As of January 1, 2024, after a period of suspension, the minimum tax on companies comes into effect. Despite the similar terminology, this tax does not burden owners of rental properties; it is a separate levy that applies to all CIT taxpayers.
Who Does the Minimum Tax Apply To?
- Polish CIT taxpayers (companies subject to the so-called unlimited tax liability).
- Tax capital groups (PGK).
- Polish permanent establishments of foreign enterprises (subject to the so-called limited tax liability).
Who is Exempt from Taxation?
The law contains several exclusions from taxation, but many of them are very specific entities. Exclusions available to a larger number of taxpayers include:
- Start-ups in the year of establishment and the following two tax years
- Small taxpayers
- Those achieving a tax profit rate of at least 2% in one of the last three tax years
- Those declared bankrupt, in liquidation, or undergoing restructuring proceedings
- Those earning income at least 30% lower than the previous year
- Those achieving a tax profit rate of at least 2% in one of the last three tax years
Exclusions for a specific group of entities include:
- Financial enterprises
- Entities with only natural persons as shareholders/partners but not holding directly or indirectly more than 5% of rights in other companies
- Those generating a majority of operational income from specific statutory activities (e.g., medical services, extraction of specific minerals, operation of maritime or air transport in international traffic, and others)
- Companies engaged in the communal economy
- Specific financial institutions
- Mining companies
What Are the Taxation Criteria?
The law establishes two main taxation criteria for entities subject to the tax. These are:
Incurring a tax loss (from a source of income other than capital gains, i.e., from operational activities)
or
Achieving a tax profitability rate not exceeding 2% (the share of tax operational income in tax operational revenue).
How to Determine the Tax Base?
The law allows for the determination of the tax base in a general (more complex) or simplified manner. In simple words, the general tax base is the sum of these three quantities
1.5% of operational revenue
+
Costs of long-term financing for related entities beyond the specified limit (close to 30% EBITDA)
+
Costs of specified intangible services/licensing fees to related entities or from tax havens beyond the specified limit (close to 5% EBITDA + 3 million PLN)
The method of determining the specific limits is presented in statutory formulas.
How to Determine the Tax Base in a Simplified Manner?
Alternatively, taxpayers can choose a simplified method for calculating the tax base. In this case, it will be:
3% of operational revenues
Importantly, the choice of the simplified method must be reported to the tax authorities in the annual tax return.
Where to Declare the Tax?
The tax is declared in the annual tax return, along with the tax base and allowable deductions.
How to Pay the Tax?
The tax is payable along with the annual CIT settlement, with the amount of the minimum tax being reduced by the regular CIT tax due for that year.
How we can help
We offer a range of services to assist you:
- Analysis and reviews of your specific case
- Computation and Minimal CIT compliance
- Tax rulings and court proceedings
If you have any further questions or need assistance with your tax matters, please don’t hesitate to reach out to us. We are here to simplify taxes and accounting, allowing you to focus on your core business.
Do not hesitate to check out our scope of services to learn more.
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