he minimum Corporate Income Tax (CIT) is being reinstated

Wraca minimalny podatek dochodowy CIT

The minimum Corporate Income Tax (CIT) was introduced in 2022 as part of the ‘Polish Deal,’ but its implementation was postponed until 2024. According to the current legal status, companies will pay the minimum tax only in 2025, during the settlement of income for the entire year 2024. Companies should already take into account the risk of being subject to the minimum tax. The tax burden may affect many entrepreneurs who do not artificially distribute profits abroad for tax optimization but simply do not exceed the 2% profitability threshold required by the regulations due to the specific nature of their business. An example may be trade sectors where companies deal with high-value goods, but the net profit, after deducting the costs of obtaining it, is disproportionately low as a percentage of the turnover.

What is the minimum Corporate Income Tax?

The tax applies to companies with their registered office or management in Poland, as well as tax capital groups and entities without a registered office or management in Poland but conducting business through a foreign establishment located on its territory (in terms of revenue generated by that establishment). Entities incurring losses from sources other than capital gains or showing low income from operational activities, i.e., not exceeding 2% of revenues (low profitability), are subject to the minimum CIT.

It is worth noting that the minimum CIT will not apply to, among others:

  • Small CIT taxpayers (entities with annual gross revenues not exceeding the equivalent of EUR 2,000,000).
  • Companies engaged in communal economy.
  • Entities where the majority of their revenues come from transactions where prices or their determination arise from laws or other normative acts.
  • Entities that are parties to a cooperation agreement with the National Revenue Administration.

How to calculate the minimum Corporate Income Tax?

Calculating the tax base for the minimum tax can be challenging. To determine the profitability threshold (to check if a company is subject to the minimum tax at all), determining the tax result on general principles will not be sufficient. This is because specific exclusions from costs and, in some cases, from revenues mentioned in Article 24ca (2) of the Corporate Income Tax Act must be made. For example, the increase in the costs of obtaining revenue from the purchase of electricity, heat, or natural gas is not taken into account, representing a positive difference between the costs of obtaining revenue incurred for this purpose in the tax year for which the minimum income tax is due and the costs of obtaining revenue incurred for this purpose in the tax year directly preceding that year.