Minimum CIT is now already in force

From 1 January 2024, the provisions on minimum income tax, contained in Art. 24ca of the CIT Act. It is worth mentioning that the minimum tax was introduced into the CIT Act on 1 January 2022 as part of the so-called Polish Deal, however, due to numerous controversies, the legislator suspended the new regulations until 31 December 2023.

Minimum tax – what is it and who does it apply to?

The minimum tax is a new, parallel form of taxation next to the so-called “classic” CIT. The 10% minimum corporate income tax is charged to companies having their registered office or management board in the territory of Poland, which are subject to tax liability on all their income, regardless of where they are earned, and tax capital groups which in a given tax year suffered a loss from other sources of income than from capital gains or achieved a share of income from a source of income other than capital gains (as defined in the regulations) in income other than from capital gains of no more than 2%. Therefore, the ratio of income to revenue is important. If it is less than 2%, the entrepreneur will pay minimum tax. The 10% minimum tax will apply to, for example, limited liability companies, joint-stock companies, simple joint-stock companies, limited partnerships, limited joint-stock partnerships, and, under certain conditions, general partnerships whose partners are not exclusively natural persons or tax capital groups that have Polish tax residence that meets the conditions described in the regulations.

Possibility of applying a deduction

In practice, it is possible for a CIT taxpayer to have a tax liability arising from the “classic” CIT tax and the minimum tax in one year. Then there should be no double taxation because the amount of minimum tax payable can be reduced by the “classic” CIT tax due. Moreover, if the taxpayer pays the minimum tax, he will be able to deduct it from the “classic” CIT in the returns submitted for the next 3 tax years.

Statutory exclusions

The minimum tax does not apply, in accordance with Art. 24ca section 14 of the CIT Act, including: to taxpayers:

1. who achieved a tax profitability of at least 2% in one of the three tax years immediately preceding the tax year for which the minimum income tax is due;
2. if their revenues were lower by at least 30% in the tax year. in relation to revenues obtained in the year immediately preceding this tax year;
3. in the tax year in which they started their business, and in the two consecutive tax years immediately following that tax year;
4. who are small taxpayers;
5. who obtained most of their operating income during the tax year in connection with:

– operation of ships or aircraft in international transport;

– mining of minerals listed in the annex to the Act – Geological and Mining Law

– performing medical activities referred to in Art. 3 of the Act on medical activities

6. being companies running municipal services;
7. which are mining enterprises receiving public aid under the Act on the Operation of Hard Coal Mining;
8. being financial enterprises;
9. declared bankrupt or liquidated, or subject to restructuring proceedings;
10. being a financial institution whose core business is the provision of services consisting in the paid purchase of receivables from a creditor resulting from the conclusion of an agreement for the sale of goods or the provision of services between the creditor and the debtor.

Tax base and rate

The minimum tax base is one of the following values:

• The sum of the elements listed below, i.e.:

– the amount of 1.5% of revenues from sources other than capital gains achieved in a given tax year;

– costs of intangible services incurred directly or indirectly to related entities or from tax havens or costs of acquiring specific services or intangible rights, to the extent that their value exceeds 3 million PLN and 5% of tax EBIDTA;

– the amount of debt financing costs incurred for related entities in the part exceeding 30% of tax EBIDTA;

• An amount corresponding to 3% of the value of income obtained in the tax year from a source of income other than capital gains.

The taxpayer has the right to choose one of the above-mentioned methods of calculating the minimum tax base.

The minimum income tax is 10% of the tax base.