies that has a loss. There are many exceptions, but you need to be aware of them in order not to be in the category of companies that will have to pay a loss CIT fees.


Which companies with a loss should pay

So, this will affect Polish companies, as well as companies of foreign entities, which:

  • have not reached a certain profitability, i.е. if the company has experienced losses during the past year or its income will be below 1% of its profit.
  • have a loss and have been in business for more than 2 years (you will see many exceptions down below) or whose shareholders or founders are exclusively legal entities.

In this case, the company will have to pay tax on operating activities. Be aware that the draft also provides for a reduction in the tax base through deductions that reduce the tax base (except for writing off bad debts) and income that is released in special economic zones or on the basis of a decision to support investment.

According to analysts, the minimum tax will be applicable only to a small percentage of companies and, especially, this will affect large corporations that have previously evaded taxes in Poland. It supposed to lead to the situation, when the companies that do not use tax optimization schemes previously should win. But there are obviously opponents of this regulation, who believe that in practice it can hit small CIT taxpayers even harder and become an additional burden for them. For instance companies doing ​​trade with low profitability – trade in consumer goods, food, cosmetics, etc. On average, the profitability of such companies is 0.7%.


Income tax calculation

The taxable base consists of the following items:

  • 4% of the value of income from “operating” activities
  • incurred to affiliates: debt financing costs over 30% of “tax EBIDTA”
  • deferred income tax resulting from the disclosure of non-depreciable intangible and legal value in tax calculations to the extent that this results in an increase in gross profit or a decrease in gross loss
  • expenses for intangible services (to the extent that it complies with the current section 15 E of the Income Tax Law) of more than 30% of “tax EBITDA”.

The tax must be 10% of the tax base. The new income tax should cover those companies that show a loss or have less than a 1% share of income. The tax will amount to 0.4% of revenue + 10% of passive expenses (expenses for debt financing and expenses for intangible services – readArt. 15C and Art. 15E CIT). The amount of the minimum income tax paid for that tax year will be deducted from the CIT tax liability (for the next 3 years).


Who will be exempt from paying

Corporate income tax will not be paid by the following taxpayers:

  • companies that started their activities from the new year and continue to run it in the next 2 years,
  • companies that are financial corporations,
  • companies that have received income at least 30% lower than the income received the year before,
  • companies whose shareholders or founders are exclusively natural persons, as well as if the taxpayer does not own a stock (shares) in the capital of another company.

Changes in the payment of Corporate Income tax came into force on January 1, 2022.

Legalbasis: 23.11. 2021 inDziennik Ustaw (Dz.U. 2021, poz. 2105)

If you have any additional questions about this topic, or would like to learn more, please contact us -office@progressholding.pl.