Special Investment Fund – Tax Optimization


Capital companies that meet the requirements for the so-called Estonian CIT but choose not to use this form of taxation have an alternative option for legal tax optimization called a special investment fund. In summary, this mechanism allows for a one-time deduction of future investment expenses as tax-deductible costs. Establishing and utilizing a special investment fund requires meeting several formal criteria. In this post, you will learn how to immediately reduce taxes in a capital company.

How to Create a Special Investment Fund?

First and foremost, it’s important to note that a special investment fund is an alternative to Estonian CIT, and both instruments cannot be used simultaneously. A company can establish a fund if it:

  1. Generated revenue from its activities in the previous tax year below 100 million PLN.
  2. Less than 50% of its revenue comes from receivables, loans, etc.
  3. Employs at least 3 people.
  4. Its shares or stocks are solely owned by individuals.
  5. The company does not hold shares or stocks in the capital of another company.

Additionally, the taxpayer must set up a dedicated bank account for transferring monetary funds to the investment fund.

What Tax Benefits Does a Special Investment Fund Provide?

By transferring funds from profits earned in the previous tax year to a special investment fund, a capital company can immediately deduct the allocated funds as tax-deductible expenses. This, in turn, reduces taxation in the tax year of the transfer. The transfer to the special investment fund is made through a reserve capital write-off from the profit of the previous tax year. One condition for using this form of tax optimization is that the capital company has earned a profit.

However, it’s important to note that the funds transferred to the special investment fund cannot remain idle in a bank account; they must be spent for investment purposes in the tax year of the write-off or the following tax year, with the possibility of extending the deadline to up to 3 years. These funds can be used for the acquisition and production of fixed assets or leasing payments (except for operational leasing) for the portion related to the initial value of the fixed asset.

In contrast to Estonian CIT, creating a special investment fund does not preclude taking advantage of other tax preferences outlined in the Corporate Income Tax Act (such as the R&D tax credit) nor does it exclude the ability to offset tax losses.