In order to encourage Polish companies to invest, the government decided to introduce a solution in Poland which is called Estonian CIT, a taxation model that has been successfully operating in Estonia for 20 years. Pursuant to the new regulations, from 2021, Polish capital companies will be able to pay corporate income tax (CIT) only at the time of payment of profits, provided that certain requirements are met, which we will describe below.
What are the benefits of the planned tax change? In the first place, the lack of tax means greater financial liquidity, improves creditworthiness and increases the company's equity. A company doesn’t have to pay tax as long as the profit remains in the company. Therefore, the company will not have to pay tax in monthly or quarterly advances, so you will not have to spend a lot of time on tax optimization, and the obligations related to accounting and filing returns will be reduced to a minimum. The proposed taxation will be available for 4 years, extending for further 4-year periods.
Entrepreneurs should first check whether the company meets all the conditions:
- the company's revenues may not exceed PLN 50 million, and revenues from operating activities should amount to not less than half of the revenues;
- the company must prove investment outlays;
- only natural persons can be partners or shareholders of such a company;
- such companies may not hold shares, stocks or all rights and obligations in other entities;
- the company must employ at least 3 employees in addition to the partners.
All criteria must be met together.
The introduction of the Estonian tax was announced by the prime minister for the first time in his speech at the end of 2019. In June 2020, the details of the reform were published on the official state website, but we are still waiting for the bill and its adoption. It is estimated that the new regulations will come into force from the beginning of 2021.