From 1 January 2024, a global minimum tax called also the top-up tax is in force.
The global minimum tax is going to apply to capital groups:
- multinationals (MNEs) earning income in different tax jurisdictions (irrespective of whether the group companies are based in the EU or outside) and
- domestic, whose consolidated revenue in at least two of the last four fiscal years was equal to or higher than EUR 750 million.
The capital group is defined broadly – it also includes one entity if it has branches.
Countries liable to the global minimum tax are not only countries based in the European Union, but also outside the EU. 138 countries and jurisdictions supported the introduction of this tax. In the EU, the global minimum tax is regulated by Council Directive (EU) 2022/2523 dated 14 December 2022.
Calculating the top-up tax (which in Poland takes the form of a global, domestic or under-taxed profits top-up tax) requires, first and foremost, determining whether, in a given jurisdiction, entities within a group subject to the GloBE / Pillar 2 have achieved an effective tax rate (ETR) (for the relevant year) of, in principle, at least 15% (subject to the application of temporary CbCR safe harbours, under which the ETR level is 15% only in 2024).
If it is determined that the ETR is below the required level, a liability to pay a top-up tax may arise in respect of that jurisdiction.
Key Global Minimum Tax rules
- If the parent company’s jurisdiction does not provide for a catch-up tax (including the application of the IIR rule), a catch-up tax on undertaxed constituent entities from countries not applying the GloBE rules will be payable in the countries where the group members are resident and where the UTPR rule applies. This is known as the UTPR mechanism – the Undertaxed Payments Rule.
- If the jurisdiction of the parent company does not impose a global minimum tax, the top-up tax will be payable in the countries where the group entities are located. This is the so-called UTPR mechanism – Undertaxed Payments Rule.
Consequences for Polish entities
The Act on the Levying of a Cumulative Tax on Entities Belonging to International and Domestic Groups – transposing Council Directive (EU) 2022/2523 of 14 December 2022 into national law – entered into force, in principle, on 1 January 2025. Poland has thus delayed the implementation of the Directive, which stipulated that it should be implemented in Member States by 31 December 2023
The tax rules in Poland are very complicated, requiring extensive and multifaceted preparation for its implementation.
Polish entities that are subsidiaries in MNEs must already today take into account the fact that due to the entry into force of the global minimum tax in the country of residence of the parent entity (head office) of the group, from 2024 they are obliged to transfer certain information and financial data used to determine the effective tax rate in Poland. For Polish companies belonging to large corporate groups, preparing to meet their GloBE calculation and reporting obligations is currently one of the most significant challenges (alongside the implementation of KSeF and JPK CIT).
Importantly, the Polish legislature has still not decided how (at least in part) to protect tax reliefs and other incentives (e.g. R&D relief or operations within the Polish Investment Zone) from the negative impact of GloBE / Pillar 2. This issue, in turn, has a significant impact on the ETR and any potential adjustment tax.
Polish GloBE taxpayers are currently grappling with determining the scope of data that is necessary for the correct calculation of the ETR and any potential catch-up tax – in order to prevent tax arrears and severe penalties.
How can we help?
Polish capital groups:
- Assessment if the group will have to pay the top-up tax and when it came into effect..
- Determining the income of which entities in the group will affect the amount of tax and which will not, and whether there are incomes excluded from the top-up tax.
- Assistance in collecting the documentation required to exclude income from the top-up tax, within the criteria available in the law.
- Evaluation of planned or possible reorganization activities, including in particular mergers or divisions in terms of potential qualification as a domestic capital group liable to pay the national top-up tax
- Diagnosis of the impact of applied reliefs and tax preferences on the amount of the top-up tax.
- Calculation of the ETR and any top-up tax (where necessary).
- Support in adapting the processes and procedures in force in the organization for the purposes of reporting data that is a component of the calculation of the ETR ETR and any top-up tax.
- Support in managing the group’s financial liquidity in connection with the need to pay tax by the parent entity.
- Training of staff of financial, tax and legal departments involved in events affecting the amount of ETR and any top-up tax.
Polish subsidiaries in MNEs:
- Determining the income of which Polish entities in the group will affect the amount of the top-up tax and which will not, and whether there are Polish incomes excluded from the top-up tax.
- Support in the preparation of data and information required by the group entity that will calculate ETR and possibly pay the top-up tax, necessary for the reporting process by the head office.
- Determination of the impact of the application of Polish tax reliefs and preferences on the amount of the top-up tax.
- Assistance in collecting the documentation required to exclude the income of Polish entities from the group from the top-up tax, within the criteria available in the law.
- Calculation of the ETR and any top-up tax of Polish entities in the MNEs according to the specific rules of the GloBE.
- Support in managing the group’s financial liquidity in connection with the need to pay tax by the parent entity.
- Training of staff of financial, tax and legal departments involved in events affecting the amount of the ETR and any top-up tax.
Our experience
Feel free to contact us
Monika Dziedzic
Partner | Tax adviser | Attorney at Law
E: monika.dziedzic@mddp.pl
Łukasz Kumkowski
Senior manager | Attorney at Law E: lukasz.kumkowski@mddp.pl T: +48 660 428 394
Anna Zielony
Senior manager | Tax adviser E: anna.zielony@mddp.pl T: +48 721 715 856