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Changes in the alternative minimum corporate income tax

On 14 September 2021 the Polish government made a correction to its bill to amend the income tax acts which it had filed with the Sejm on 8 September 2021 as part of the Polish Deal. The most important changes concern the minimum tax on certain taxpayers generating low profits.
Rafał Zuchowicz
Senior TAX Specialist

According to the justification presented by the government, the changes mainly result from comments by the Ministry of State Assets, which took the view that the new regulations would impose a much greater tax burden on Polish state-owned companies than on foreign-based corporations.

  1. The first change involves the manner of determining losses and the ratio of net income to revenue which would subject a taxpayer to the minimum tax.

It is proposed that these values would not include revenue or costs connected with transactions in which the price or the manner of setting the price is determined by statute or normative acts issued pursuant to statute, and, from a source of revenue other than capital gains, the taxpayer has:

  • Suffered a loss on such transaction, or
  • Generated from such transaction a share of net income within revenue not exceeding 1% during the tax year,

where the loss and the share of net income in revenue is calculated separately for transactions of the same type.

According to the government justification, in a situation where the price or the manner of setting the price is regulated, taxpayers achieving low profit because transactions are subject to regulated prices would be burdened by an additional tax, which would only exacerbate their problems with economic margins (this mainly concerns regulated prices for electricity).

  1. Another change concerns the possibility of reducing the amount of the minimum income tax by the amount of income tax due for the same tax year under general rules.

According to the justification from the Ministry of Finance, this regulation is intended to clearly specify the manner of proceeding in a situation where for the given tax year, the taxpayer would have to pay both the minimum income tax and income tax under the general rules. This change would effectively set off the two taxes, excluding double taxation of the same amount.

  1. The list of taxpayers not subject to the alternative minimum tax is greatly extended.

An exemption has been added to the bill for taxpayers generating most of their revenue, from sources other than capital gains, from operation of ships or aircraft in international transport, or from extraction of minerals whose prices depend directly or indirectly on global market prices. According to the justification presented by the Ministry of Finance, exemption from application of the minimum tax for entities generating revenue from operation of ships or aircraft is intended to ensure that the new regulations are consistent with tax treaties concluded by Poland (under the treaties, revenue of this type is generally taxed in the state where the taxpayer has its registered office). The exemption concerning minerals governed by market prices is due to the need to take account of sudden changes in prices and thus in the profitability of entities operating in these sectors, where the taxpayers often have no influence over these changes and it would be difficult (cost-intensive) to make changes in the taxpayers’ operations. In practice, this makes it necessary for taxpayers to continue operating in situations where there is a slump on global commodities markets, or where there are great fluctuations in the prices for such commodities.

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