The Polish Deal: Estonian CIT to be widened

According to the Ministry of Finance, Estonian CIT is a good tax form for entrepreneurs, especially those who are most severely affected by the pandemic. Hence, the idea to change the regulations in such a way as to remove some of the existing barriers.

– According to the announcements made, three of the five conditions for entering the Estonian system are to disappear. The income limit, which excluded larger entities from the Estonian system, is to be removed. This form of taxation is also to be extended – under certain conditions – to limited partnerships, limited joint-stock partnerships and cooperatives. Today, Estonian CIT is provided for limited liability and joint stock companies only. Moreover, the minimum investment volume, which often was an entry barrier – especially during the economic slowdown, is to disappear – points out Łukasz Kupryjańczyk, tax advisor, partner at Thedy & Partners.

Consequently, two conditions will have to be met for the application of Estonian CIT. Firstly, a simple ownership structure, i.e. limiting the circle of shareholders to individuals and lack of a multi-level structure. Secondly, conducting real business activity in Poland, i.e. generating the majority of revenues from operations and employing a minimum number of employees. These conditions are to continue to operate under the current rules.

Some modifications will also take place in the tax rates. Today its amount depends, among others, on the investments made. In a nutshell- the higher the investments, the lower the tax rate. After the changes, this rule will not apply to small taxpayers. In their case, effective PIT and CIT taxation will always be 20%, regardless of the volume of investments. For large taxpayers, who will take advantage of the lump-sum taxation, the current possibility to show the increased investment outlays in two-year periods will remain.

Once the draft regulations are published, we will present concrete proposals of the new solutions.