| 17 July, 2024

Introduction of the Global Minimum Tax in Poland (Pillar 2)

Introduction of the Global Minimum Tax in Poland (Pillar 2)

Starting January 1, 2025, regulations concerning the so-called global minimum tax (Pillar 2) are expected to come into effect in Poland. The goal of this tax is to level the "tax competitiveness" of different countries by imposing an obligation on the largest corporate groups to pay a minimum tax of 15% regardless of where they operate.

Who will be subject to the global minimum tax?

The global minimum tax will apply to entities (including so-called establishments of foreign companies) that belong to international or domestic corporate groups with consolidated revenues of at least EUR 750 million in at least two of the last four fiscal years. However, the global minimum tax regulations will not apply to international organizations and non-profit organizations, among others.

How does the global minimum tax work?

Simply put, the global minimum tax involves imposing a top-up tax if a group's effective tax rate (ETR) in a given country is lower than 15%. It should be noted that the ETR is calculated on the basis of the net accounting income reported in the consolidated financial statements.

The draft law provides for three types of global minimum tax:

global top-up tax,
domestic top-up tax, and
top-up tax on under-taxed profits.

The global top-up tax will primarily apply to ultimate parent entities of international corporate groups located in Poland. As a general rule, the global top-up tax should be paid in Poland with respect to foreign entities whose effective tax rate is lower than 15%.

The domestic top-up tax will primarily apply to entities located in Poland that are part of international or domestic corporate groups if their effective tax rate in Poland does not reach the minimum level of 15%.

The top-up tax on under-taxed profits will primarily apply to entities in Poland when, for example, the ultimate parent entity is located in a country that does not implement the global minimum tax. This tax will cover entities whose effective tax rate is lower than 15%.

The global minimum tax may significantly affect entities benefiting from tax reliefs, such as those within the Polish Investment Zone (PIZ) or Special Economic Zones (SEZs). Pillar 2 could potentially negate the positive effects of these tax incentives.

Are there any simplifications or exemptions available?

The draft law provides for the possibility of using certain mechanisms to simplify or limit the application of Pillar 2, for example:

newly established corporate groups whose ultimate parent entity is located in Poland can benefit from an exemption for the first 5 years if, among other conditions, the group's entities are located in no more than six countries (including Poland) and the total net book value of tangible fixed assets of all the group’s entities does not exceed a specified level.
Entities with economic substance (tangible assets and personnel) will be able to deduct the value of tangible fixed assets in a given jurisdiction and eligible wage costs from the tax base.

What’s next?

For corporate groups, Pillar 2 represents not only an additional fiscal burden but also an obligation to collect and process data to meet compliance requirements and accurately calculate the tax. Therefore, we recommend that you promptly verify whether and to what extent your group is subject to Pillar 2.

Should you have any questions or concerns regarding the global minimum tax, please contact the TIAS Tax Department at office@tias.pl.

Introduction of the Global Minimum Tax in Poland (Pillar 2)

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