What is the Legislation?

Poland will implement the provisions of Council Directive (EU) 2022/2523 of 15 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the European Union (the so-called Pillar 2 Directive) into the Polish legal system.

Which Entities are impacted?

The Pillar 2 Directive provides for the introduction of a global minimum tax for multinational and domestic groups whose:

• consolidated annual revenue in at least two of the four fiscal years preceding the tested fiscal year amounted to at least EUR 750 million,

• effective tax rate (ETR) in a given jurisdiction is lower than 15%.

According to the announcement, multinational groups operating in Poland will be subject to an annual review to verify whether they meet the minimum effective tax rate requirement (i.e. taxation at the level of 15%).

If the effective tax rate for a group in a specific jurisdiction is lower than 15%, an appropriate top-up tax will be levied.

What Types of Top-up Tax?

The proposed global minimum tax system is based on three types of top-up tax: a global top-up tax, a domestic top-up tax, and a tax on undertaxed profits.

Global: The income inclusion rule (IIR) stipulates that, in principle, the obligation to pay a top-up tax rests with the ultimate parent entity in the group (top-up tax in respect of low-taxed subsidiaries in other jurisdictions).

Domestic: A qualified domestic (minimum) top-up tax (QDMTT) is a type of top-up tax collected in the country where the low-taxed group entities are located (the top-up tax is paid in the jurisdiction where the low-taxed income is generated).

Undertaxed profits: The undertaxed profit rule (UTPR) stipulates that the obligation to pay a top-up tax in respect of a parent entity rests with group entities located in a given jurisdiction if their parent entity operates in another jurisdiction where there is no IIR.

How can you prepare?

Since the new regulations will take effect at the beginning of 2025, it is advisable to carry out a comprehensive review now to determine whether your group may be required to pay the global minimum tax and, if so, to estimate its amount.

GGI INSIDER No 130 March 2024