As we reported in our Tax This and That series, 2025 will be the first year in which some CIT taxpayers will pay the minimum tax. The minimum tax rate will be 10%. Due to the high interest in this topic, we are presenting detailed rules for calculating this tax.
Taxpayer
The minimum tax will be paid by CIT taxpayers who incurred a loss in the tax year, or whose income was less than 2% of their total revenue. The minimum tax exemption is presented in the following chart [link]
However, for the purposes of determining the loss and the share of income in revenues, not all economic events are taken into account. To determine whether a company will or will not be required to pay minimum tax, the following are not included in costs and revenues:
1) included in the costs of obtaining revenues, including through depreciation write-offs, costs resulting from the acquisition, production or improvement of fixed assets or the use of fixed assets on the basis of a leasing agreement, if the depreciation write-offs are made by the user;
2) revenues and costs of obtaining revenues directly or indirectly related to such revenues, respectively earned or incurred in connection with the transaction, if:
a) the price or the method of determining the price of the subject of the transaction results from the provisions of acts or normative acts issued on their basis, and
b) in the tax year the taxpayer incurred a loss from a source of revenues other than from capital gains from the transaction referred to in letter a, or achieved a share of income from a source of revenues other than from capital gains in revenues other than from capital gains resulting from such a transaction in the amount of no more than 2%, and the calculation of the loss and the share of income in revenues is made separately for transactions of the same type;
3) fees included in the costs of obtaining revenues, as specified in the leasing agreement;
4) revenues and costs of obtaining revenues directly related to these revenues from the sale of receivables to a financial institution conducting factoring activities;
5) an increase in the costs of obtaining revenues from the purchase of electricity, heat or gas for the year for which the minimum tax is due compared to the previous year;
6) the amounts paid by the entity obliged to do so:
a) excise tax,
b) retail sales tax,
c) gaming tax,
d) fuel fee,
e) emission fee;
7) the amount of excise tax included in the price of excise goods purchased and sold by the taxpayer trading in these goods, included in the revenues or costs of obtaining revenues, as appropriate;
8) 20% of the costs of obtaining income from remuneration for work, cash benefits from social insurance paid by the employer, payments to employee capital plans made by the employer, social insurance contributions financed by the employer.
Tax base
Once we have determined that for the purposes of minimum tax the company incurred a loss, or that the share of its income in revenue was lower than 2%, we must calculate the basis on which the tax will be calculated.
The tax base for the minimum tax is:
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 for the benefit of related entities, except when the connections result exclusively from the connection with the State Treasury or local government units or their associations, in the part in which these costs exceed the amount calculated according to the following formula:
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 and related rights, licenses, industrial property rights, know-how,
c) transfer of the risk of debtor's insolvency 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 territory or in a country applying harmful tax competition in the part in which these costs in total in a tax year exceed by PLN 3,000,000 the amount calculated according to the following formula:
The individual symbols mean:
P – the summed value of revenues from all sources of revenues, the income from which is subject to income tax,
Po – interest revenues
K – the sum of costs of obtaining revenues without excluding debt financing costs
Am – depreciation write-offs included in the tax year’s costs of obtaining revenues
Kfd – costs of debt financing included in the tax year’s costs of obtaining revenues, not included in the initial value of fixed assets and intangible assets, before reducing debt financing costs
O – interest included in the tax year’s costs of obtaining revenues, without reducing debt financing costs
The tax base is reduced by:
1) the value of deductions reducing the tax base in the tax year, excluding reductions for bad debt relief;
2) revenues that are taken into account when calculating tax-exempt income for taxpayers operating in special economic zones and from business activities achieved from the implementation of a new investment specified in the decision on support for a taxpayer who benefits from tax exemptions for activities in SEZ and for new investments in the tax year;
3) revenues that are not taken into account when determining the loss and the share of income in the company's revenues for income tax purposes.
Tax
On the basis thus determined, the tax due is 10%.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of December 15, 2024.
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