A closer look at Estonian CIT in Poland

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

A closer look at Estonian CIT in Poland

Sponsored by

sponsored-firms-mddp.png
The ‘Polish Deal’ is a complex tax reform

Łukasz Kosonowski of MDDP discusses the Estonian CIT and explains who is likely to benefit the most from this new form of taxation for the corporate taxpayer.

The ‘Polish Deal’ is a complex, and probably the hugest, tax reform in Poland seen for years. It has brought significant changes to the so-called Polish ‘Estonian CIT’ –  a new form of taxation introduced to Polish tax law in 2021.

In short, the Estonian CIT allows corporate taxpayers to defer payment of corporate income tax (CIT) at the point of profit distribution, up to a few years. However, due to restrictive and unprecise regulations, only a few hundred entities have chosen it so far. However, this may change from 2022 as the new law not only reduces the list of requirements that need to be fulfiled in order to qualify for the Estonian CIT, but it is also more attractive compared to other forms of taxation. 

The effective taxation rate of income tax (both for companies and individuals – CIT and personal income tax (PIT)) may be as low as 18.1% (in case of entities whose turnover does not exceed €2 million) or 21.2% (for other entities) - most likely the lowest possible tax rate among many different forms of business taxation in Poland. This is in line with the option to defer payment of tax up to 4.5 years.

The Estonian CIT is in principle allowed for any businesses, with one exception being a financing and crediting activity. It is particularly interesting that real estate companies are also allowed to opt for it. 

The legal form is also not a problem – limited liability company, joint stock company, limited partnership or so-called ‘simple joint stock company’ (new corporate form, dedicated to new ventures and start-ups), are all eligible. 

Also, the scale of the business does not matter any longer (from 2022) – small, medium as well as large entrepreneurs will be allowed to choose this taxation model. In addition, the Polish Deal also brings another awaited change – starting from 2022, the requirement to incur investments expenditure will be removed.

So, where is the catch? In fact, there are not many – but one of the most important things is to fulfil the so-called ‘simple capital structure’ criteria. This means in practice that a company may be entitled to the Estonian CIT only if its direct shareholders are individuals (not companies or other entities) and at the same time the company does not have any subsidiaries. 

This certainly limits the number of eligible entities, but apart from this all other requirements should be simple to fulfil. One of the requirements is related to minimal required employment – the companies applying the Estonian CIT should employ a minimum of three employees; but even this condition may be milder in case of new companies or so-called ‘small taxpayers’ (turnover below €2 million).

While the Estonian CIT is only formally allowed for Polish tax resident companies, there are no limitations for individuals who are shareholders of such companies. Thus, it should be also considered as an investment vehicle for non-Polish tax resident individuals interested in investing or doing business in Poland.

 

 

Łukasz Kosonowski

Partner, MDDP

E: lukasz.kosonowski@mddp.pl

 

more across site & shared bottom lb ros

More from across our site

The long-awaited overhaul of Brazil’s tax systems will cause uncertainty for businesses. Experts from Lavez Coutinho argue it is essential for company leaders to get ahead of the issues
‘KPMG Workbench’ has a network of 50 AI assistants and chatbots that will assist clients; in other news, Baker McKenzie hired a former US deputy attorney general and tax disputes expert
The UK tax agency reported that the total estimated tax gap for the 2023/24 tax year is £46.8 billion
The case shows that legal relationships between parties bear significance and should be given sufficient weight in TP analyses, one local adviser says
Burford Capital said it hopes that the US Congress will not ‘set back’ business growth and innovation by introducing a tax on litigation funding profits
The new framework simplifies the process of relocating eligible employees to Luxembourg and offers a ‘clear and streamlined benefit’, says Alexandra Clouté of Ashurst
The Portuguese firm’s managing partner tells ITR about his love of Sporting Lisbon, the stress of his '24-hour role', and why tax is never boring
The reduction would still ‘leave room’ for pillar two and further reductions would be possible, one expert tells ITR
Funding from private equity house EQT will propel WTS Germany to compete with the ‘big four’, the firm’s leaders told ITR in an extensive interview
New Zealand is bucking the trend of its international counterparts with its investment-friendly visa approach. Here’s what high-net-worth investors need to know
Gift this article