Since 2022, a minimum corporate income tax has been in force, i.e. a corporation tax.
What is the corporation tax and who does it apply to?
This is a brand new type of tax liability for corporate taxpayers applying to:
taxpayers with their registered office or management board in Poland that are subject to Polish income tax on their worldwide income, regardless of where it is earned;
tax capital groups;
taxpayers operating in Poland though a Poland-based foreign establishment, i.e. taxpayers who do not have their registered office or management board in Poland and are subject to Polish income tax only on income earned in Poland.
The minimum corporate income tax is imposed on taxpayers that:
reported a loss from a source of income other than capital gains; or
reported no more than 1 per cent of income coming from a source of income other than capital gains.
What does this mean?
Taxpayers that report a loss from a source of income other than capital gains, or that have a low share of income from a source other than capital gains in their total income will pay the minimum CIT.
The calculation of a loss for the purposes of corporation tax does not mean only the identification of a loss in the accounts. When calculating a loss and a share of income in the total income, the taxpayer should not include:
expenses on purchase of fixed assets; and
income and deductible expenses that are directly or indirectly connected with the income earned or incurred in connection with a given transaction.
Who is not subject to corporation tax?
There are several exceptions. The corporation tax does not apply, specifically, to:
taxpayers that commenced business during the tax year – in the year of commencing business and for two subsequent tax years. This exception does not apply to taxpayers formed as a result of transformations, mergers or divisions, by the contribution of an enterprise, an organised part of an enterprise or specific assets.
financial undertakings, meaning credit institutions, banks, companies such as credit unions (SKOK), insurance companies or investment firms;
taxpayers who reported revenues at least 30 per cent lower in a given tax year in comparison with revenues reported in the previous tax year;
taxpayers whose shareholders are only natural persons;
taxpayers who are members of a group of at least two companies, where one of the companies directly holds a 75 per cent interest in the other members of the group throughout the entire tax year, where all the companies have the same tax year, and where the share of the total income earned by these companies in their total revenues calculated for the tax year is more than 1 per cent.
In addition, in the case of taxpayers who commenced their business in the tax year, the corporation tax applies only to Polish tax residents. The same applies to financial undertakings.
What are the main categories of the tax base?
The minimum rate of income tax is 10 per cent on the tax base, which consists of four main categories:
revenues other than capital gains;
debt financing to related parties; and
deferred income tax resulting from the disclosure of non-amortized intangible assets;
some costs of intangible services.
The tax base of the corporation tax is the sum of specific revenues, debt financing costs, deferred income tax and other expenses including advisory, advertising, insurance and other services. The calculation of the tax base and the tax is not simple and may cause many problems.
In view of the above, and given the fact that the initial assumptions underlying the introduction of the minimum tax have not been met, the government is now considering suspending the minimum CIT and it is likely that, among the provisions in a new amendment to the Act Governing the Rules of CIT Settlements (which is due shortly), the removal of the provisions introducing the corporation tax will be proposed.