Minimum CIT is a new tax obligation that came into force at the beginning of 2024. Under the CIT Act, companies must make a strategic choice between the classic and simplified methods of calculating the tax base. In this article, we analyse the details of both approaches, present the conditions for their application and recommend optimal solutions depending on the taxpayer’s financial structure.
1. Introduction
Minimum tax regulations were introduced to Article 24ca of the CIT Act by the Polish Deal amendment and came into force on 1 January 2024. Pursuant to Article 38ec of the CIT Act:
1. Taxpayers obliged to pay minimum income tax are exempt from the obligations specified in Article 24ca for the period from 1 January 2022 to 31 December 2023.
2. In the case of taxpayers whose tax year is different from the calendar year and began before 1 January 2024 and ends after 31 December 2023, the exemption referred to in paragraph 1 shall apply until the end of that tax year.
Minimum tax payers are required to pay the tax by the end of the third month of the following year, which means that taxpayers will pay the minimum tax for the first time by 31 March 2025 for the 2024 tax year, which coincides with the calendar year.
During the suspension period, the legislator clarified and modified the new provisions (Act of 7 October 2022, Journal of Laws of the Republic of Polandof 2022, item 2180). The amendment, among other things, broadened the scope of entities exempt from the obligation to calculate the minimum tax and introduced simplifications in the calculation of the tax.
This tax is intended to limit aggressive tax optimisation, particularly by entities with low profitability or losses while generating significant revenues. The regulations provide for two alternative methods of calculating the tax base: the classic and the simplified. The choice of the appropriate method should be dictated by the taxpayer’s cost structure, profitability and tax risks.
2. Classic method of calculating the tax base
2.1 Components of the tax base (Article 24ca (3) of the CIT Act):
- 1.5% of revenues (from sources other than capital gains),
- Debt financing costs for related entities, exceeding 30% of EBITDA,
- Costs of acquiring services and intangible rights from related entities or tax havens, exceeding PLN 3 million + 5% of EBITDA.
2.2 EBITDA formulas
The calculations use appropriately modified EBITDA ratios, which are designed to limit the inclusion of excessive costs in tax-deductible costs.
2.3 Exclusions
Certain costs, such as insurance services or guarantees provided by entities specified in Article 15c, do not increase the base.
2.4 Advantages and disadvantages of the classic method
Advantages
- Allows for the inclusion of actual operating costs and the profitability structure.
- Preferential for entities with high EBITDA and low intra-group transaction costs.
Disadvantages
- High level of complexity, requires accurate data.
- Susceptible to errors in transfer pricing and documentation.
- May lead to high taxation despite low profitability.
3. Alternative simplified method (Article 24ca (3a) CIT Act)
The tax base is 3% of revenues from sources other than capital gains. No need to analyse costs or EBITDA. Choosing this method requires a declaration in the annual tax return.
Advantages:
- Simple and predictable calculation.
- No need to document and verify intra-group costs.
- Attractive for entities with low profitability or high intangible costs.
Disadvantages
- May be less advantageous for entities with high EBITDA and low intra-group costs.
- Does not allow for the settlement of actual operating costs.
4. Recommendations for choosing a method
4.1 When is the simplified method (3%) more advantageous:
| Case | Description | Conclusion |
| High fees for intangible services | Know-how, consulting, management | Better than the classic model, which adds these costs to the base |
| Significant intra-group financing | Loans from related companies | Exceeding the 30% EBITDA limit results in an addition to the base |
| Low profitability / loss | EBITDA < 0 | Despite no profit, the classic method may generate tax |
| Low margin / high turnover | Trade, logistics | 3% of revenue may be less severe than the classic calculation |
| Difficulties with transfer pricing documentation | Lack of complete TP documentation | Lower risk of errors |
4.2 When is the classic method more profitable:
- High EBITDA (high deduction limits of 30% and 5% + PLN 3 million).
- No debt financing or intangible costs – no components increasing the base.
- Well-documented intra-group transactions and stable cost structure.
5. Deductions from the tax base (Article 24ca (10) CIT Act)
The following may be deducted from the tax base:
- Reliefs specified in Article 18 CIT Act (except for reductions referred to in Article 18f CIT Act),
- Revenues exempt from PSI/SSE activities,
- Revenues excluded under Article 24ca(2).
6. Tax return and payment
- Disclosure of the tax base and tax in the annual CIT-8/M return.
- Payment deadline: by the end of the third month following the end of the tax year.
- The minimum tax is reduced by the amount of CIT due under Article 19.
- Unused minimum tax overpayment may be deducted for 3 consecutive years.
7. Application of the minimum tax exemption (Article 24ca(14)(9) of the CIT Act)
If the taxpayer achieved a profitability ratio of over 2% in 2024, they may benefit from the minimum tax exemption for the years 2025–2027.
According to the Act:
“A taxpayer who has achieved a profitability ratio of at least 2% in one of the three years preceding the year to which the tax obligation relates is exempt from minimum income tax.”
This means that:
- A profitability of over 2% in 2024 protects the taxpayer from minimum CIT in the following three years (2025, 2026, 2027).
- This is confirmed by the latest individual interpretation of the Head of the National Tax Administration of 8 May 2025, ref. no. 0114-KDIP2-.4010.134.2025.1.SP/IN.
8. Summary and final conclusions
The minimum income tax is an instrument that forces additional verification of cost policy and transfer pricing. The choice between the classic and simplified methods should always be preceded by an analysis of the EBITDA ratio, cost structure and potential tax risks.
Recommendation:
- Entities with high intra-group costs or low profitability should seriously consider using the simplified method.
- Entities with high EBITDA and transparent transactions with related entities – the classic method may ensure a lower effective tax rate.
- Taxpayers who exceed a profitability ratio of 2% in 2024 are eligible for exemption from the minimum tax for the years 2025–2027.
If you have any additional questions regarding the minimum CIT, please do not hesitate to contact us!
