Minimum income tax 2025 in Poland – payment deadline is March 31st

From 2024, some entities taxed under the classic CIT are obliged to pay the minimum tax. Who is affected by this obligation and what are its consequences?

Minimum tax, what is it and who is affected?

The minimum income tax is a new, parallel form of taxation in addition to the regular CIT. According to the new regulations, the obligation to pay regular CIT may occur as a minimum tax.

Who is affected by the global minimum tax?

According to Article 24ca of the CIT Act, the minimum tax of 10% of corporate income includes:

• a company with its registered office or management board in the territory of the Republic of Poland, which is subject to tax on its entire income, regardless of where it is earned,
• tax capital groups which, in a given tax year:
  • incurred a loss from sources of income other than capital gains
  • or achieved a share of income from sources of income other than capital gains (specified in the regulations) in income other than capital gains not exceeding 2%.

If the income-to-revenue ratio is less than 2%, the taxpayer will be required to pay minimum tax.

The following, among others, qualify for up to 10% of the minimum tax:

• limited liability companies,
• joint-stock companies,
• simple joint-stock companies,
• limited partnerships,
• joint-stock limited partnerships,
• some business Partnerships, if their partners are not exclusively natural persons
• tax capital groups with tax residence in Poland that meet certain conditions described in the CIT regulations.

Can the minimum tax be deducted?

According to the CIT Act, it is possible that a CIT taxpayer incurs a tax liability for regular CIT and minimum tax in one year. In this case, the legislator has provided for the possibility for the taxpayer to deduct the minimum tax from the regular CIT.

The taxpayer will be able to deduct it from the ordinary CIT in the tax returns submitted for the next 3 tax years.

When does the minimum tax come into effect?

The first year covered by the new regulations is 2024.

If the taxpayer has a tax year other than the calendar year (starting before January 1, 2024 and ending after December 31, 2023), the minimum tax does not apply to them until the end of this tax year (Article 38ec (2) CIT).

Who is exempt from the minimum tax?

Exempt from the minimum tax are individual income taxpayers, regardless of the form of taxation. Small taxpayers whose annual gross sales revenue does not exceed 2 million euros will not pay the minimum tax. The exemption also applies to taxpayers starting their business activity—in the year of commencement and the following two tax years—as well as those benefiting from the Estonian CIT.

Are foreign companies subject to the minimum tax?

The minimum tax also applies to non-residents when they conduct business in Poland through a foreign establishment.

In the case of an establishment, the minimum tax will only apply to income and losses related to the activities of that establishment.

How is the minimum tax calculated?

The minimum income tax is 10% of the tax base. How is it calculated?

The tax base is 1.5% of the value of income from sources other than capital gains earned by the taxpayer in the tax year.

Debt financing costs within the meaning of Article 15c(12) of the CIT Act, i.e. incurred for the benefit of related entities, should also be added to the tax base.

The legislator has also provided for numerous exemptions and deductions. Therefore, to calculate the minimum tax, a different method of calculation than the classic CIT will have to be used.

This is due, among other things, to the exclusion of fixed asset lease payments from tax-deductible expenses.

The legislator has also provided for the possibility for the taxpayer to choose a simplified method of determining the tax base, which is the amount corresponding to 3% of the value of income earned in the tax year from sources other than capital gains.

However, the taxpayer must inform the competent tax authority of the choice of this simplification in the tax return submitted for the tax year in which the choice is made.

By when must the minimum tax be paid?

The legislator does not provide for the payment of advances during the tax year in the CIT Act.

The minimum tax payment obligation is due at the end of the third month of the following year, i.e. by March 31, 2025 for the year 2024.

Do you need help?

Every CIT taxpayer should review their situation to see if they are affected by the new regulations and how they can optimize their tax liabilities.

Contact our law firm to analyze your situation and implement the appropriate measures. We provide professional advice and support!