The minimum income tax, introduced in the CIT Act as of January 1, 2022, from the beginning has raised doubts and controversy among taxpayers. Recently, however, there has been hope for business conducted in Poland to change the unfavorable regulations. The Minister of Finance has published a draft law that postpones the application of the minimum income tax for a year and significantly modifies the regulation, limiting its scope of application.
So what awaits taxpayers from next year?
WHAT IS THE MINIMUM INCOME TAX
- A tax imposed on taxpayers (companies and tax capital groups) with seat or management in Poland, which have incurred a loss or have achieved a low ratio of income to revenue (low level of profitability).
- The tax rate is 10% of the tax base, which is 4% of operating income.
- Obligation to calculate the tax amount in the annual tax return (no obligation to calculate the minimum tax during the year at the stage of advance payments).
PROPOSED AMENDMENTS
Postponement of the application of the minimum income tax until January 1, 2023. As a result, taxpayers will not be required to calculate the minimum tax in the annual tax return for 2022.
Modification of the current wording of minimum income tax by:
- Extension of the catalog of entities excluded from the scope of application of the minimum tax to, among others, small taxpayers, entities conducting medical activities, taxpayers in bankruptcy and entities whose profitability is at least 2% over 3 tax years.
- Increasing the profitability ratio that determines whether taxpayers are subject to the minimum income tax calculation from 1% to 2%.
- Change in the calculation of the tax: extension of the catalog of costs to be excluded, in particular, the cost of lease payments for fixed assets and the value of excise taxes.
- The taxpayer’s ability to choose an alternative way of determining the tax base: 4% of operating income or 2% of income plus passive costs, i.e. debt financing and intangible services.
Consequences for taxpayers
The planned changes to the CIT Act are beneficial to taxpayers although the provisions in their new wording continue to raise interpretive questions.
Taxpayers will have an additional year to prepare for the entry into force of the new regulations, and they will pay the minimum income tax only by the deadline for filing their tax return for 2023 (i.e. by the end of March 2024). At the same time, it is not impossible that the MF will make further changes to the regulations by then.
We will keep you informed about further changes to the minimum income tax.
If you are interested in our support on the minimum income tax, please contact our experts:
Paweł Jóźwik
Senior Manager
E: pjozwik@asbgroup.eu
Paulina Malendowicz
Senior Tax Consultant
E: pmalendowicz@asbgroup.eu
Igor Zwolak
Junior Tax Consultant
