Minimum CIT from 2024

Minimum CIT - suspension for 2022-2023

The draft of changes to the CIT Act adopted by the Council of Ministers is intended to clarify the existing solutions. The proposed changes relate in particular to the reduction of administrative obligations on the part of taxpayers and are a response to numerous signals from small, medium and large enterprises.

One of the most significant changes designed to adapt the tax system to the realities of doing business in Poland concerns the suspension of the entry into force of the minimum corporate income tax - minimum CIT - for two years, until 2024.

The draft bill amending the CIT Act has been approved by the Council of Ministers and is awaiting further proceedings.

Minimum CIT - what is it and who does it apply to?

The minimum corporate income tax is the so-called company tax introduced as of January 2022 and implemented by the so-called "Polish Order". The rate of the minimum CIT is 10 per cent of the tax base, which consists of the total of the income amount, the cost of debt financing, the value of deferred income tax and costs such as, for example, advisory services.

The minimum CIT applies to companies - legal entities which:

• have recorded a loss from a source of income other than capital gains, or
• have recorded a share of income from a source of income other than capital gains, in income other than capital gains, of not more than 1%.

Additionally, the minimum corporate tax applies to entities:

• with registered office or management in the territory of the Republic of Poland,
• that are tax capital groups
• conducting activity through a foreign permanent establishment located in the territory of the Republic of Poland.

Thus, the condition of being subject to tax liability in Poland is important for foreign entities and the condition of incurring losses or low income in income other than capital gains for all both foreign and domestic companies.

However, the legislator has provided for certain exclusions in the application of the minimum CIT. The tax on companies does not apply, among others, to taxpayers commencing their business activity in a given year, financial enterprises created as a result of a transformation, merger or division, through the contribution of the entire enterprise, an organised part of the enterprise or assets, companies whose shareholders or partners are exclusively natural persons.

Moreover, it is possible to deduct the minimum CIT paid in 3 consecutive years after the year in which the payment of this tax took place.

At present, no entity has yet paid the corporate minimum tax, as this tax is settled within the CIT return - the annual corporate tax return.