CIT rate of 9% not for all entities starting a business in Poland
The basic CIT tax rate in Poland is 19%. In addition to the basic rate, there is a preferential rate of 9%, but this applies only to income (revenue) other than from capital gains. The application of a reduced CIT rate is possible, but under certain conditions. The 9% CIT rate is not available to all entities that start their business in Poland.
The 9% rate in CIT-who can use it in Poland?
The application of a reduced CIT rate is possible, but under the following conditions:
Income limit for the current year in Poland
The 9% CIT rate is available to a taxpayer whose income earned in a given tax year did not exceed EUR 2 million. The conversion is made at the average EUR exchange rate announced by the National Bank of Poland on the first working day of the tax year. The amount is rounded up to PLN 1,000. In 2022, the limit is PLN 9,178,000.
Status of a small taxpayer in Poland
Another condition for the application of the preferential CIT rate is to be a small taxpayer.
According to Article 4a point 10 of the Corporate Income Tax Act, a small taxpayer is one in which the value of income from sales (including the amount of output tax on goods and services) did not exceed EUR 2 million in the previous tax year. Conversion of amounts expressed in EUR shall be made according to the average exchange rate of EUR announced by the National Bank of Poland on the first working day of October of the previous tax year, rounded up to PLN 1,000.
In 2022, a small taxpayeris an entity whose income from sales in 2021, including VAT, did not exceed the amount of PLN 9,188,000.
9% cit rate for entities starting a business in Poland
The reduced rate of 9% in CIT is also available to taxpayers starting their business (in the tax year in which they started it), but with certain restrictions for entities formed as a result of certain restructuring activities. The 9% rate in the year of commencement of operations and the following year may not be used by taxpayers listed in Article 19(1a) of the Corporate Income Tax Act, e.g.:
- formed as a result of the transformation of a partnership into a capital company,
- formed as a result of the conversion of a sole proprietorship,
- to which a non-cash contribution (in-kind contribution) was made to the capital in the form of:
- previously operated business,
- organized part of an enterprise, or
- business assets with a total value exceeding the equivalent of at least EUR 10,000. The amount shall be converted at the average exchange rate of the National Bank of Poland on the first working day of October of the year preceding the tax year in which the assets were contributed, rounded up to the nearest PLN 1,000.
For example, a spółka z ograniczoną odpowiedzialnością (a limited liability company) that was formed from a civil partnership will not be able to apply the reduced CIT rate either in the year of conversion or in the following year. The same will be true of conversions from partnerships or general partnerships, which are notCIT taxpayers.
Conversely, converting a joint stock company into a limited liability company, a limited partnership or a limited joint-stock limited partnership will not withdraw the possibility of applying the 9% CIT rate, since all of these companies were already CIT taxpayers before the conversion. A 9% CIT rate will also not be denied to a spółka z o. o. (limited liability company) that is formed from the transformation of a general partnership, if the latter has elected CIT status..
Author: Agnieszka Bojar, Manager of the Accounting area in MDDP Outsourcing.
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