Global Minimum Tax – when will the new rules apply?

This article will answer the following questions:

• When will the new Pillar 2 directive regulations apply?
• Is it possible to apply top-up taxation provisions to a company earlier?

In April 2024, the Ministry of Finance published a draft law on to-up taxation of constituent entities of international and domestic groups, which implements the provisions of Council Directive (EU) 2022/2523 on the global minimum tax (so-called Pillar 2). Interestingly, the draft law provides for the possibility of earlier application of these provisions.

Pillar 2 enters into force in Poland from 2025

The law regulating the top-up tax is to enter into force on 1 January 2025.

Let us recall that Poland, as part of the second pillar of the global tax reform agreed by the OECD, was supposed to implement the above-mentioned directive by the end of 2023. The fact that our country did not fulfil this obligation on time does not mean, however, that Polish companies will not have to take any steps when settling their accounts for 2024 – as we wrote in the previous posts in the series.

Voluntary application of Pillar 2 provisions in 2024 

Despite the fact that Poland did not implement the new regulations on time, capital groups operating in our country may voluntarily decide to apply the new regulations from 1 January 2024. In such a case, the group applies the regulations governing the global minimum tax as if they had entered into force on 1 January 2024. 

It seems that the Polish legislator, by introducing the possibility of applying the provisions on the domestic and global top-up tax by Polish companies from 2024, is to some extent aiming to maintain the originally planned implementation date of the Pillar 2 directive. 

It is worth remembering that the solution discussed here is completely voluntary. However, if an entity subject to Pillar 2 decides to use it, this choice cannot be revoked.

The intention to voluntarily apply the provisions of Pillar 2 in 2024 should be declared in the form of an appropriate declaration (in the form of a notarial deed) submitted to the relevant tax authorities between 1 March 2026 and 30 May 2026. 

It should also be noted that the aforementioned declaration should be submitted by the ultimate parent entity located in Poland. If such entity is located in another country, the declaration on voluntary application of the global minimum tax from 1 January 2024 may be submitted by all constituent entities of a given group located in Poland – provided that they also provide the consent of the parent entity to submit such a declaration. This consent must be recorded in the form of a notarial deed and presented together with a sworn translation into Polish.

How can foreign group companies take advantage of the possibility of applying Polish regulations on global minimum tax from 2024?

Why is it worth deciding to be subject to the top-up tax provisions earlier? The practical implication of such a decision is to protect the right to pay the minimum tax in Poland, and not in a country that (unlike Poland) implemented the Pillar 2 provisions on time and in which the group would therefore be subject to the global minimum tax.

In the justification for the draft act, the Polish legislator indicated that, from the perspective of a given group, the decision to apply the provisions earlier does not fundamentally affect the overall level of burden on that group. Moreover, from the point of view of foreign capital groups that have subsidiaries located in Poland, the decision to take advantage of the possibility of voluntary application of Pillar 2 in 2024 may be motivated by the desire to apply safe harbour simplifications relating to the calculation of structural elements of the top-up tax. 

It therefore seems that international groups operating in Poland have enough incentives to consider this solution and start settling the global minimum tax in Poland earlier. 

Taxpayers should not postpone preparations for new obligations until the last minute – especially since some of them may affect Polish companies already in the current tax year. The changes introduced during the implementation of the global top-up tax should be properly prepared. It is necessary to plan the budget, allocate resources and find the time necessary to implement the appropriate processes in companies. Groups should also take into account the need to conduct a detailed analysis of the effects of implementing Pillar 2 and perform the necessary calculations. 

If you would like to learn more about how the Pillar 2 regulations will operate in Poland, or check today whether your group will be subject to the new obligations in both 2024 and 2025, we invite you to complete our interactive survey, which will help you determine whether the new regulations will apply to your company.

If you have any questions or would like to discuss the topic in more detail, please feel free to contact our experts.