The tax break for reinvestment of profits has extended to companies with sales of up to PLN 100 mln (EUR 22 mln) as part of an extended business “top five” plan, up from PLN 50 mln (EUR 11 mln).
“Our goal has remained the same - the best-paying jobs for Poles and support of small businesses, which are often in a worse position than larger business,” said Prime Minister Morawiecki, updating the government’s ‘top five” initiatives for businesses, after confirming the final draft of the 2020 budget bill.
The proposed change to the tax regulations will mean that small and medium-sized companies will be able to retain profits for investment. The idea is often referred to as “Estonian tax”, after the Baltic country, which has produced several unicorns, including Skype, due to regulations which encourage companies to invest in R&D.
To qualify for the “Estonian” tax exemption a company will be required to retain income to invest in technology or equipment which will increase its value added, such as software or AI. Only firms with at least three members of staff will be eligible. Investments in real estate or passenger cars will not be included. The extension to companies with higher sales will create “tens of thousands of jobs in technically-advanced sectors,” according to Mr Morawiecki.
An additional amendment to regulations for companies from January 2021 is that the 9 percent rate of corporate profits tax will be available to companies whose income does not exceed EUR 2mln. Currently the limit is EUR 1.2 mln.
Meanwhile PM Morawiecki said that the government has followed up on his promise to reduce social security premiums for companies with low earnings and intends to increase the amount of sales that can be settled according to the 19 percent flat rate of tax from EUR 250,000 to EUR 2 mln.
The Lord giveth…. Another change which has been introduced is that general partners in what are known as limited company limited partnerships will have to pay tax. Currently, the form of limited partnerships which are part-owned by a limited company, is used as a way of optimising tax, particularly by companies with a foreign partner. According to PWC “the impact on Polish general partners is likely to remain limited, as the draft provides for a deduction of CIT paid in limited partnership by general partner.” Around 200,000 companies use this form of taxation currently.