What is a global equalisation tax

The global equalisation tax applies to international or national groups with consolidated annual revenues of at least EUR 750 million. As a rule, this indicator should be met in at least two of the last four financial years. If the effective tax rate of such a group in a specific country is less than 15 per cent, the group is obliged to pay a top-up tax (this does not apply if the group makes a loss).

The draft p of the Polish Act on Compensatory Taxation regulates in detail the rules for calculating and paying the tax, categories of entities excluded from the scope of taxation (e.g. state entities, pension funds) and entities subject to special rules (e.g. investment entities).

Obligations of the parent company

As a general rule, tax is calculated by the ultimate parent company of the group and paid in its country of residence (rather than in the low-tax country).

If the right to pay the tax does not accrue to the parent company, the obligation to pay the tax passes to the lower-tier entity. This may occur, for example, if the parent entity is an excluded entity from compensatory taxation or if its state has not implemented compensatory taxation rules.

Sometimes the obligation to pay tax may affect more than one entity in a group due to its specific structure. Then, in order to avoid double taxation, the tax payable is allocated to the individual units according to their share of the low-taxed units or the tax payable by the lower-tier unit is deducted from the tax payable by the higher-tier unit.

Importantly, the equalisation tax regime is based on consolidated financial (rather than tax) data. The regulations specify which accounting standards are acceptable, what happens when a group does not consolidate its results and when adjustments to financial data are necessary.

The entire article can be read in Rzeczpospolita of 30 September 2024, p.: D2-D3