January brought about the introduction of revised CIT rates which now include, in addition to the basic rate of 19%, also two preferential rates – 9% and 5%. Who and on what terms can apply them?
19%, 9% or perhaps 5%?
In 2019, revenues (income) of CIT taxpayers who operate in Poland and are Polish tax residents may be taxed at three different rates:
- 19% – basic rate,
- 9% – preferential rate for smaller entities,
- 5% – rate applicable to revenues (income) from qualifying IP rights.
9% rate for the chosen ones
The preferential rate of 9% will apply to small taxpayers whose revenues in a given tax year does not exceed the PLN equivalent of EUR 1,200,000. This threshold is translated from euro at the mid exchange rate quoted by the National Bank of Poland on the first business day of the tax year. Next, the resulting amount is rounded to the nearest PLN 1,000. This means that in 2019 the revenue threshold is PLN 5,135,000.
Who is a small CIT taxpayer?
A small taxpayer is a taxpayer whose sales revenues (together with the amount of output VAT) have not exceeded the PLN equivalent of EUR 1,200,000 in the previous tax year.
Who can apply the 9% rate in 2019?
For example, the 9% CIT rate may be applied in 2019 by a limited liability company whose:
- total gross revenues (including VAT) in 2018 amounted to PLN 5,176,000,
- total revenues in 2019 amounted to PLN 5,135,000.
What about VAT in the calculation of the threshold for 2019? The regulations are not entirely consistent and where they refer to a right to the 9% rate, there is no indication that the amount of EUR 1,200,000 is to include VAT. Therefore, in my opinion there is no reason why a company whose net revenues in 2019 reached EUR 1,200,000 should not apply the 9% rate. The other thing is that in such circumstances, such a company would not be able to apply the 9% rate in 2020 (as it would no longer hold the status of a small taxpayer in 2020).
Newly established companies have the right to apply the 9% rate regardless of the amount of turnover reported in the first year of their operation. In the next year, the CIT rate will depend on whether or not the company holds the status of a small taxpayer.
The legislation introduces limitations on the application of 9% rate. The preferential rate applies only to the so-called other gains – i.e. to operating income. The preferential rate does not apply to income from capital gains.
As for new companies, the 9% rate cannot be applied by companies created as a result of transformations (merger or division) or to which an in-kind contribution has been made.
5% rate – income from qualifying intellectual property rights
Legislation on the so-called IP Box (or Innovation Box) became effective as of 1 January. Under the new regulations, income can be taxed at a rate of 5% (!). Naturally, this rate does not apply to all types of income, but is limited to income earned from the sale or licensing of computer software developed, patents or other intellectual property rights.
Click here to learn how to benefit from the IP box relief.
2019 brought about a number of changes in taxes. Fortunately, some of them are for the benefit of entrepreneurs!
To learn more about CIT rates, please visit the website of the Ministry of Finance.
Read more about changes in taxes in 2019: