Lump-sum tax on company revenues, i.e. the so-called Estonian CIT, is a solution that, according to the preliminary draft published by the Ministry of Finance, is to enter into force in Poland on 1 January 2021. The essential feature of the Estonian system is that the taxation of a company’s income is deferred until it is actually consumed rather than merely obtained.

The main assumptions of the new settlement system include a lack of obligation to pay the tax in the form of monthly or quarterly advances, lack of obligatory annual settlements, and no need to keep separate accounts for tax purposes – as long as the company’s income is reinvested in company development.

The simplification is only dedicated to limited liability companies and joint-stock companies which satisfy certain additional requirements, viz.:

• The company’s turnover does not exceed PLN 50 million;
• The passive turnover does not exceed the turnover from operations;
• The shareholders only include individuals who do not hold shares in any other companies;
• The company employs a minimum of 3 persons apart from its shareholders on employment contracts (in full-time equivalents), for a minimum of 300 days in a fiscal year;
• The company shows capital expenditure;
• The company must notify the Head of its respective Tax Office of the election of lump-sum tax by the end of the first month of the first fiscal year in which such taxation form is to be used.

In principle, the Estonian system will be elected for 4 years, and it is not possible to waive it earlier unless the company fails to meet the above criteria. The only exception is the PLN 50 million revenue requirement, failure to comply with which will leave the taxpayer the right to continue the settlements until the end of the 4-year taxation period or leave the system. Another important point is that a loss of right to apply lump-sum tax does not render it necessary to correct the past settlements, whereas failure to meet any conditions does not require the company to re-book the CIT.

The implementation of the Estonian CIT in Poland is closely related with the ongoing epidemic as the amendment sets out to bring multiple benefits to companies, such as contributing to faster development and mitigating the adverse implications of COVID-19. Although the programme is to support primarily small and medium-sized businesses, the Ministry of Finance does not exclude the possibility that the system will be extended to cover other entities over the next years.

Natalia Szymocha, Tax Consultant, ATA Tax Sp. z o.o.

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