Income tax, as the name suggests, is paid when income is earned. If the taxpayer does not earn income, they pay no tax. This is the current rule. A minimum income tax for companies will apply from 2024. Legislators believed they knew better how much a given entity should earn, and if they reported a lower amount, they were certainly optimizing their tax, so they should pay tax based on the assumed amount.
Who does the minimum tax apply to?
The minimum tax will apply to companies and tax capital groups with their registered office or management board in the territory of the Republic of Poland. Foreign companies, however, will not be subject to the tax, even if they generate income in Poland. The tax will also not apply to entities other than companies, such as foundations, associations, cooperatives, or family foundations.
When does it have to be paid?
The minimum tax will be paid only by taxpayers who incurred 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, determined in accordance with Article 7, paragraph 1 or Article 7a, paragraph 1 of the CIT Act, in income other than capital gains in the amount of no more than 2%.
How much will it be?
The minimum tax is 10% of the tax base. However, what will be the tax base if, for example, a company suffers a loss? The legislator has determined that the tax base will be the sum of:
1) an amount corresponding to 1.5% of the value of revenues from sources other than capital gains earned by the taxpayer in the tax year and
2) debt financing costs incurred on behalf of related entities in the part in which these costs exceed the amount calculated according to the formula provided in the Act and
3) costs of:
a) advisory services, market research, advertising services, management and control, data processing, insurance, guarantees and sureties and similar services,
b) all kinds of fees and charges for the use or the right to use copyrights, licenses, industrial property rights and know-how,
c) transfer of the risk of insolvency of the debtor under loans other than those granted by banks and cooperative savings and credit unions, including liabilities arising from derivative financial instruments and similar services, incurred directly or indirectly for the benefit of related entities or entities having their place of residence, registered office or management board in a tax haven, in which these costs in total in the tax year exceed by PLN 3,000,000 the amount calculated according to the formula provided in the Act.
What about ordinary income tax?
Being subject to minimum tax does not preclude the company from paying income tax (unless the company incurred a loss). However, the minimum tax amount may be reduced by the corporate income tax. Furthermore, if the company pays minimum tax in one year and is not required to pay it in subsequent years, the amount of minimum tax paid will be deductible from the ordinary income tax for the next three years.
Exceptions
The minimum tax will take effect in 2024. The first settlement will occur in 2025. However, for companies whose tax year does not coincide with the calendar year, the minimum tax will apply differently. The tax will not apply to tax years beginning in 2023 and ending in 2024.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of November 20, 2023
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