The Top-up Tax Act signed – what changes for companies?
What is the top-up tax?
The top-up tax is a new tax that is part of the tax reform (BEPS 2.0) implementing the global minimum tax. The global minimum tax is based on 3 types of top-up tax:
- Global top-up tax - applies to the ultimate parent entity of an international group;
- National top-up tax - calculated by a taxpayer who is a low-taxed component unit of an international group or a domestic group;
- Tax on under-taxed profits - the taxpayer of this tax is a component unit of an international group located in the territory of the Republic of Poland.
The enacted act implementing top-up taxation of component units of international and domestic groups in Poland enters into force on 1 January 2025.
We wrote about the assumptions of the project in the article: Global minimum tax – when in Poland?
Top-up tax – who does it apply to and how is it calculated?
The new regulations apply to component units of an international group or a domestic group if they achieved the minimum group revenue for at least 2 out of 4 tax years immediately preceding the tax year.
The minimum group revenue is the annual revenue of the international group or the domestic group, as shown in the consolidated group reports, of at least EUR 750 000 000.
However, if the tax year is other than 12 months, the minimum group revenue is determined by multiplying the number of months in that tax year by EUR 62,500,000.
The Top-Up Tax Act provides for exclusions. Its provisions do not apply to excluded entities, including, inter alia:
- Government units;
- International organizations;
- Non-profit organizations;
- Pension funds;
- Investment funds that are ultimate parent entities;
- Entities investing in real estate if they are the ultimate parent entities.
- Entities in which at least 95% of the nominal value of their shares or rights of a similar nature and, in the case of shares or rights without a nominal value - the issue value of such shares or rights, belong to excluded entities, with the exception of entities providing pension services, directly or through one or more excluded entities, if they conduct activities supporting or auxiliary to the activities of excluded entities;
- Entities in which at least 85% of the nominal value of their shares or rights of a similar nature and, in the case of shares or rights without a nominal value - the issue value of such shares or rights, are held by excluded entities, except for entities providing pension services, directly or through one or more excluded entities, if substantially all of their income is derived from excluded dividends .
Furthermore, the global top-up tax and the top-up tax on under-taxed profits are not calculated for the domestic group.
15% tax for the largest companies
The adopted regulations mean that entities will be obliged to pay a top-up tax – the minimum tax rate is 15%.
However, entities affected by the adopted regulations will be obliged to apply the principle of inclusion of income in taxation in relation to their low-taxed components. They will apply this principle if the effective tax rate is lower than the minimum tax rate. The effective rate is calculated for a given country according to the formula:
Top-up tax information – when should it be filed?
Capital group entities with their registered office in Poland must submit information on the top-up tax to the tax office. This information will be submitted in accordance with the established template to the appropriate head of the tax office. The deadlines depend on the type of tax:
- Information on the top-up tax for the tax year - by the end of the 15th month following the end of the tax year;
- Information on the global top-up tax, the domestic top-up tax and the top-up tax on under-taxed profits – by the end of the 18th month following the end of that tax year.
If there are several entities in the same group - Polish companies liable for the same tax, they can choose one that will be responsible for it. This choice is made for a maximum of 5 years and can be changed during that time.
Failure to comply with new obligations – what are the sanctions?
Entrepreneurs who fail to meet their obligation related to the top-up tax must expect consequences. They may be punished for failure to submit information or submitting it after the deadline, submitting information in an incorrect manner (not in accordance with the electronic document template), providing false data or concealing it. Failure to submit information electronically is also subject to sanctions. Statutory penalties also apply to the obligation to inform the tax office about the data/change in the data of the group unit submitting the information.
In accordance with the provisions of the Fiscal Penal Code, for failure to comply with the provisions on submitting information regarding the top-up tax, obliged entities may be subject to a fine of up to 720 daily rates.
Top-up tax – how can we help?
The introduction of the top-up tax means additional obligations for the entities of the capital group. The new tax may, among other things, lead to an increase in the tax burden for the obliged companies. Therefore, it is important to carefully analyse the company's situation and take appropriate actions aimed at, among other things, avoiding double taxation.
What to do? Consult an expert. A Crowe Polska tax advisor will help you assess how the new regulations will affect your business and what steps to take.
