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Poland: Proposal for new corporate income tax regime, the “Estonian solution”

Poland: Proposal for new corporate income tax regime

A proposal for a new corporate income tax regime—referred to as the “Estonian solution” and presented on 17 June 2020—would not require corporate taxpayers that satisfy certain conditions and that have an annual turnover below PLN 50 million (approximately €11 million) to pay income tax until such time that the company’s earnings are distributed.

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Under the Estonian solution for corporate income tax, companies are not required to pay corporate income tax on their earnings if reinvested (and not paid out to shareholders). Thus, tax collection is shifted to the moment in time when the profit are distributed.

In Poland, the proposed regime would apply for corporate taxpayers:

  • That have least three employees and only natural persons as shareholders, who do not participate in the equity of any other entity
  • That have operating activities that account for most of the income

The regime would not be available for individual income taxpayers (i.e., natural persons conducting business activities) or partners of partnerships, or for companies whose shares are held by a separate (foreign or domestic) company.

The regime would provide a new format for tax settlement, available for four years with an option for extension for a further four-year period. The extension could be granted if in the last year of applying the regime, the taxpayer still satisfies the requirements. However, crossing the turnover threshold of PLN 50 million during the settlement period would not preclude the use of the regime.

It is estimated that the regime may be available for about 200,000 companies in Poland.

As proposed, the regime would be effective 1 January 2021.

Read a June 2020 report [PDF 230 KB] prepared by the KPMG member firm in Poland

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