1 January 2024 will see the reinstatement of minimum tax regulations that were suspended until 31 Dec 2023. For now nothing suggests the suspension will be extended. What is more, the Finance Ministry has recently posted on its website an updated minimum tax form (CIT/M).
As a reminder, minimum tax was introduced as part of the Polish Deal at the beginning of 2022 but the regulations were statutorily suspended for two years, meaning generally until the end of 2023. For taxpayers whose tax year straddles calendar years, the regulations will resume as of the tax year first beginning after 1 January 2024.
Minimum tax is designed to address aggressive tax planning arrangements, but the subject regulations show that it may well affect other entities, too.
Minimum tax can apply to:
1) companies with unlimited income tax liability in Poland,
2) tax groups, and
3) taxpayers with limited income tax liability in Poland who conduct their business via a permanent establishment situated in Poland if in the given tax year:
– they had a tax loss in their operating business (i.e. to the exclusion of losses for the purposes of capital gains tax), or
– the ratio of their net taxable income to gross taxable income from operating business is 2% or less.
Minimum tax is 10% of the tax base, with tax base equal to the sum of:
1) 1.5% of gross income from operating business,
2) borrowing costs paid to affiliates over 30% of tax EBITDA, and
3) costs of certain management and similar services and benefits paid to affiliates or tax haven entities in excess of PLN 3 million + 5% of tax EBITDA.
The law allows for a simplified calculation whereby such tax base equals 3% of gross taxable income.
Minimum tax is calculated after the end of the tax year to which it refers, so in practice any compliance duties will arise after 2023/2024 cut-off. Still, we would advise you not to delay with having a look at the regulations now to make a preliminary assessment if you will be caught by the new levy next year or perhaps will be able to use any exclusions that are available. Tax law offers a number of relief measures allowing certain taxpayers or transactions to avoid the tax.
If this issue pertains to your business and you are interested in our assistance, please contact us.
This blog post is provided for general information purposes to keep you up-to-date with changes in tax law, tax rulings by authorities, case law of courts and interesting commentaries. Doradztwo Podatkowe WTS&SAJA shall not be held legally liable for any acts or omissions resulting from reliance on such information.