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New CIT rate for small taxpayers

2016-07-29

Legislative works are underway on the governmental proposal of the Act amending the Corporate Income Tax Act and the Personal Income Tax Act. Among other things, the amendment is to lower the CIT rate for certain taxpayers from 19% to 15%.

According to the proposed Act, the lower rate is to cover:

  • small taxpayers, i.e. taxpayers whose sales revenue (together with due VAT) in the previous tax year did not exceed the PLN equivalent of EUR 1.2 million (where the translation is made at the average exchange rate in the National Bank of Poland prevailing for the first business day of October in the previous tax year, rounded to PLN 1 thousand),
  • taxpayers commencing business activity – in the tax year in which they commenced the activity.

Tax capital groups will not be able to benefit from the above provision. In addition, it will not be applicable to taxpayers established, inter alia:

  • following transformation, merger, division, save for transformation of a company into another company,
  • following transformation of an entrepreneur who is a natural person and conducts business activity in their own name or of a company which is not a legal person,

in the tax year in which the taxpayer so established commenced business activity and in the tax year directly following that year.

In the rationale to the Act it is indicated that the provisions which are currently in force do not provide for any preferential CIT rate, contrary to PIT where taxpayers conducting business activity may chose the flat rate or simplified lump-sum forms of taxation (lump-sum tax, constant amount of tax). The introduction of the reduced CIT rate for small taxpayers is to affect their competitiveness against larger entities, often operating on the international scale and having more possibilities to acquire the funds for development and investments.

Taking into account “double level” taxation of legal entities – i.e. once at the level of the company and once at the level of income derived by its members from participation in the company – the introduction of the reduced rate will lower the effective taxation from ca. 34.39% to 31.15%, however, it will be still much higher that the PIT flat rate of 19% available for individuals conducting business activity.

 

The Act is to enter into force as of 1 January 2017.