Changes to the minimum corporate income tax from 2023
The minimum income tax is a solution that was introduced in the Corporate Income Tax Act (hereinafter: 'CIT Act') on January 1, 2022. The objective of the introduction of the new tax was to mitigate the issue of undervaluation of income by taxpayers who, as a consequence of optimisation efforts, reported low income or losses for a prolonged period of operation in the market.
For the first time, taxpayers were to pay the minimum income tax for the tax year ending December 31, 2022. However, on June 28, 2022, a draft law amending the Corporate Income Tax Act and certain other statutes was published in the Government Legislation Centre, pursuant to which the collection of the minimum income tax would be suspended for one year.
Furthermore, the draft law proposes numerous adjustments to the structure of this tax, among which the following should be highlighted as some of the most important:
- an increase to 2% of the profitability ratio (previously 1%) serving to determine the obligation to pay the minimum tax;
- change of the manner of calculation of the profitability ratio by exclusion:
- from the tax deductible costs, of leasing contract rent fees and the increase in the value of salaries, social security contributions and the value of energy on an annual basis;
- from revenue, of the value of trade receivables sold to factoring companies;
- the amount of excise duty;
- tax exemption of:
- small taxpayers (annual revenues of up to EUR 2 million);
- municipal companies;
- taxpayers in bankruptcy or liquidation;
- taxpayers whose majority of revenue is derived from the provision of health care services;
- taxpayers whose profitability ration in one of the last three tax years was above 2%.
Furthermore, the draft provides for the implementation of two alternative methods of calculating the taxable base, one of which to be chosen by the taxpayer. The taxpayer will be entitled to determine the taxable base as:
1. 4% of the value of revenue from sources other than capital gains (simplified manner);
2. 2% of the value of revenue from sources other than capital gains plus debt financing costs and intangible services.
According to the draft, the changes in question are scheduled to come into force on January 1, 2023.
Natalia Szymocha, Tax Consultant, ATA Tax Sp. z o.o.
Interested in the topic?