From this article you will learn:

• Who is subject to the global minimum taxation and what challenges are impending 
• What are the consolidated revenue thresholds 
• What obligations may be imposed on Polish companies prior to 2025 

In our previous article from the series on the global minimum level of taxation (Pillar 2), we have informed you about the publication of the draft Act on top-up tax levied on constituent entities of both multinational as well as domestic groups. The solution is being implemented with the intention to counteract BEPS and force global corporations to pay their fair share of tax if the effective tax rate in the jurisdiction where the group operates falls below 15%. Today we will pinpoint the companies affected by the global minimum level of taxation and discuss the applicable thresholds.

Who is subject to top-up tax?

As we have briefly stated in the previous article on the implementation of Pillar 2 regulations, the new law concerns:

• MNE groups having their subsidiaries in other countries (this includes Poland), where the parent entity is located outside of Poland,
• MNE groups having their subisidiaries in other countries, where the parent company is located in Poland,
• domestic groups operating exclusively in Poland.

Contrary to OECD Model Rules, the top-up tax involves not only MNE groups but also groups where all constituent entities are located in the Member State (e.g. in Poland).

How does Pillar 2 define group minimum revenue?

If a MNE group or a large-scale domestic group exceeds the threshold of EUR 750 000 000 of consolidated annual revenue, it becomes subject to the new regulations. Importantly, the group must exceed the threshold in at least two out of four years preceding a given fiscal year.

The threshold set by the global minimum taxation regime is consistent with the threshold that is relevant for country-by-country reporting purposes (notices submitted by entities being members of groups). This means that Polish companies can already find out if they fall under the obligation to comply with the new regulations upon verifying whether in previous years they filed CBC-P. 

As the regulations are about to come into force as of 1 January 2025, to be able to determine whether a company will be subject to tax under Pillar 2, they must consider the group’s consolidated revenue for the years 2021-2024 (if the group’s fiscal year concides with the calendar year). Additionally, some obligations will already apply to Polish companies in 2024 and, as a result, the financial standings for the years 2020-2023 will also have to be taken into account.

According to demonstrative data resulting from CBC-P, as many as 8 0000 constituent entities of MNE groups will be subject to the new obligations ragarding global minimum level of taxation, yet as few as a couple dozen multinational groups with a Polish ultimate parent company.

Absence of regulations and obligations of Polish entities

Please bear in mind that Poland is obliged to implement Pillar 2 as of 1 January 2024. Failure to comply will not, however, stop the regulations from affecting Polish companies. MNEs originating from countries where Pillar 2 has been already implemented (i.e. Germany, the Netherlands, UK), having subsidiaries in Poland, will be obliged to compute ETR in Poland and pay tax if the rate is below 15%.

This means that parent companies from countries where Pillar 2 is in force may request their Polish related entities to provide a multitude of in-depth data necessary for the computation of ETR in Poland.

Nevertheless, the computation of ETR is not linked to CIT calculation – this is an entirely new system based on unique accounting data and its implementation may indeed pose a substantial challenge. We strongly recommend that you devise a strategy helping you effectively prepare your business for the upcoming requirements but first of all, we do encourage you to check whether the new regulations affect your business.

In our next article, we will identify the entities exempt from the new top-up tax obligations.

Should you have any questions – or would like to discuss the topic – we strongly encourage you to contact our experts.