The latest version of the amendment to the tax acts under the so called “Polish Deal” provides for the introduction of a new burden on corporations, tax capital groups and permanent establishments of foreign entrepreneurs.
In principle, the tax is to be imposed on entities which (i) incur tax losses from operating activities or (ii) show low tax profitability from such activities (below 1%). Importantly, depreciation write-offs and costs resulting from acquisition or improvement of fixed assets are not taken into account in determining these figures.
The tax base was determined as the sum of the following components:
- 4% of the taxpayer’s operating taxable revenues (other than from capital gains),
and so-called excess passive payments, consisting of:
- debt financing costs incurred to related parties in excess of 30% of taxable EBITDA calculated according to a statutory formula,
- deferred income tax arising from the disclosure of intangible assets to the extent that it results in an increase in gross profit/ decrease of loss
- costs of purchase of specific services or intangible rights incurred directly or indirectly from related parties (or entities from a country or territory applying harmful tax competition) which exceed by PLN 3 million the value of 5% of tax EBITDA calculated in accordance with the statutory formula.
The latter element of the minimum tax base is to replace the current mechanism arising from Article 15e of the CIT Act, limiting the possibility of classifying as tax deductible costs the expenses for a specific catalog of management, advisory and guarantee services, etc. up to the level of PLN 3 million increased by 5% of the taxable EBITDA.
There are certain values reducing the tax base foreseen, like allowances with certain reservations, as well as the income which is included in the calculation of the tax exempt income for the activity in PSI, for a taxpayer benefiting from such tax exemptions.
The minimum income tax will effectively consist of two parts:
- 0.4% of taxable operating revenues
- 10% of excess passive payments to group affiliates
Taxpayers liable to pay minimum income tax will report the tax base, deductions and the amount of minimum income tax in their annual return.
The amendment also provides for a mechanism to deduct the minimum tax paid from the 'regular’ tax in a given annual return and for the following 3 tax years.
The proposed entities excluded from the minimum tax are:
1) start-ups in the year of commencement and two tax years thereafter
2) financial companies
3) entities that have earned revenues that are at least 30% lower than the revenues earned in the tax year immediately preceding that tax year
4) entities whose shareholders or members are exclusively natural persons and do not hold shares/units in other entities,
5) entities in which most of operating revenues in a given tax year was obtained in connection with i) operation of ships or aircraft in international transport, ii) extraction of minerals whose prices depend directly or indirectly on listing on the world markets,
6) entities forming part of a group of at least two companies, where one company holds for the whole tax year directly a 75% share in the capital for the remaining companies of the group, if i) the tax year of the companies covers the same period and ii) calculated for the tax year the share of the total income of the companies in their total income is greater than 1%.
