“ESTONIAN” CORPORATE INCOME TAX

Estonian CIT is referred in the law as a lump sum on income of capital companies. It is a modern way of taxation that promotes investments and minimizes formalities when settling taxes for capital companies and partnerships.

This solution is addressed to:

• micro, small and medium-sized capital companies and partnerships (limited and limited joint-stock partnership) being CIT taxpayers,

• companies in which the shareholders are exclusively natural persons.

The Estonian Corporate income tax will be available to companies:

• which do not have shares in other entities,

• which employ at least 3 persons, excluding shareholders (facilitations for small and start-up taxpayers are granted),

• whose passive income does not exceed the income from operating activities,

• which do not prepare their financial statements in accordance with IAS,

• file an appropriate notice of their choice of this form of taxation to the Inland Revenue Office.

All of the above criteria must be met simultaneously.

Estonian CIT is due when the Company distributes its profit. In principle, therefore, no CIT is payable by the company accounting for CIT under Estonian CIT until profit is distributed.

The CIT rate for Estonian CIT is 10% for small taxpayers and 20% for all others.

However, the shareholder has the right to apply a deduction for the received dividend. The shareholder can reduce the tax paid on that dividend by the corresponding portion of the tax paid by the company. This results in the partner’s final tax bill amounting to:

• 10% for a small taxpayer

• 5% for all other companies

A company subject to Estonian CIT is also not obliged to pay the minimum tax (statutory exemption).

A company subject to Estonian CIT, that does not exceed the sales value of PLN 2,000,000.00 (including VAT) for the preceding tax year is eligible for a quarterly settlement of VAT.

Investing in Poland in 2023 Corporate Income Tax (CIT)

However, when opting for an Estonian CIT settlement, it should be borne in mind that, in addition to the profit distribution indicated above, CIT tax liability will also arise in connection with:

• the appropriation of profit to cover losses generated in the period before the profit was subject to Estonian CIT,

• so-called hidden profits,

• expenses not related to business activities.

Hidden profits are understood as benefits to shareholders, partners and their related parties, including e.g. a loan granted to such a shareholder.

The choice of this solution entails its obligatory application for a period of four years, with the possibility of an extension for a further four years.

ACCOUNTING & TAX ADVISORY FOR YOU!

If you have any questions regarding accounting, taxation, or other aspects of tax law in Poland, please contact our team of advisors.

Customer Relation

ELŻBIETA NARON

Head of Customer Relationships Department / Senior Manager

Tax Advisory Office

Location: Wroclaw

Other Tax On Corporations

Real estate property tax Tax is generally levied on the owner of real estate (land, buildings and construction) at rates imposed by the local authorities.

Tax rates are determined by a resolution of the Municipal Council, and now they cannot exceed:

2% of the property value entered as the basis for depreciation

Social security Employers and employees must make social security contributions in an amount that is approximately 35% of an employee’s remuneration (with certain caps).

Stamp duty

Stamp duty is levied, for example, when filling a power of attorney and when the (central or local) authorities are requested to perform activities such as issuing certificates, granting permission, etc. The applicable rates or fixed amounts are specified in the stamp duty law.

Other

• Excise tax is charged on turnover of selected goods,

• Shipping companies may opt to pay tonnage tax on certain types of income,

• A special tax is imposed on the excavation of silver and copper.

• A special tax is imposed on goods containing sugar, including sweet drinks.