What is Pillar 2: The Global Minimum Tax of 15% and Its Impact on Businesses in Poland?
Starting in 2025, Poland will join the OECD’s global initiative called Pillar 2, introducing a global minimum tax rate of 15%. This initiative aims to create a more transparent tax system and prevent tax avoidance through low-tax jurisdictions.
What is Pillar 2 and How Does It Work?
Pillar 2 is a mechanism that ensures the global profits of large multinational corporations are taxed at a minimum rate of 15%. If a company operates in a country where the corporate tax rate is lower than this level, its parent company will have to pay the difference in the country where it is registered.
Practical Example:
A multinational company earns profits in a country with an effective tax rate of only 5%. Poland, where the parent company is registered, will add an additional 10% to reach the 15% minimum rate.
Who Does Pillar 2 Affect?
The new tax applies to:
- Large Multinational Companies: Those with annual revenues exceeding €750 million across all countries of operation.
- Companies registered or conducting business in Poland.
Who is Exempt from Pillar 2?
- Small and Medium Businesses in Poland: With revenues below €750 million.
- Local Companies: That do not have international operations.
Example:
The “TechnoGlobal Group” with €1 billion in revenues pays taxes in various countries. If part of the profit is taxed below 15%, Poland will apply the difference.
How is Pillar 2 Calculated?
The calculation is based on the company’s effective tax rate in each country of operation:
- Determine the company’s total profit.
- Calculate the taxes paid in each jurisdiction.
- If the tax rate is below 15%, the difference is added in the country where the parent company is registered.
Example:
The company “EcoTrade” earns profits in a country with an 8% tax rate. Poland, as the parent company’s registration country, will add another 7% to meet the minimum level.
Impact on Businesses in Poland
- For Large Multinational Corporations:
- They will need to review their tax strategies to avoid additional charges.
- This may lead to a redistribution of financial flows and restructuring.
- For Poland:
- It provides an opportunity to increase tax revenues.
- The government will have more resources for social programs and infrastructure.
- For Small and Medium Businesses:
- Pillar 2 will have no impact as it only applies to large corporations.
Example:
The company “AgroInvest,” which operates only in Poland with €10 million in revenue, is not subject to this tax.
How to Prepare for Pillar 2 Implementation?
- Analyze Profits and Taxes:
- If part of a multinational group, ensure your subsidiaries meet the 15% minimum rate.
- Review Jurisdictions of Operation:
- Operating in low-tax jurisdictions may result in additional charges.
- Consult Experts:
- These new rules are complex and require expert advice to understand their impact on your company.
Example:
The “LogisticsGroup” is reviewing its structures in low-tax countries to avoid additional charges in Poland.
What Will Poland Gain from Pillar 2?
- Ensure fair distribution of tax burdens among countries.
- Increase revenue to the state budget.
- Reduce incentives for companies to shift profits to offshore zones.
Conclusion
The implementation of Pillar 2 is a step toward global tax transparency. While this tax directly impacts only large corporations, its influence on Poland’s business environment could be significant.
Our team is here to help you adapt to these changes and minimize tax risks. 🚀
