With the introduction of the global minimum tax, fiscal incentives for large foreign investors will lose their significance, and Poland may become less competitive compared to other EU countries, experts at Baker McKenzie assess. The work on implementing the EU directive into Polish law should be accompanied by a reconstruction of the existing system of reliefs and incentives that attract investments from international corporations.
The global minimum tax will apply to companies that belong to capital groups and have had revenues of at least €750 million in recent years. EU member states were required to issue the appropriate regulations implementing the directive on ensuring a global minimum level of taxation for international and large domestic groups by the end of 2023. In Poland, the draft law was submitted for public consultation at the end of April, and the adoption of the law introducing the minimum CIT is planned for the second half of this year. Regardless of the delay in adopting the regulations, the tax will cover income earned from the beginning of 2025.
The EU directive comes into force as a result of a consensus among OECD countries, according to which large international companies should pay an effective income tax of no less than 15 percent in each country where they are present.
“The basic CIT rate in Poland is 19 percent and does not seem competitive in the region, but it is accompanied by numerous reliefs, allowing companies, especially in the early stages of investment, to effectively pay much lower amounts or be exempt from taxes,” says Katarzyna Kopczewska, a partner at Baker McKenzie, leading the tax team. “With the implementation of the global minimum tax, it will be necessary to pay a top-up tax to reach a 15 percent burden, regardless of the industry, type of investment, or its stage.”
According to estimates by the Ministry of Finance, the impact of introducing the global minimum tax will be limited to a small group of taxpayers – the largest companies, who are also beneficiaries of incentives. Currently, Poland is one of the locations frequently chosen by investors from Germany and Scandinavia.
“When deciding on the choice of location, the investor considers the entire region and compares the conditions provided by individual countries,” adds Katarzyna Kopczewska. “So far, Poland has been winning, among other things, thanks to attractive fiscal incentives linked to investments. However, this may change with the introduction of the global minimum tax.”
Poland is one of the beneficiaries of the nearshoring trend, according to which international manufacturers move part of their production closer to the end customer. The relief involving income tax exemption for a specified period of investment is currently an important argument for relocating production and conducting business in Poland. To maintain or increase investment attractiveness with the implementation of the global minimum tax, the government should review the existing catalog of reliefs and incentives for major investors and introduce new categories of reliefs, according to Baker McKenzie experts. Other EU countries, including Spain and Hungary, have reviewed their regulations in this regard, ensuring their compliance with the new rules and maintaining competitiveness for foreign investments.
“In the global minimum tax system, certain categories of reliefs and exemptions are permissible, the application of which in a limited scope necessitates the payment of a top-up tax. However, their nature is closer to grants, subsidies, or incentives rather than the reliefs currently applied in Poland, which mainly involve tax exemptions,” says Katarzyna Kopczewska. “Another important issue that should be considered is the change in the way withholding tax is enforced. This tax is widely commented on among foreign investors and is significant in making investment decisions by international players.”
The system of withholding tax collection in Poland, operating for two years, was intended to curb tax optimization but has resulted in double taxation when transferring profits from investments in Poland abroad. With the current interpretation of the regulations by tax offices, the investor pays tax both on the earned profit and on its transfer abroad. According to Baker McKenzie experts, foreign investors are aware of the aggressive policy of the Polish tax authorities and take it into account when choosing investment locations.
