11 April 2024

Minimal CIT – tax rate and subjects

Starting in 2024, CIT taxpayers who report a loss or have significantly low income for a given tax year will be subject to the minimal CIT tax. This minimum tax is an additional liability that operates alongside other CIT obligations and cannot be replaced. If you are eligible for both the basic CIT and minimal CIT obligations, the amount payable for the basic CIT will be reduced by the value of the minimum CIT.

Provisions introducing the minimal income tax were added to the draft “Polish Deal” after public consultation.

If a taxpayer pays the minimal tax, they will be able to deduct it from the traditional Corporate Income Tax (CIT) in their tax returns for the next three years. The regulations for this introduction came into effect on January 1st, 2022, but were amended and their application was suspended until December 31st, 2023.

Minimal CIT – statutory definition

The minimum Corporate Income Tax (CIT) of 10% is imposed on companies that have their registered office or management located within the territory of the Republic of Poland. Such companies are subject to tax liability on all their income, regardless of where it is earned. Moreover, tax capital groups are liable to pay the minimum CIT if they incurred a loss from a source of income other than capital gains or earned a share of income from a source of income other than capital gains (as defined by law) which is not more than 2% of the total income.

Who it will cover, who it will not

The minimal tax is to apply to all of the following companies (whose partners are not exclusively individuals or tax capital groups, and have Polish tax residence):

• limited liability companies, 
• joint stock companies, 
• simple joint stock companies, 
• limited partnerships, 
• limited joint-stock partnerships,
• general partnerships, 

The minimum tax can be a burden for companies operating in sectors with low profitability or experiencing periodic losses, such as industries related to hospitality services, transportation, real estate, industry, processing, wholesale and retail trade, and construction.

The new tax liability generally covers larger CIT taxpayers. However, there are statutory exceptions. Which taxpayers are not subject to the tax?

• New taxpayers (starting business, 3 years).
• Financial companies.
• Taxpayers showing a decline in revenues (revenues in the tax year are at least 30% lower than those earned in the immediately preceding tax year).
• Taxpayers operating in a simple organizational structure.
• Taxpayers operating aircraft and sea vessels in international transport, engaged in mineral extraction, mining companies, and taxpayers performing medical activities.
• Taxpayers engaged in transactions covered by regulated prices.
• Capital groups.
• Small taxpayers.
• Companies engaged in municipal activities.
• Taxpayers with historically high profitability.
• Taxpayers in bankruptcy, liquidation, or under restructuring.
• Factoring institutions.

Minimal CIT – tax base

According to the wording of the law, the tax base first includes 1.5% of the value of income from sources of income other than capital gains that the taxpayer earned in the tax year.

The tax base also includes debt financing costs, as defined, incurred for the benefit of related parties (does not apply to ties with the State Treasury or local government units), the value of which exceeds the threshold set by the legislator.

The threshold for the value of financing costs shall be determined in the amount of EBITDA calculated based on the formula specified in the law.