WHEN IS A LIMITED LIABILITY COMPANY ENTITLED TO PAY 9% CIT TAX?

Running a company inevitably involves CIT. There is a lot of talk in Poland about Estonian CIT, which actually has little in common with Estonian CIT, where the income tax structure covers all companies. In Poland, the “Estonian CIT” by numerous requirements and exclusions applies only to a select few. So what does CIT look like in Poland? What are its rates? Who can count on 9% tax? You will read about it in the following publication.

WHO IS REQUIRED TO BE COVERED BY CIT?

First of all, it should be noted that the 9% CIT rate applies only to the taxation of income (revenue) other than from capital gains, but these gains are also counted when determining the income limit mentioned below.

Companies have the right to pay a preferential tax rate, but this is subject to several conditions that taxpayers must meet:

• their income earned in the current tax year must not exceed an amount in zlotys equivalent to the equivalent of 2,000,000 euros (converted according to the average euro exchange rate announced by the National Bank of Poland on the first working day of the tax year, rounded up to the nearest PLN 1,000). This limit has been raised to the aforementioned amount in 2021 from the current amount of €1,200,000, and has thus been equalized with the income limit applicable to small taxpayers.
• have the status of a small taxpayer, i.e. a taxpayer whose sales revenue including the VAT due from the previous year did not exceed the equivalent of €2,000,000. This amount is converted at the average euro exchange rate in effect on the first working day of October of the previous year. An exception to this rule is limited partnerships, which have been subject to corporate income tax since May 1, 2021. In this case, sales revenues from the period from May 1 to December 31, 2021 will be taken into account.
• are starting a business. In this case, the companies do not need to have the status of a small taxpayer, but then the preferential rate applies only to the year of start-up. Among start-up taxpayers, an exception is made for entities that were created as a result of certain restructuring activities. Taxpayers that were created as a result of a merger, transformation or demerger of other taxpayers cannot apply the 9% CIT rate in the year of commencement and the year immediately following. However, there is an exception to this rule as well. It is constituted by the transformation of a company into another company.

WHEN DOES A TAXPAYER LOSE THE RIGHT TO 9% CIT?

A taxpayer with the right to pay the preferential CIT rate will lose it when his revenues counted from the beginning of the tax year exceed the limit of EUR 2,000,000. Then, starting from the following month or quarter, the taxpayer will be obliged to pay the 19% CIT rate.

In summary, it can be said that a limited liability company in Poland has the right to pay 9% CIT when it has the status of a small taxpayer or its sales revenues will not exceed €2,000,000 in the current tax year, or when it starts a business.