In January 2023, an amendment to the Polish Corporate Income Tax Act will come into force. Pro-fiscal changes as well as solutions that are favourable for taxpayers will be introduced, making certain tax instruments more challenging and some more attractive.
The most important amendments are outlined below.
1. Minimum income tax
Although minimum income tax provisions came into force in 2022, they have been suspended until December 31 2023, giving taxpayers another year to prepare for their application.
Also, the profitability ratio that makes a company subject to minimum income tax has been increased from 1% to 2%. In addition, the formula used to calculate the tax base has been adjusted.
2. Capital gains participation exemption
The conditions for the application of the capital gains exemption for Polish holding companies have been simplified.
Till the end of 2022, a capital gains exemption does not apply if the sold company owns at least 5% of the shares in another company. This limitation will not apply from 2023. The exemption will also apply if the subsidiary benefits from an exemption on income from activity conducted in a Special Economic Zone or within a Polish Investment Zone, which is not possible till the end of 2022.
Another improvement is the replacement of the 95% exemption for dividend income earned by a qualifying Polish holding company with a 100% exemption.
An adverse change is the requirement of having to own the shares of the disposed company for two years (in 2022, this period was one year).
3. Withholding tax
The rules of the pay and refund system have been simplified. The new mechanism includes restrictions on withholding tax on certain payments above PLN 2 million ($400,000). Above this amount, withholding tax must generally be charged by the remitter without applying an exemption or a reduced tax rate, even if the recipient qualifies.
