From January 1, 2024, Poland enters an era of significant changes in tax legislation, marked by the reinstatement of the minimum corporate income tax. This innovative tax policy responds to substantial losses and low profitability among taxpayer companies.
Tax Base for companies in Poland – details and innovative approaches
One key feature of this new tax regime is the determination of the tax base, which includes components reflecting the actual financial condition of companies. The tax base comprises:
- 1.5% of the company’s revenue (excluding capital gains)
- debt financing costs with related parties that exceed 30% of EBITDA
- Expenses for a number of services or intangible rights provided to related parties to the extent that these expenses in the tax year exceed the value of 5% of the so-called EBITDA plus PLN 3 million
There is also an alternative method of determining the base, which allows Polish companies to choose a simplified approach.
Tax based for Polish companies
The taxpayer may choose the simplified method of determining the tax base for Polish companies, which includes an amount equivalent to 3% of the income value from other sources unrelated to capital gains. After determining the tax base using the general or simplified method, the taxpayer must pay 10% of the new minimum tax.
Subsequently, within 3 years from this tax’s payment date, its amount can be deducted from the “classical” tax.
Entities subject to the new tax norms retain the obligation to pay the general corporate income tax; however, they can now reduce the minimum tax by an amount equal to the standard income tax. This calculation can be applied to deductions in the following three tax years after the year of minimum tax payment.
This system propels Polish tax legislation into a new stage, encouraging businesses toward more transparent and efficient financial practices.
Who is exempt from the minimum tax?
Companies exempt from the minimum tax include:
- Taxpayers initiating their entrepreneurial activities (within the first three tax years).
- Financial institutions.
- Taxpayers whose income has decreased by 30% compared to the previous year.
- Taxpayers whose founders, shareholders, or partners are only natural persons, owning more than a 5% share in the capital of other economic entities or rights to receive payments.
- Taxpayers operating in mineral extraction, medicine, or engaging in international transportation by sea or air (with the majority of income from these activities).
- Municipal companies, mining companies receiving state aid, providers of medical services, and entities undergoing bankruptcy, liquidation, or restructuring.
- Groups of companies where one company owns at least 75% of the shares of other companies, provided that the share of the total income of these companies exceeds 2%.
- Taxpayers declared bankrupt, liquidated, or undergoing restructuring.
- Taxpayers entering into cooperation agreements.
- Small taxpayers with annual income less than 2 million euros.
- Taxpayers who received at least a 2% share of income from other sources before paying the minimum income tax in the three preceding tax years.
However, even if a company is not listed among the aforementioned economic entities, it does not automatically imply an obligation to pay the minimum tax.
Companies must verify whether they meet the conditions for applying this tax each year. The verification will include an analysis of whether the share of the entity’s income in its total income (excluding capital gains) was less than 2% during a specific year or whether the entity incurred a loss during the specified tax period (excluding capital gains).
- Expenses related to the acquisition, production, or improvement of fixed assets are not considered in the calculation of taxable expenses in the tax year, including depreciation.
- Remunerations specified in a leasing agreement are also not considered among taxable expenses in the tax year, including the depreciation of fixed assets used under the leasing agreement, provided that the user is depreciating.
- Income and expenses related to the sale of accounts receivable resulting from an agreement between a financial institution and a debtor are not considered.
- Increases in expenses to obtain income from the purchase of electricity, heat, or gas (yearly comparison) are not considered in the calculation of tax obligations.
- Amounts of excise duty, retail trade tax, gambling tax, fuel duty, and emission tax paid by the economic entity responsible for these purposes are not considered.
- Income and expenses related to the taxation of excise tax included in the price of purchased or sold excisable goods are not considered in tax obligation calculations.
- 20% of the cost of expenses related to labor payments and social security contributions are also not considered in tax calculations.
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