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The first weeks of 2025 are also the first time many companies will settle minimum CIT. What is this tax and what exemptions are available? Read on!
What is minimum CIT?
Minimum corporate income tax targets corporate taxpayers and tax capital groups reporting a year-end loss or extremely low profit, where income is less than 2% of revenue.
Under Article 24ca(1) of the Corporate Income Tax Act of 15 February 1992, the tax is 10% and was introduced to counter aggressive tax optimisation by large companies.
2024 is the first year for which minimum tax must be settled, so many firms are now preparing their first such settlement.
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Who is subject to minimum CIT, and who is not?
Minimum tax rules do not apply to PIT taxpayers or companies whose partners are exclusively PIT taxpayers.
They concern only:
- Corporate income taxpaying companies with a seat or management in Poland, including incorporated commercial companies, companies being formed, limited and limited joint-stock partnerships and some general partnerships;
- Tax capital groups.
Among these CIT taxpayers, the 10% minimum tax applies only if, in a tax year, they:
- Incur a loss on a source of revenue other than capital gains;
- Have income from non-capital-gains sources no more than 2% of revenue from those sources.
Minimum CIT: exclusions and exemptions
Article 24ca(14) of the CIT Act lists exclusions and exemptions. Minimum CIT rules do not apply, among others, to taxpayers:
- In the tax year they start business and the following two consecutive tax years;
- That are financial enterprises;
- Whose tax-year revenue is at least 30% lower than in the immediately preceding tax year;
- That are small taxpayers;
- Whose non-capital-gains income represented at least 2% of non-capital-gains revenue in any of the three tax years immediately preceding the year for which minimum tax is due;
- In bankruptcy or liquidation;
- Under restructuring proceedings;
- Party to a cooperation agreement.
In simpler terms, start-ups, small taxpayers with revenue no more than the equivalent of EUR 2 million, and firms experiencing temporary revenue declines are principal groups not paying it.
A lower financial result as a way to avoid minimum CIT!
Revenue at least 30% below the immediately preceding tax year is a principal way to qualify for exclusion from minimum CIT!
According to the Director of the National Tax Information Office's individual interpretation of 20 June 2024, case 0111-KDIB1-1.4010.189.2024.2.AW, revenue may be compared even if the tax year is shorter than twelve months. In that case, a taxpayer made a loss in January–February 2024, closed the books and opted for Estonian CIT for the rest of the year. The authority found that minimum tax exclusion applied because revenue in those two months of 2024 was at least 30% below revenue in the immediately preceding tax year, the full year 2023.
If you found this article interesting, explore our tax advisory services and read how we can help you:
Summary
Minimum CIT provisions are complex, and interpreting and applying them can cause problems because they have been in force for a short time and are calculated differently from ordinary CIT. If you need help with minimum CIT or any other tax and accounting matters, explore the TaxCoach accounting firm's services and contact us today.
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