CIT - basic information

Who is a CIT taxpayer

CIT taxpayers are:

• legal persons (including limited liability companies, joint-stock companies, foundations, associations, cooperatives)
• companies in the process of formation
• organisational units without legal personality (such as tenants’ associations, educational establishments), except for partnerships without legal personality
• general partnerships with their registered office or management board in Poland, if the partners of the partnership do not include only natural persons, and the partnership does not, before the beginning of the tax year, submit a notification on CIT taxpayers and PIT taxpayers holding, directly or through entities not subject to income tax, rights to participation in the profits of the partnership
• partnerships limited by shares with their registered office or management board in Poland
• limited partnerships with their registered office or management board in Poland
• tax groups (groups registered with the tax office, consisting of at least two companies or partnerships with legal personality, linked by capital and meeting certain conditions)
• partnerships without legal personality, with their registered office or management board in another country, if, in accordance with the tax law of that country, they are treated as legal persons and are subject to taxation in that country on their total income, regardless of the place where such income is earned.

If you pay CIT:

• you must file your tax return by the end of the 3rd month of the year following the given tax year. If your tax year is the same as the calendar year, you must file your tax return by 31 March of the following year
• during the tax year, you do not file tax returns, but only make tax advance payments by the 20th of each month. Taxpayers who have chosen to make tax advance payments quarterly, must pay them by the 20th of each month following the quarter for which the advance is paid
• you must keep full accounting records.

Read more on how to file your tax return with form CIT-8 (PL).

CIT rates

The CIT rates are:

• 19% of the tax base
• 9% of the tax base on revenue (income) other than from capital gains for small taxpayers and new businesses.

Who can apply the 9% rate

The reduced 9% rate may be applied by:

• small taxpayers with the value of gross sales revenue (including the amount of output VAT) in the previous tax year not exceeding EUR 2 million, converted according to the average EUR exchange rate announced by the National Bank of Poland (NBP) for the first working day of October of the previous tax year, rounded up to PLN 1,000
• whose revenues earned in the tax year did not exceed the net amount of EUR 2 million, according to the average EUR exchange rate announced by the National Bank of Poland for the first working day of a given year, rounded up to PLN 1,000 (usually it will be 2 January of a given year).

Also, new businesses starting their activity may apply the 9% CIT rate in the first tax year.

Please note! You cannot apply the 9% rate if your business was established through restructuring (for example, division of a company), through transformation of a natural person’s business or a partnership that is not a legal person into another type of business, or if an enterprise (a part of it or its assets) worth more than EUR 10,000 was contributed to the business.

What is subject to tax

The subject of taxation is income (surplus revenue over the costs incurred) that a company has earned in a given tax year. Income is the sum of:

• income earned from capital gains, and
• income earned from other sources of income.

Some income of CIT taxpayers is exempt from tax, provided it is used for the activities defined in their association documents: scientific, scientific and technical, educational, including education of students, cultural, physical culture and sport, environmental protection, support of social initiatives for the construction of roads and telecommunications networks in rural areas and the supply of water to rural areas, charity, health care and social assistance, professional and social rehabilitation of invalids and religious worship. Such income is usually received by associations, societies and foundations.

A special form of taxation is lump sum tax on income of companies, so-called Estonian CIT. In this case, the subject of tax (income) is the net profit that will be allocated by the company for specific purposes.

Companies that have their registered office or management board in Poland pay CIT on all their income, regardless of where such income is earned.

Companies that do not have their registered office or management board in Poland pay CIT only on the income they earn in Poland.

In some cases, it is revenue that is subject to taxation.

CIT – taxable revenue

Taxable revenue in the event of CIT includes, in particular, money received, monetary values, exchange rate differences or the value of things received gratuitously or partially gratuitously, rights or other benefits.

Please note! Revenue related to business activity includes any revenue due, even if not actually received yet, after exclusion of the value of returned goods and discounts granted.

Revenue arises on the date of delivery of goods, disposal of a property right or performance of a service, including partial performance of a service, and no later than on the date when the invoice is issued or the amount due is settled.

In the case of a service settled in settlement periods, revenue arises on the last day of the settlement period specified in the agreement or invoice (at least once a year). This solution is also applied to determine the date on which revenue arises from the supply of electricity, heat and piped gas.

In the case of revenue to which the solutions presented above do not apply, the date on which revenue arises is the date on which the payment is received.

CIT – tax deductible expenses

Tax deductible expenses in relation to CIT are expenses incurred in order to achieve revenue or to preserve or secure a source of revenue.

These may include expenses directly related to revenue (such as expenses incurred to purchase commercial goods) but also those that are only indirectly related to revenue.

Expenses directly related to revenue are accounted for in the year in which such revenue is earned. Other expenses are accounted for in the year in which they are incurred.

The date on which an expense is incurred is the date on which it is recognised in the accounting records on the basis of an invoice or other accounting evidence.

To qualify as a tax deductible expense, an expense must:

• be incurred by the taxpayer and not by another person (as a rule, it is not the actual payment that matters but the incurring of the cost, i.e. issue of the invoice or recognising it in the books)
• be incurred in order to achieve revenue, preserve or secure a source of revenue
• not be listed in the catalogue of non-deductible expenses.

Depreciation

Depreciation write-offs are treated as tax deductible expenses.

Depreciation applies only to acquired intangible assets, i.e. buildings, structures, machinery, means of transport, investments in third-party fixed assets and property rights, such as licences, copyrights, industrial property rights and know-how, costs of development work.

As a rule, taxpayers make depreciation write-offs on the determined initial value of fixed assets – in equal instalments every month, every quarter or once at the end of the tax year (subject to the declining balance method).

Small taxpayers and new businesses (with the exception of transformed companies) may benefit from a one-off depreciation write-off of up to 100% of the initial value of a fixed asset in the tax year in which the asset is entered in the register of fixed assets and intangible assets.

This applies to fixed assets from groups 3-8 of the Classification of Fixed Assets (machinery, equipment and means of transport), excluding passenger cars.

The total amount of such one-off depreciation write off for cars may not exceed the limit of EUR 50,000. The limit is calculated into PLN according to the average EUR exchange rate announced by the National Bank of Poland on the first working day of October of the previous tax year, rounded up to PLN 1,000.

All taxpayers may make one-off depreciation write-offs on the initial value of:

• purchased brand new fixed assets from groups 3-6 and 8 of the Classification of Fixed Assets in the tax year in which they were entered in the fixed assets register, and
• intangible assets

to an amount not exceeding PLN 100,000 in a tax year.

In order to apply a one-off write-off is that the initial value of

• one fixed asset is at least PLN 10,000, or
• the total initial value of at least two fixed assets is at least PLN 10,000, and
• the initial value of each of them exceeds PLN 3,500.

Lease

Lease payments are tax deductible expenses, depending on the terms of the lease agreement. Lease payments are fully deductible for the lessee if:

• the agreement has been concluded for a fixed term representing at least 40% of the normal depreciation period, or at least 5 years in the case of real property
• the sum of agreed payments (including the sale price), less the VAT due, corresponds to at least the initial value of the subject of the agreement, and in the case of a subsequent lease agreement of a fixed asset or an intangible asset which was previously the subject of such an agreement, it corresponds to at least its market value on the date of the subsequent lease agreement

the lease agreement, where the lessee is a natural person who does not conduct business activity, was concluded for a fixed period.

Deductions from the tax base (income)

The following can be deducted from income (among other things):

• donations to public benefit organisations, up to 10% of income
• in banks – loans redeemed in connection with restructuring (20% of such loans)
• donations for religious purposes, up to 10% of income
• donations to public vocational training schools for vocational training purposes
• relief for research and development activities (certain eligible costs)
• relief for innovative employees
• prototype tax relief
• robotisation tax relief
• pro-growth relief
• consolidation relief
• relief for initial public offering (IPO)
• relief for support of sport, culture and education
• relief on payment terminals.

In addition, if you incur a loss in a given tax year, you can settle it (reduce the income earned) in the following five tax years.

Monthly and quarterly CIT advance payments

Monthly tax advances

You must pay your monthly CIT advance payments by the 20th of each month for the previous month, and the advance payment for the last month of the tax year – by the 20th of the first month of the following tax year. If you file your tax return and pay tax before the deadline for the tax advance payment for the last month, you do not pay this advance payment.

CIT taxpayers may pay monthly tax advances in a simplified form, i.e. in the amount of 1/12 of the tax due as indicated in the tax return submitted in the year preceding the given tax year.

If you do not show any tax due in that return, you may pay monthly tax advances in the amount of 1/12 of the tax due as resulting from the return filed in the year preceding the given tax year by two years. However, if you did not declare any tax due in that year either, you may not make tax advance payments in the simplified form.

Taxpayers who wish to choose the simplified form of making tax advance payments must:

• use this form for tax advance payments throughout the entire tax year
• make tax advance payments within deadlines set for monthly advance payments
• settle their tax for the tax year.

The choice of simplified tax advance payments should be indicated in the annual return submitted for the tax year in which the tax advance payments in the simplified form were paid.

Tax preference

Taxpayers who – from the start date of their business activity until the first day of the month of the tax year in which they start using the exemption – are small entrepreneurs within the meaning of the business activity regulations, may apply a tax preference.

The preference consists in postponing the obligation to pay tax advance payments for income tax, while spreading these payments into 5 interest-free instalments.

In such a case, the taxpayer submits a tax return and pays the tax due for the year covered by the exemption in five consecutive tax years, in the amount of 20% of the tax due shown in the return filed for the year covered by the exemption.

The tax is payable on the dates specified for filing returns for the five consecutive tax years immediately following the year covered by this exemption.

To make use of the exemption, submit a declaration indicating use of the exemption to the head of the relevant tax office. The declaration must be submitted in writing by the 20th day of the first month of the tax year covered by this exemption.

Quarterly advances

Quarterly advances may be paid by:

• taxpayers who are starting their business activity – in their first tax year
• small taxpayers.

Quarterly tax advances are paid by the 20th day of each month following the quarter for which the tax advance payment is made, and the tax advance payment for the last quarter of a tax year – by the 20th day of the first month of the following tax year. If you submit your tax return and pay tax before this deadline, you do not pay your tax advance payment for the last quarter.

The choice of the method for making quarterly tax advance payments must be indicated in your tax return for the tax year in which the quarterly tax advance payment method was applied.

Please note! Taxpayers may choose not to pay monthly or quarterly tax advances if the tax due on income earned from the beginning of the year, less the sum of tax advances paid since the beginning of the year, does not exceed PLN 1,000. Tax advance payments are collected from the moment (for the month) when income calculated cumulatively exceeds that amount.

Annual CIT settlement

Taxpayers are required to file an annual tax return on the amount of income (or loss, if any) for a given tax year, by the end of the 3rd month of the following year. If the taxpayer’s tax year coincides with the calendar year, this will be 31 March of the following year.

They must also pay tax by the same deadline.

Submit your tax return to the head of the competent tax office, using the CIT form.

Also, the taxpayer is required to file the financial statements with the National Court Register (KRS) within 6 months of the new financial year.

Read an article on how to file your financial statements with the National Court Register (PL).

Tax year for CIT purposes

The tax year for CIT purposes is the calendar year.

However, you may specify a different tax year in the articles of association, statutes or other document regulating the structure of your business entity.

This means that for a company entered in the National Court Register, the tax year may be the following 12 months, and the beginning of the tax year may be chosen as a day other than 1 January of each year.

In the case of a first-time business owner, the first tax year lasts from the start date of business activity until the end of the calendar year, or until the last day of the selected tax year, but no longer than twelve consecutive calendar months.

Where business activity is started for the first time in the second half of a calendar year, and a tax year coinciding with the calendar year is chosen, the first tax year may run from the start date of business activity until the end of the calendar year following the year in which the business was started.

The choice of a tax year other than the calendar year must be indicated in your CIT-8 tax return.

Changing the tax year

When changing the tax year, the first tax year after the change is considered to be the period from the first month following the end of the previous tax year, until the end of the newly adopted tax year.

When changing the beginning of the tax year, you must bear in mind that this period cannot be shorter than 12 months nor longer than 23 consecutive calendar months.

Tax year and obligation to close accounting books

If the obligation to close the accounting books (to draw up the balance sheet) before the end of the tax year adopted by the taxpayer results from other provisions, the tax year will be the period:

• from the first day of the month following the end of the previous tax year
• until the day the accounting books are closed.

In this event, the following tax year will be the period from the date of opening the accounting books until the end of the tax year adopted by the taxpayer.

Alternative tax settlement method – Estonian CIT

CIT payers who meet the conditions set out in the law may apply the Estonian tax settlement rules.

In the case of Estonian CIT, it is not required to:

• keep tax accounting
• determine tax deductible expenses
• calculate tax depreciation write-offs.

In this case, CIT advances are not paid on a monthly basis – instead, tax is paid at the time of distribution of profit from the company (dividends).

This gives you the freedom to determine the moment when taxation occurs and allows you to allocate the money for purposes related to the day-to-day operations of the company.

In addition, at the moment of taxation (profit distribution), the effective tax rate (consisting of tax on the company’s profit and tax on dividends paid by the shareholder) will be lower than in the case of classic CIT. For small taxpayers, it will be only 20% instead of 26.29%, and for other taxpayers – in total only 25% instead of 34.39%.

Support

National Tax Information

Here, tax experts answer your questions on topics related to taxation, customs or the interpretation of legislation.

Open Monday to Friday from 7:00 a.m. to 6:00 p.m.

• from a landline: 801 055 055
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• from abroad: +48 22 330 0330

Tax interpretation

If you are not sure whether you are applying the tax law correctly, you can ask the National Tax Information for help and obtain a tax interpretation. The interpretation may relate both to events that have already occurred (facts) and to events that you are only planning (future events).

Find out how to apply for an interpretation (PL).

Use the database of issued interpretations. There may already have been an interpretation issued on a matter similar to yours.

Tax portal

On the Tax Portal website you will find a lot of useful information on tax returns, and tax forms.

The information covers the following topics:

• powers of attorney for tax matters
• reporting of tax schemes
• transfer pricing
• withholding tax

Electronic tax return

The e-Deklaracje (electronic tax returns) system makes it possible to submit tax returns online.

• CIT
• Taxes
• Tax returns and tax settlement.