Amendment to the CIT Act signed by the President

Amendment to the CIT Act signed by the President

Amendment to the CIT Act signed by the President
On 21 October 2022, the President signed an amendment to the CIT Act, which will delay the entry into force of the minimum tax provisions by two years. What other changes for entrepreneurs will come into force?

The great part of the regulations of the CIT Act amendment signed by the President is beneficial for entrepreneurs. One of the most important modifications is the postponement until 1 January 2024 of the entry into force of the provisions on minimum income tax. The provisions on the documentation obligation for the so-called indirect paradise transactions, will also change.

Amendments to the CIT Act - major changes for companies

There are several provisions of particular importance to entrepreneurs among the many modifications introduced by the amended Act of 7 October 2022 modifying the Corporate Income Tax Act and certain other acts:

  • Suspension of the minimum CIT provisions for two years, i.e., from 1 January 2022 to 31 December 2023,
  • Changes to the minimum tax provisions, from 2024 an increase to 2%, among other things, of the profitability rate, with a change to the tax calculation methodology,
  • Repeal of the application of the hidden dividend provisions (they were to come into force on 1 January 2023),
  • Documentation obligation in indirect paradise transactions in a reduced scope, no need to verify counterparties, retroactive effect from 1 January 2021,
  • Abandoning the quarterly update of the individual data of large taxpayers made public, in favour of an annual update by 30 September,
  • Amendment of the regulations on foreign controlled entities (CFCs), including the introduction of provisions eliminating double or multiple taxation of CFCs if dividends are cascaded in holding structures, not including the reliefs and exemptions listed in the CIT Act in the calculation of a foreign entity's income,
  • Withholding tax (WHT) - changes to, inter alia, the filing of declarations, the original payer's declaration to be filed no later than the last day of the second month following the month in which the PLN 2 million limit was exceeded, and a follow-up declaration to be filed by the last day of the month following the end of the tax year,
  • Change in accounting for debt financing costs - debt financing costs excluded from deductible costs to the extent to which debt financing cost surplus exceeds the higher of the amounts indicated:
  • the amount of PLN 3 000 000 or,
  • the amount calculated according to the formula indicated by the legislator.
  • An amendment to the Polish holding company (PSH) provisions providing for:
    • amending the definition of a subsidiary - a subsidiary may own shares in partnerships as well as hold more than 5% of the capital of other companies,
    • allowing subsidiaries within the PSH to benefit from the exemption provided for the Special Economic Zone or the so-called Polish Investment Zone,
    • clarification of the provisions regarding, inter alia, 1 year of holding company ownership of shares in subsidiaries,
    • a holding company may be a simple joint stock company, an extension of the catalogue of legal forms for PSH,
    • introducing a 100% dividend exemption (currently an exemption for 95% of dividends),

Learn more: Entry into force of the holding law

  • Amendment of the provisions relating to the flat-rate taxation on company income, including:
    • the deadline for a taxpayer to submit a notice of choosing flat-rate taxation on company income (ZAW-RD) is by the end of the tax year accepted by a taxpayer,
    • the tax liability due to the so-called initial correction expires entirely after at least one full flat tax period, i.e., 4 tax years,
    • if the tax on the income from the restructuring is paid in full, the taxpayer shall pay the tax by the deadline provided for the submission of the CIT-8 return for the tax year preceding the first year of flat-rate taxation,
  • the deadline for payment of the flat rate on income from net profit and distributed profit and income from profit to cover losses - by the end of the third month of the tax year (following the year in which the resolution to distribute or cover net profit was adopted), non-business expenses exclude depreciation and amortisation expenses and impairment losses in connection with the use of, for example, passenger cars:
  • at 50% (for assets other than those used exclusively for business purposes),
  • at full value (for assets used exclusively for business purposes).

The Act of 7 October 2022 amending the Corporate Income Tax Act and certain other acts was published in the Official Journal on 25 October 2022.

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Agata Nieżychowska
Agata Nieżychowska
Tax Director