On August 12, the Government Legislation Center published a draft amendment to the CIT Act, aimed at introducing the so-called Estonian CIT. The Ministry of Finance intends to provide taxpayers with a new model of tax settlement in capital companies with tax preferences for companies making investments from 1 January 2021. Over 5 billion PLN are to be left in the pockets of taxpayers.

The draft provides for two alternative income taxation options that can be used by the taxpayer. The first is a lump sum on the income of capital companies, which, in principle, simplifies the taxation rules and postpones the obligation to pay the tax until the profit is paid out. The second option concerns the creation of a special investment fund that will enable faster settlement of depreciation of fixed assets in tax costs.

The lump sum on the income of capital companies will be addressed to small and medium-sized capital companies that meet the following criteria:

  • the company’s revenues do not exceed PLN 50 million during the year;
  • the shareholders of the company are only natural persons;
  • the company has no shares in other entities;
  • the company employs at least 3 employees, excluding shareholders;
  • passive income does not exceed operating income;
  • the company shows investment expenses

What investment expenses will entitle to a lower tax?

The investment expenses will include: expenditure on the purchase of brand new fixed assets or the production of fixed assets, but only included in group 3-8 of the Fixed Assets Classification, excluding passenger cars, air transport, floating rolling stock and other assets used mainly for the personal purposes of shareholders or members of their families.

In order to take advantage of tax preferences, a taxpayer taxed with a lump sum will be obliged to incur direct investment expenses in the amount higher by:

1) 15%, but not less than PLN 20,000 in the period of two consecutive tax years of lump sum taxation, or

2) 33%, but not less than PLN 50,000 in the period of four tax years.

The new taxation model is to enter into force on 1 January 2021.