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The Ministry of Finance published a long-awaited draft act on top-up tax of constituent entities that are members of multi-national and domestic groups (hereinafter: the draft Act). The draft Act is intended to implement the provisions of Council Directive (EU) 2022/2523 on global minimum tax (Pillar 2), which Poland should have implemented by the end of 2023 as part of Pillar 2 of the global tax reform agreed within the OECD.
What does the draft Act implementing Pillar 2 introduce?
The draft Act on global minimum tax introduces three types of top-up tax:
- global top-up tax levied under Income Inclusion Rule (IIR);
- qualified domestic minimum top-up tax (QDMTT);
- top-up tax on under-taxed profit levied under Under-Taxed Profit Rule (UTPR).
The draft Act stipulates that groups with annual consolidated revenues of at least EUR 750 million will be required to pay a top-up tax if the effective tax rate in the given jurisdiction is below 15%.
Domestic top-up tax will be levied on under-taxed income which the group obtained in the territory of Poland.
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Who will be covered by the changes in the legislation?
The so-called top-up tax will apply to:
- international capital groups with subsidiaries in other countries (including Poland) with the parent company based outside of Poland;
- international capital groups with subsidiaries in other countries with the parent company based in Poland;
- capital groups where all subsidiary companies are based in Poland
– provided that they have fulfilled other conditions listed in the draft Act.
When will the top-up tax enter into force?
The Ministry of Finance has referred the draft Act on top-up tax to public consultations, which will last until 17 May 2024. The legislation is expected to enter into force on 1 January 2025. Taxpayers will also be able to decide voluntarily to apply the regulations retroactively – from 1 January 2024.
Taking into account the deadline proximity, we highly recommend that you already start the verification process of whether your company will be covered by the new requirements. If you have any questions – or need to discuss the topic – please do not hesitate to contact our experts.
