Minimum Tax in Poland: How It Works and What You Need to Know
Starting in 2024, Poland introduced a new minimum income tax. This significant change affects companies that report losses or operate with low profitability. In this article, we’ll explain what this tax is, who it applies to, how it is calculated, and how to prepare your business for these changes.
What Is the Minimum Tax?
The minimum tax is a new measure aimed at ensuring fair taxation in Poland. Its primary goal is to guarantee that even companies operating at a loss or with low profitability (less than 2% of total turnover) contribute at least a minimum amount to the budget.
Why Was It Introduced?
Some companies use tax planning to minimize or even eliminate their tax obligations, despite having high revenues. The minimum tax is designed to level the playing field and create more transparent rules.
Who Is Affected by the New Tax?
The minimum tax applies to:
- Companies registered in Poland, including limited liability companies and joint-stock companies.
- Companies with low profitability, where income constitutes less than 2% of turnover.
- Companies reporting losses.
Exceptions
Not all companies are subject to this tax. Exemptions include:
- Small businesses with annual revenues of up to 2 million euros.
- New companies, which are exempt from the tax during their first year of operation and the following two years.
- Businesses in crisis, such as those undergoing restructuring, bankruptcy, or significant revenue decline.
Example: A company called “BuildTech,” which started operations in 2024, will not pay this tax during its first three years, even if its revenues are low.
How Is the Minimum Tax Calculated?
The minimum tax is set at 10% of the tax base, which is determined using the following formula:
- 1.5% of the company’s annual revenues,
- plus “excessive” expenses (e.g., significant payments for consulting services from related entities or financing).
Example: A company called “DesignPro” earned 1 million PLN but spent almost all its income on services from designers and consultants from other companies. Due to its low profitability, it will be subject to the minimum tax.
When Can the Tax Be Avoided?
The tax does not apply if:
- The company’s income dropped by 30% or more compared to the previous year.
- The company has been in operation for less than three years.
- The company’s revenue does not exceed 2 million euros annually.
Example: A company called “TourPlus” lost 40% of its clients in 2024 due to an economic crisis. It will not be required to pay the minimum tax that year.
How to Prepare for the New Tax?
To avoid unexpected expenses and maintain business efficiency, follow these recommendations:
- Conduct a Financial Audit
- Check whether your company falls within the scope of the minimum tax. If you have losses or low profitability, consider optimizing costs and improving efficiency.
- Work with Experienced Accountants
- They can help you accurately calculate the tax base and avoid overpayments.
- Reduce Foreign Expenses
- Large payments to foreign companies (e.g., for consulting or financial services) can increase your tax base. Shift these expenses to the local economy if possible.
Example: A company called “IT Service” pays for consulting services abroad every year. Reducing these costs will lower its tax obligations.
Conclusion
The minimum tax in Poland is a step toward creating a more transparent and fair tax system. While it presents a challenge for businesses, proper preparation will help avoid additional costs and risks.
Our experts can help you adapt to the new regulations and safeguard your business against tax surprises. 🚀
