Corporate Income Tax in Poland

Last updated: 16.01.2025

What you need to know about CIT – general information, rates and deadlines

Income is generally subject to 19% CIT.

Income should be calculated as a difference between revenue and tax deductible costs. If the difference between revenues and tax deductible costs is negative, a taxpayer will declare a tax loss.

Tax deductible costs are expenses incurred to generate revenue from a source of revenue or to maintain or secure a source of revenue, with the exception of costs listed as non-tax deductible costs.

How does the reduced 9% CIT rate work?

From 2019, a 9% CIT rate have been introduced for the revenues (incomes) other than from capital gains – in the case of the taxpayers as regards which the revenues earned in a tax year did not exceed an amount denominated in PLN being the equivalent of EUR 2 million converted at the average EUR exchange rate announced by the National Bank of Poland as at the first business day of the tax year.

It should be noted that the taxpayers mentioned above shall apply the 9% tax rate if they have the status of a small taxpayer. A small taxpayer is a taxpayer in whose case the value of revenue from sales (including the amount of output goods and services tax) did not exceed in the preceding tax year an amount denominated in PLN being the equivalent of EUR 2 million; amounts denominated in EUR shall be converted at the average exchange rate of EUR announced by the National Bank of Poland as at the first business day of October of the preceding tax year.

Are there any exceptions for small taxpayers?

However, the condition of having a small taxpayer status shall not apply to the taxpayers commencing the business activity, in the year of the commencement of such activity. This means that they can use 9% CIT rate until exceeding the EUR 2 million revenue threshold in the first tax year. Taxpayers created as a result of certain restructurings cannot apply 9% CIT rate in some of the situations.

Reporting deadline – CIT tax return deadline

Taxpayers are required to submit their annual tax return, detailing income or loss for the given tax year, by the end of the third month of the following tax year. If the taxpayer’s tax year aligns with the calendar year, the deadline is March 31 of the next year. The tax due must also be paid by that date.

What are the sources of revenue and rules for tax losses?

Under the CIT Act, there are two sources of revenues:

• from capital gains (including e.g. profit distributions, such as dividends, revenue from disposal of shares, revenue from reorganisations, such as mergers, divisions, in-kind contributions etc.);
• from other sources (so-called operational / business activities source of revenue).

Income / loss from particular sources is subject to separate settlement and cannot be offset against each other.

A tax loss incurred in one tax year may be carried forward and settled over the following 5 tax years, provided that:

• the amount of loss deducted from income in any one year of these 5 years may not exceed 50% of that loss, or
• it is possible to make a one-time reduction of income in one of these 5 years by an amount of up to PLN 5 million, and the remaining amount of that loss is deductible in subsequent years of the 5-year period – with the provision that the amount of loss deducted in any one of the subsequent years may not exceed 50% of that loss.

As a general rule, when determining taxable income, losses of entrepreneurs undergoing transformation, merger, acquisition or division are not be taken into account.

In order to limit the practice of taxpayers utilizing losses of another entity to reduce their own tax liabilities, further restrictions have been introduced.

According to the rules in force from 1 January 2021, when determining taxable income, a taxpayer’s losses shall not be taken into account if the taxpayer has acquired another entity or acquired an enterprise or an organized part thereof, including by way of an in-kind contribution, or received a cash contribution used to acquire an enterprise or an organized part thereof, resulting in either:

• the actual core business activity conducted by the taxpayer after such acquisition, in whole or in part, is different from the actual core business activity conducted by the taxpayer before such acquisition, or
• at least 25% of the taxpayer’s shares are held by an entity or entities that did not hold such rights on the last day of the tax year in which the taxpayer incurred such loss.

How does interest deductibility work for CIT?

The repayment or capitalisation of the interest from a loan (i.e., adding it to a principal amount of a loan) generally should constitute tax deductible costs for the taxpayer on cash basis – i.e. at the moment of a repayment / capitalisation.

Interest from loans obtained for the purpose of acquisition/production of fixed assets or investment assets that accrues during the development/investment phase increases the initial value of these assets. It becomes tax-deductible either through depreciation write-offs (for fixed assets) or when the investment asset is sold. This rule applies to all interest accrued during the development/investment phase (regardless of whether it has been paid or not). Its repayment can be made before or after putting the asset into use/completing the investment, and it makes no difference from a CIT perspective.

For interest accrued after putting a fixed asset into use or completing the investment, it must be paid/capitalised to be treated as tax-deductible cost.

All tax deductible interest expenses (whether included in the tax result through depreciation write-offs, cost of investment assets sold, or on an “ongoing basis”) are subject to the debt financing costs limitations (e.g. thin capitalisation limitation).

Obligations in respect of WHT always arise at the time of repayment/capitalisation of interest (more below).

Debt financing costs limitation – so-called thin capitalisation

Costs of debt financing (both resulting from intra-group and external financing) are excluded from tax deductible costs in part in which the surplus of costs of debt financing over interest-type revenues (Surplus) exceeds 30% of tax EBITDA or the amount of PLN 3 million.

Based on the provisions, the limit should be determined at higher of the two values: PLN 3 million or 30% tax EBITDA.

Costs of debt financing are all kind of costs related to obtaining and using funds from other entities (also from unrelated parties, including banks) in particular:

• interest (also capitalised and added to initial value of fixed and intangible assets);
• fees, commissions, premiums;
• interest being part of leasing instalments;
• penalties and charges for delay in payment of liabilities;
• costs of collaterals securing liabilities (including derivatives);
• f/x differences.

How is tax EBITDA calculated under thin capitalisation rules?

For the purpose of thin capitalisation, tax EBITDA is calculated using the following formula: [(R – Ri) – (C – D – Df)] × 30%, where:

R = total taxable revenues from all sources

Ri = interest-type revenues

C = total tax-deductible costs before any adjustments under this article

D = tax-deductible depreciation and amortisation write-offs

Df = tax-deductible debt financing costs not included in the initial value of fixed assets or intangible assets, before any adjustments under this article

The result of this formula multiplied by 30% determines the limit up to which debt financing costs can be recognized as tax deductible in a given tax year.

It should be noted that thin capitalisation restrictions apply also to interest capitalised and added to initial value of fixed assets and recognised as costs through depreciation write-offs.

All interest which is not deducted in a given year due to thin capitalisation limitations may be fully deducted in five subsequent tax years – within limits binding in these years. Some exceptions apply, including lack of possibility to carry forward interest in the case of merger, demerger or transformation forward interest in the case of merger, demerger or transformation.

The CIT Act also contains a possibility of limitation of interest-type costs deductibility on the basis of the transfer-pricing provisions, e.g. in the case of stating that debt in a company is too high compared to equity.

Generally, in the case The Polish tax authorities would assume that costs of debt financing exceed market creditworthiness of the taxpayer (value of the financing, which could be granted by unrelated parties), the Polish tax authorities may determine the taxpayer’s income / loss excluding part of the interest from tax deductible costs for CIT purposes. If the interest rates on intragroup financing between related parties are set at a non-market level, then the tax authorities may also question their deductibility.

Interest on financing granted with respect to long-term public infrastructure projects is not subject to the limitation.

There are also limitations resulting from hybrid mismatch regulations (please see point “Hybrid mismatches”).

What should you know about initial value and depreciation?

Tax depreciation is allowed for fixed assets and intangible assets with an initial value exceeding PLN 10,000, subject to specific conditions under the CIT Act.

General principles of tax depreciation:

• depreciation write-offs are tax-deductible costs;
• the straight-line method is the primary method of depreciation;
• annual depreciation rates are specified in the CIT Act;
• initial value is generally based on acquisition price or production cost;
• monthly write-offs start from the month following the month when the asset was put into use.

Special depreciation methods available:

• reduced rates (the taxpayer may apply lower rates than standard);
• increased rates (for specific assets used in deteriorating conditions);
• one-off depreciation (for small taxpayers and start-ups, up to PLN 50,000 annually);
• individual rates (for used or improved fixed assets).

Specific asset considerations:

• land and residential buildings / units are not subject to depreciation;
• buildings and structures should be depreciated separately from land;
• used or improved assets may qualify for increased rates;
• certain assets like passenger cars have specific value limitations;
• intangible assets have specific minimum depreciation periods.

The depreciation base (initial value) includes all costs incurred to make the asset ready for use, including:

• purchase price;
• transportation and installation costs;
• interest and FX differences during the investment period;
• improvement costs exceeding PLN 10,000.

What is the minimum CIT on commercial buildings?

The CIT Act provides for taxation of “revenue” from buildings that are:

• owned (or co-owned) by a taxpayer
• used based on rental, lease, or similar agreements
• located in Poland

The tax rate is 0.035% per month of the tax base, where:

• the “revenue” is determined as the gross initial value of the building as of the first day of each month;
• the tax base is the sum of “revenues” from all buildings decreased by PLN 10 million;
• for partially leased buildings, the revenue is calculated proportionally to the leased usable area;
• no revenue is determined if the leased area does not exceed 5% of total usable area.

Payment and settlement rules:

• tax is paid monthly by the 20th day of the following month;
• can be deducted from monthly/quarterly CIT advance payments;
• taxpayers may not pay the tax if it’s lower than monthly CIT advance payment;
• amount paid and not deducted during the tax year can be deducted from annual CIT.

If the annual CIT liability is lower than the building tax paid, excess amount can be refunded upon request after filing the annual CIT return (tax authorities however conduct some verification of the CIT settlements of the taxpayer prior to the refund).

Special provisions:

• exemption for residential buildings used under government social housing programs;
• specific rules for related entities regarding the PLN 10 million threshold;
• anti-avoidance rules for transfers of ownership/use aimed at avoiding taxation.

What is the minimum income tax?

In 2022 the new Minimum Income Tax was introduced. It is payable by CIT taxpayers, including tax capital groups. The provisions apply from 1 January 2024.

Minimum Income Tax applies to the below mentioned entities, which:

• report losses from the sources of income other than capital gains, or
• report the share of income in the revenues (other than capital gains) amounting to 2% or less.

For purposes of calculating the loss or the share of income in the revenues, the following positions shall not be considered:

• the costs resulting from acquisition, manufacturing or improvement of tangible assets which were included in the tax deductible costs, including via depreciation write-offs or the use of fixed assets under a lease agreement, if the depreciation write-offs are made by the lessee;
• the revenues and tax deductible costs related, directly or indirectly, to such revenues which were obtained or incurred, respectively, in connection with the transaction, if:
  • the price or the method of determining the price of the transaction results from the provisions of laws or normative acts issued on their basis, and
  • in the tax year, the taxpayer incurred a loss from the source of revenues other than capital gains from the transaction or achieved the share of incomes from the source of revenues other than capital gains in the revenues other than capital gains, resulting from such transaction, in the amount not exceeding 2 percent, such loss and share of incomes in revenues to be calculated separately for the transactions of the same type;
• the charges resulting from the leasing agreement recognised as tax deductible costs;
• revenue and tax deductible costs directly related to such revenue from the sale of receivables to a financial institution whose business purpose is to provide financial services involving the acquisition from a creditor of receivables arising from the sales agreement or the provision of services between that creditor and the debtor; an increase in the tax deductible costs from the purchase of electricity, heat or line gas, amounting to the excess between the tax deductible costs incurred on that account in the tax year for which the Minimum Income Tax is due and the tax deductible costs incurred on that account in the tax year immediately preceding that year;
• amounts paid for:
  • excise duty;
  • retail sales tax;
  • tax on games;
  • fuel duty;
  • emission charge;
• the amount of excise tax included in the price of excise goods purchased and sold by a taxpayer trading in such goods, which is included in revenue or tax deductible costs;
• 20% of the tax deductible costs incurred on social security contributions.

The rate of the Minimum Income Tax is 10% of the tax base which is calculated as the sum of:

• 1.5% of revenues from the sources other than capital gains in the tax year;
• debt financing costs, incurred to related entities (except where the relation arises exclusively from a relationship with the State Treasury or local government units or their unions), to the extent that such costs exceed 30% of tax EBITDA;
• costs regarding purchasing of some services and intangible rights from related entities or the entities having their registered seat in “tax haven” in the part exceeding 5% of tax EBITDA plus PLN 3 million.

A taxpayer may opt for a simplified method of determining the tax base which is an amount equal to 3% of the value of the revenue earned by the taxpayer in the tax year from a source of income other than capital gains. Taxpayers are required to report the tax base, deductions and the amount of minimum income tax due on their annual CIT return.

The amount of the Minimum Income Tax due is deductible from CIT calculated according to general rules for three subsequent tax years after the given tax year in which the tax was paid.

Who is exempt from the minimum income tax?

The Minimum Income Tax does not apply to i.e. taxpayers:

• starting their business activity (in the year in which they commence their activity and in two subsequent tax years);
• if obtained revenues in a tax year are lower by at least 30% in comparison with the revenues obtained in the tax year directly preceding that tax year;
• being part of the group consisting of two Polish tax resident companies, in which one company possesses for the whole tax year directly or indirectly 75% share in the capital of the other companies forming the group if:
  • the tax year of the companies is the same and
  • share of the total income of the companies in their total revenues is higher than 2%;
• who are small taxpayers;
• who have achieved a share of income in the revenues (other than capital gains) amounting to 2% or less in one of the three tax years immediately preceding the tax year for which the Minimum Income Tax is due;
• placed in bankruptcy, liquidation or under restructuring proceedings.
• being a financial institution.

Hybrid Mismatches – tackling tax inefficiencies across borders

From 2021, taxpayers are not allowed to recognise tax deductible costs or to exempt certain revenues, if these costs or revenues resulted from hybrid mismatches.

Hybrid mismatches may arise in result of different tax treatment of certain corporate structures (entities, companies) or instruments (financial instruments, PECs, bonds, loans, profit participating loans) in two or more countries.

Lack of the right to deduct or exempt will also apply to payments, which directly or indirectly finance hybrid mismatches. In result, if a hybrid mismatch arises several tiers above in the structure (i.e. between parent and grandparent companies / investors to the fund) and Polish company indirectly finances it, interest may be non-deductible in Poland. Such situation may arise if Polish debtor repays interest, from which parent company finances repayment of financial instrument, which is deductible for the parent company and for the recipient it is an exempt dividend.

Based on the Polish CIT provisions, the limitations on hybrid mismatch with apply to the costs which, directly or indirectly, serve to finance the expenditure giving rise to a hybrid mismatch through a transaction or series of transactions entered into between related parties or as part of a structured arrangement except to the extent that one of the states involved in the transaction or series of transactions has made an equivalent adjustment in respect of such hybrid mismatch.

In our opinion, this can be the most common application of hybrid mismatch provisions in Poland. In order to exclude arising such hybrid mismatches, an analysis of how the funds repaid from Poland are used in the subsequent transactions in the structure should be made.

Who qualifies as a related entity or structured arrangement under the CIT Act?

These restrictions and obligations shall occur only if the deduction without taxation or double deduction has been made by related entities or under a ”structured arrangement” within a meaning of the CIT Act.

A related entity shall mean:

• a legal person or an organisational unit having no legal personality in which the taxpayer holds, directly or indirectly, at least 25% of the shares in the capital or at least 25% of the voting rights in the control, decision-making or managing bodies or at least 25% of the right to participate in profits;
• an individual, a legal person or an organisational unit having no legal personality holding, directly or indirectly, in the taxpayer at least 25% of the shares in the capital or at least 25% of the voting rights in the control, decision-making or managing bodies or at least 25% of the right to participate in profits;
• a legal person or an organisational unit having no legal personality in which the entity referred to in point above holds, directly or indirectly, at least 25% of the shares in the capital or at least 25% of the voting rights in the control, decision-making or managing bodies or at least 25% of the right to participate in profits;

– however, in some cases the percentage of the share in the capital or voting rights in control, decision-making or managing bodies or the percentage of the right to participate in the profit amounts to at least 50%.

Also, members of a capital group obliged, under accounting provisions, to drawing up consolidated financial statements are treated as related entities.

A structured arrangement shall mean shall an arrangement making use of a hybrid mismatch where the mismatch is included into the terms of the arrangement or an arrangement that has been designed to produce a hybrid mismatch outcome, unless the taxpayer or a related entity could not reasonably have been expected to be aware of the hybrid mismatch and did not gain tax benefits resulting from this mismatch.

What is the tax on shifted income?

On January 1st, 2022 the new tax on shifted income entered into the force, which regulations then were amended (regulations in a current form are effective as of 1 January 2023). New form of taxation applies to CIT taxpayers having their seat or management office within the territory of Poland, which are subject to tax liability imposed on their total incomes, regardless of place of their achievement.

The tax on shifted income rate is 19% of the tax base understood as sum total of shifted incomes in a given tax year.

The tax is very complicated and raises many doubts, therefore only its key assumptions are presented in the following part. Verification in this regard always must be subject to thorough analysis.

Also, it is important to remember that the burden of proof that all of the condition stated below has been met lies with the Polish taxpayer which included the below mentioned costs in the tax deductible costs.

The shifted incomes are costs incurred by the taxpayer for the benefit of that taxpayer’s related parties, that do not have their seat or management office in the territory of Poland, given that the said costs had been included in the tax deductible costs during a tax year and i.a. the following conditions are met:

• related party’s income (revenue) earned on one of the grounds of enlisted sources (see below) is subject to taxation at the income tax rate lower than 14.25 % or is subject to exemption or exclusion from taxation with that tax;
• related party earns from the taxpayer or other companies (partnerships) having unlimited tax obligation in Poland (i.e. tax residents in Poland) which are that taxpayer’s related parties on the grounds of enlisted sources below, at least 50% of total revenues determined pursuant to the provisions on income tax or the provisions on accounting;
• related party transfers, in any form, at least 10% of the revenues referred to in point above for the benefit of another entity;;
• the sum of the costs referred to in enlisted point below, which were incurred by the taxpayer and were included in that taxpayer’s tax deductible costs accounts for at least 3 % of the sum total of that taxpayer’s tax deductible costs.

The costs that can fall within the range of the shifted income consist of:

• intangible services (e.g. advisory, advertisement, management and the services of a similar nature);
• royalties;
• costs of transfer of risk of insolvency;
• debt financing costs (including interest paid and capitalised);
• remuneration for transfer of functions, assets or risks.

The conditions of the shifted incomes are also deemed to be met, if e.g. the costs included in the tax deductible costs were incurred for the benefit of the taxpayer’s related party having its seat the so-called tax haven.

Shifted income tax is settled and paid annually by the end of the third month after the end of the tax year and does not cumulate with other income (revenues) and losses of the taxpayer (i.e. cannot be lowered).

When does the tax on shifted income not apply?

The tax on shifted income does not apply if e.g.:

• the receiving company is based in the EU or EEA (European Economic Area),
• the company conducts real, substantial business activities there.

In determining whether a related entity is engaged in genuine business activity, particular consideration should be given to whether the company has:

• actual office space and business premises;
• qualified employees;
• business equipment;
• control over its own money;
• real financial risk in its operations.

The above stated rules apply accordingly also to e.g.:

• foreign companies with permanent establishments in Poland;
• situations where money is passed (e.g. through partnerships) to other related companies;
• cases where payments go through non-European companies to reach related companies.

Estonian CIT – a flexible taxation model for businesses

Estonian CIT regime, also referred to as lump-sum CIT, is a form of corporate income taxation introduced in 2021. It allows taxpayers subject to CIT to defer their tax payments on profits for four or more years, until those profits are actually distributed as dividends. This “Estonian” CIT option is available to limited liability companies, joint-stock companies, simple joint-stock companies, as well as limited or limited joint-stock partnerships, provided that their shareholders or partners are solely individuals.

In order to apply the lump-sum CIT regime, companies must meet certain criteria. For instance, the company must not hold shares in other entities, and its passive income must not exceed its operating income.

Once this taxation method is selected, it remains in effect for four years. After this initial period, provided that all requirements continue to be met, the lump-sum CIT regime may be extended.

In order to apply the Estonian CIT regime, the company must submit the ZAW-RD form by the end of the first month of the first tax year in which it will be subject to Estonian CIT.

The tax rate for small taxpayers and for those commencing business operations under these conditions is 10% of the taxable base. For all other taxpayers, the tax rate is 20% of the taxable base.

• The tax on dividends paid out by a company taxed under the Estonian CIT regime is subject to preferential treatment, meaning it is reduced by:
  • 90% of the company’s due tax attributable to the shareholder’s stake, in the case of a distribution from a small taxpayer company;
  • 70% of the company’s due tax attributable to the shareholder’s stake, in the case of a distribution from a non-small taxpayer company.

The taxable base under the Estonian CIT regime comprises:

• the total income from distributed profits and income from profits allocated to cover losses, determined in the tax year in which the resolution on distributing or covering the net financial result was adopted;
• the total income from hidden profits and from expenses not related to the business activity, determined in the month the performance, payment, or expenditure was made;
• income from changes in the value of assets, earned in the month in which a merger, division, transformation of entities, or a non-monetary contribution occurred;
• income from net profits, earned in the tax year in which lump-sum taxation ended;
• income from undisclosed business operations, earned in the tax year.

Polish Holding Company (PSH)- tax advantages and conditions

The Polish Holding Company (PSH) was introduced into Polish tax law in 2022. It allows for the exemption of dividends and capital gains from taxation.

One of the main advantages of the PSH model is the 100% exemption from taxation of dividend income received from a subsidiary. In addition, income received by a PSH from the disposal of shares (stocks) of a subsidiary to an unrelated party is exempt from taxation – with the reservation that in the assets of the subsidiary (indirectly/indirectly) real estate represents no more than 50%.

This exemption also applies to dividends received by Polish holding companies from non-EU/EEA/Swiss entities, provided these entities are not located in tax havens.

The CIT Act provides a series of conditions that must be collectively fulfilled by both holding companies and their subsidiaries, including but not limited to:

• the entity must be incorporated as a limited liability company, joint-stock company, or simple joint-stock company;
• for the holding company: maintaining at least a 10% share (equity) in the subsidiary for a minimum of two years; conducting genuine business activities (a requirement analogous to the provisions related to withholding tax concerning the recipient of payments or controlled foreign companies provisions); having no shareholders (directly or indirectly) registered in tax havens;
• for the subsidiary: not meeting the criteria to be classified as a Controlled Foreign Corporation;
• for both the holding company and the subsidiary: not being part of a tax capital group.

Bad debt relief – a CIT mechanism for managing tax bases

The CIT Act provides for a bad debt relief mechanism that affects the tax base calculation:

• For creditors:

• • • may reduce their tax base by the value of receivables that have not been settled or disposed of within 90 days from the payment deadline;
    • must increase their tax base once the payment is received;

• For debtors:

• • must increase their tax base by the value of liabilities not settled within 90 days from the payment deadline;
  • may reduce their tax base when the liability is settled.

The relief applies when:

• the transaction is made in the course of business activity;
• the receivable was recognized as taxable revenue;
• neither debtor nor creditor is in bankruptcy/liquidation;
• no more than 2 years have passed since the invoice date v. both transaction parties are CIT/PIT taxpayers.

The relief is excluded for:

• transactions between related parties;
• cases of set-offs and compensations.

The adjustment is made:

• in the tax return for the year in which 90 days from the payment deadline have passed;
• in the return for the subsequent period in case of payment/non-payment.

FAQ – Corporate Income Tax rates in Poland