Who will pay the national top-up tax
The national equalisation tax is the second pillar on which the mechanism of equalisation taxation soon to be in force in the Polish tax system is based. For Polish companies, it may be the key pillar, writes Adrian Celiński of Thedy & Partners in Rzeczpospolita.
The nationaltop-up tax results from the provisions of Council Directive (EU) 2022/2523, which grant EU member states the right to establish the so-calledqualified domestic minimum top-up tax. Poland, like many other countries, has decided to take advantage of the possibility to establish a national tax.
Who will be covered by the tax
The national top-up tax seems to be the main element of the whole system of compensatory taxation in Poland. This is because it will mainly apply to the taxation of Polish constituent units of national and international groups (achieving consolidated annual revenues of EUR 750 million in two of the last four tax years), if the effective tax rate (ETR) calculated for the Polish jurisdiction is lower than 15 per cent. Polish branches of foreign enterprises and so-called joint venture units are also to be subject to the national tax.
The legislator estimates that the obligation to calculate the ETR in order to determine the tax liability for the national top-up tax will cover several thousand Polish companies. As a rule, these will be Polish subsidiaries clustered in international capital groups with a parent company based in another country.
Unlike the global tax, the domestic top-up tax is calculated and paid by the subsidiary itself, not the parent company, unless the parent company itself is a Polish tax resident, in which case the obligation to pay the domestic tax may also be imposed on it.
In other words, unlike the global top-up tax, the domestic top-up tax will not be paid by the parent company, as it were, ‘on behalf of’ the low-taxed subsidiaries. Indeed, it will be paid by the low-taxed entity itself in Poland – if the ETR for the Polish jurisdiction turns out to be lower than 15 per cent.
Consequently, it is from the domestic top-up tax that Poland should gain the most revenue for the budget, as there should be far fewer parent entities located in Poland subject to the global tax than subsidiaries subject to the domestic tax.
An important issue here is the applicability of the so-called safe harbour, as the domestic tax paid by a low-taxed component unit in Poland should be taken into account when calculating the global tax at the level of the ultimate parent. Thus, the domestic top-up tax paid in Poland may significantly reduce the payment of global tax at the parent entity level.
The entire article can be read in Rzeczpospolita of 7 October 2024, pp. D4-D5