Changes to CIT – 9% rate for the smallest businesses
On 25 September 2018, a bill was introduced to the Sejm to amend the act on personal income tax, corporate income tax and certain other acts (hereinafter: ‘Bill’) introducing a number of changes to the tax system. One of those involves a reduced preferential CIT rate from the current 15% to 9% of income.
The current corporate income tax rates are 19% and 15%. The lower tax rate can be applied by taxpayers enjoying the status of small taxpayer and those who begin to trade in a given year.
Following 1 January 2019, the 15% tax rate will be abolished with some taxpayers taking advantage of the reduced preferential 9% rate. According to the Bill, it will only apply to income other than capital gains. Thus, for instance, the revenue from sale of shares in companies and from dividends will be taxable at a 19% rate.
The reduced CIT rate can be used by the taxpayers:
- Whose revenue has not exceeded EUR 1.2 million in the current year. The amounts are to be calculated at the average euro exchange rate as announced by the NBP (the National Bank of Poland) for the first business day of a fiscal year, rounded up to PLN 1,000.
- Who enjoy the status of a small taxpayer (determined on the grounds of revenue from the preceding fiscal year), or are beginning to trade in a given year.
The Ministry of Finance has withdrawn the condition involving a participation of the income in the revenue in the year preceding the year in which the taxpayer wishes to apply the preferential CIT rate. Initially, the ratio was not to exceed 33%.
According to the Bill, the taxpayers beginning to trade and small taxpayers can calculate their advances at the lower rate for the months or quarters in which their respective revenues, generated since the beginning of the fiscal year, will not exceed EUR 1.2 million. They will be required to begin applying the standard rate in the following month or quarter. What is particularly noteworthy is that where the threshold has been exceeded, the 19% standard rate will apply, according to the Bill, to the entire income rather than merely to the excess over the EUR 1.2 m threshold.
On the other hand, the reduced CIT rate will not apply to:
- a split company,
- a taxpayer who has contributed to another entity, including into such entity’s capital:
a) An enterprise already managed by itself, an organised part of an enterprise or assets of such enterprise whose aggregate value exceeds the PLN equivalent of EUR 10,000, to be calculated at the average euro exchange rate as published by the NBP for the first day of October of the year preceding the fiscal year in which such assets were contributed, to be rounded up to PLN 1,000; or
b) Assets acquired by such taxpayer as a result of other taxpayers being wound-up, if such taxpayer held shares in such other wound-up taxpayers.
- in a fiscal year in which such split was carried out or contribution made, and in the fiscal year directly following it.
The first reading of the Bill was held on 2 October. It has currently been passed on to the Public Finance Committee.
Anna Skórska, Tax Consultant, ATA Tax Sp. z o.o.
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