Return of the minimum tax – end of the suspension period

From this article, you will learn:

• who the minimum income tax applies to;
• how to calculate the minimum income tax amount;
• what every minimum income tax payer should pay attention to.

Many people may have already forgotten about it, but the package of regulations known as the Polish Deal introduced the so-called minimum tax, which, before it had a chance to come into force, was suspended by the government due to the pandemic situation and the outbreak of the war in Ukraine. However, the suspension period ends on December 31, 2023, which means that taxpayers operating in Poland must comply with the provisions on the minimum tax from January 1, 2024. Importantly, the provisions on the minimum tax have been amended by the legislator in comparison with their original form. So, what should we remember when settling the minimum CIT?

Who does the minimum CIT income tax apply to?

The minimum income tax applies to entrepreneurs who report a loss from a source of income other than capital gains or achieve a share of income in revenue from these sources of no more than 2%.

However, the Act provides for a number of exemptions from minimum income tax. It will not be paid by, among others:

• entities starting their business,
• financial companies,
• entities in bankruptcy, liquidation or undergoing restructuring proceedings,
• entities with a simple ownership structure,
• entities with the status of a small taxpayer,
• taxpayers whose majority of revenues are generated in connection with the provision of health care services,
• mining companies (upon fulfilment of additional conditions),
• entities that have achieved a certain level of income in recent years (rules specified in detail in the CIT Act).

What exclusions does the minimum CIT tax provide for the purposes of calculating losses?

For the purposes of calculating the loss (or the share of income in revenues other than capital gains), the legislator provided for exclusions including:

• exclusion from tax-deductible costs of fees related to: leasing contracts, trade receivables sold to entities from the factoring industry, costs of salaries and social insurance contributions and the increase in the value of electricity, heat and gas at annual intervals,
• exclusion from revenues of the value of trade receivables sold to entities from the factoring industry,
• the value of excise duty, retail sales tax, gaming tax, fuel fee and emission fee.

How to calculate the tax base?

The minimum tax, in accordance with current regulations, is 10%. 

When it comes to the tax base for income tax, the legislator allows the taxpayer to use two alternative methods of determining it:

1. the tax base may be 1.5% of revenues other than capital gains plus passive costs (i.e. costs of debt financing and intangible services incurred for related entities - the CIT Act provides for detailed and complicated regulations in determining these values);
2. the tax base may be 3% of the value of revenues other than capital gains. 

The taxpayer must inform the authorities about the choice of the second method of determining the tax base in the tax return submitted for the year in which they made such a choice.
 

Important dates and the future of the minimum tax  

The tax for 2024 will have to be reported by taxpayers (and paid) by the end of March 2025. 

The settlement of the minimum tax will be different for taxpayers whose tax year is different than the calendar year. If it starts before January 1, 2024 and ends after December 31, 2023, the taxpayer will not be subject to minimum tax until the end of this tax year.

How long will the new solutions introduced by the minimum CIT income tax be in force? For now, there is no prospect of the tax being suspended or abolished again in the near future. However, it is worth remembering that the current solutions concern matters similar to the so-called top-up tax introduced by the Pillar II Directive. The EU solution proposes the introduction of a global minimum level of 15% taxation of domestic and international capital groups. What will be the mutual relationship between the Polish minimum tax and international solutions will only be known after Poland implements this directive.