The latest version of the draft law on the global minimum tax, published on July 26, indicates which Polish taxes can be considered as covered taxes.
Covered taxes are those parts of national taxes that should be included when calculating the Effective Tax Rate (ETR) for Pillar 2 purposes. By dividing the value of covered taxes by the so-called qualified income, we get the ETR – if it is lower than 15%, it may result in the imposition of the so-called top-up tax.
In view of the above, precise determination of the scope of covered taxes is crucial from the perspective of preparations for the implementation of the Pillar 2 mechanism.
Regarding the definition of covered taxes, the original draft regulations referred to the model guidelines prepared by the OECD. According to the original draft, covered taxes were defined as taxes levied on income / in place of income tax when the standard tax is not levied.
Based on such wording of the regulations, doubts could arise as to whether taxes such as the minimum income tax or tax on commercial buildings income could be considered as covered taxes, as neither of them was calculated from the taxpayer’s income. The fact that Poland imposes a "standard" CIT on taxpayers could exclude these types of taxes from being considered taxes levied "in place of income tax."
The amended draft law introduces provisions to the definition of covered taxes, specifying that covered taxes particularly include:
- Tax on income of a controlled foreign corporation (Article 24a of the CIT Act),
- Tax on shifted income (Article 24aa of the CIT Act),
- Tax on commercial buildings income (Article 24b of the CIT Act),
- Minimum income tax (Article 24ca of the CIT Act).
We emphasize that the above list is open.
Further to the draft justification, the taxes listed in the mentioned catalog are an integral part of the CIT system. The project authors treat them as a complement to the income taxation system, considering them anti-abusive measures that counteract erosion of income as the tax base. They also point to the connection between CIT and the national minimum income tax in the form of the ability to deduct the minimum tax paid from CIT.
The above changes should dispel at least part of the doubts related to the interrelations between the global minimum tax and the above-mentioned forms of entrepreneur income taxation.
Firstly, the clear provisions of the draft law eliminate doubts on how to treat the aforementioned taxes for the purposes of calculating the global minimum tax.
Secondly, the Ministry of Finance seems to be sending a clear signal that taxes functioning "parallel" to "classical" CIT (especially the minimum income tax or shifted income tax) may stay with us longer. Therefore, it is worth looking into them with appropriate foresight, as their impact on the taxpayer’s situation may be greater than most of us thought so far.
Simultaneously, the justification for the draft law points out the taxes in force in Poland that are not considered covered taxes. In this regard, it is particularly worth noting:
- Retail sales tax,
- Tax on certain financial institutions,
- Tax on the extraction of certain minerals.
Taxpayers operating in certain sectors (e.g., retail or financial) may thus be required to pay both the sectoral tax and the top-up tax resulting from Pillar 2.
In case of any questions or doubts, we encourage you to contact our experts.
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