Corporate Income Tax (CIT) is a fundamental aspect of Poland’s tax system, impacting businesses operating within its borders. With its complexities and nuances, understanding CIT in Poland is crucial for both domestic and international enterprises. This article aims to provide a helpful guide to CIT in Poland, shedding light on its key aspects, regulations, and implications.
Overview of CIT in Poland:
CIT in Poland is governed by the Corporate Income Tax Act of 1997, which underwent significant amendments over the years to align with changing economic landscapes and EU directives.
CIT main rates are:
- 19% of the tax base
- 9% of the tax base on revenues (income) other than capital gains for small taxpayers and startup companies.
Other rates:
- 5% on the income from the disposal of intellectual property rights
- 15% on the income from the benefits or property transferred or provided by a family foundation
- 10% on the minimum corporate income tax (the minimum tax was suspended in 2023 but applies in 2024)
- 25% on the income in the case of a family foundation conducting business activities beyond the scope included regulations
- Lump sum tax on the income of capital companies (Estonian CIT)
- 10% of the tax base– in the case of a small taxpayer and a taxpayer, at which value average income no exceeds the maximum values revenues specific for a small taxpayer
- 20% of the tax base – in the case of a taxpayer other than indicated in point 1
Who is the subject of taxation?
CIT payers include not only legal persons such as companies, associations, foundations, but also organizational entities without legal personality – except civil partnerships, general partnerships, partnerships and limited partnerships.
What is the subject of taxation?
The subject of taxation is the income (the surplus of revenues over incurred costs) garnered by the company within a given tax year.
Income is inclusive of:
- Proceeds from capital gains
- Income derived from other sources.
Note: Some income of CIT taxpayers is exempt from tax, provided that it is transferred to the statutory activities of these entities.
A distinctive form of taxation entails a lump sum on the income of capital companies, akin to the Estonian CIT model. Here, the subject of taxation (income) pertains to net profit, earmarked by the company for specific purposes.
Revenue in CIT
Tax revenues in CIT include in particular received money, monetary values, exchange rate differences or the value of items, rights or other benefits received free of charge or partially in return.
Revenues related to business activities are considered revenues due, even if they have not yet been actually received, excluding the value of returned goods and discounts granted.
Revenue is generated on the date of delivery of the item, sale of property rights or provision of the service, including partial provision of the service, no later than the date of issuance of the invoice or settlement of the receivable.
Deductible costs in CIT
The deductible costs are costs incurred in order to obtain revenue or maintain or secure a source of revenue, with the exception of expenses at the will of the legislator that are not considered costs of obtaining revenue.
By this definition, we understand that a given expense may be considered a tax-deductible cost if it meets all the following conditions:
- was actually incurred
- it was incurred in order to generate revenue or maintain or secure a source of revenue
- is not included in the catalog of expenses not considered as costs, listed in the CIT Act.
Including a given expense as a tax-deductible cost depends on its actual and final incurrence.
Incurring an expense should be understood as a burden on the taxpayer’s assets. This burden should also be of a final nature. Expenses incurred only temporarily by the taxpayer do not meet the criteria for being definitively incurred.
Depreciation
The deductible includes depreciation deductions.
Tax depreciation is performed by most taxpayers. The regulations exclude from the group of taxpayers only entities that meet all the following conditions:
- the taxpayer was declared bankrupt,
- the taxpayer does not run a business.
The depreciation write-offs are made on the initial value of the fixed asset (intangible asset). As a rule, the initial value is determined by one of the following parameters:
- purchase price,
- manufacturing cost,
- market value,
- valuation made by the taxpayer or value resulting from the books,
- algorithm specified in the regulations regarding groups of assets taken over
Only acquired intangible assets are subject to depreciation, i.e. buildings, structures, machines, means of transport, investments in external fixed assets and property rights, such as: licenses, copyrights, industrial property rights and know-how, and development costs.
Monthly and Quarterly Advance Payments in CIT
Monthly CIT advances are due by the 20th day of each month for the preceding month, with the final advance payment for the tax year payable by the 20th day of the first month of the subsequent tax year.
If the taxpayers submit their tax return and pay tax before the deadline for paying the advance payment for the last month, they do not pay this advance payment.
CIT taxpayers may pay monthly advances in a simplified form, i.e. in the amount of 1/12 of the tax due, shown in the tax return submitted in the year preceding a given tax year.
Quarterly advance payments can be made by:
- taxpayers who start their business – in the first tax year,
- small taxpayers.
Taxpayers make quarterly advances by the 20th day of each month following the quarter for which the advance payment is made, and the advance payment for the last quarter of the tax year – by the 20th day of the first month of the following tax year.
Tax Preferences
Taxpayers who are, from the date of commencement of business activity to the first day of the month in the tax year in which they begin to benefit from the exemption, small entrepreneurs within the meaning of the provisions on business activity, may benefit from tax preferences.
The preference involves postponing the obligation to pay income tax advances, while spreading these payments into 5 interest-free installments.
Annual CIT Settlement
Taxpayers must submit an annual return on income (or loss) for a given tax year by the end of the third month of the subsequent year, with tax payment due by the same deadline. Additionally, a financial report must be furnished to the National Court Register within 6 months of the new financial year.
Tax Year in CIT
The tax year in CIT typically aligns with the calendar year; however, alternative tax years may be stipulated in the company agreement, statute, or other regulatory documents.
Alternative Settlement Method – Estonian CIT
Corporate income taxpayers qualifying under specific Act conditions may opt for Estonian tax settlement rules, which negate the necessity for tax accounting, determining tax-deductible costs, or computing tax depreciation deductions. CIT advances are deferred, with tax payable upon profit distribution (dividends).
Conclusion
Understanding the rules of CIT in Poland is essential for businesses. The tax is paid by both small companies with a few employees and banks employing several thousand people. The scale of the action requires consideration when it comes to consequences, especially in the case of the latter organizations. CIT returns are handled from the very beginning by specialists, and often even by a whole team of accountants. Adwisen offers you qualified and helpful assistance throughout the whole process.
