The European Union on December 15, 2022 adopted Council Directive (EU) 2022/2523 on ensuring the global minimum level of taxation of multinational enterprise groups and large domestic groups in the Union – hereinafter Directive 2022/2523. The adopted directive obliges Poland to join, as of January 1, 2024, the system of global minimum taxation of multinational enterprise groups. The described directive is the EU implementation of Pillar II of the international tax reform, which was approved on 14.12.2021.
On April 25, 2024, the Ministry of Finance published a draft law on equalization taxation of component units of international and domestic groups.
What is a global equalization tax?
Global equalization tax (IIR) obliges the parent company to pay the appropriate equalization tax. A system of so-called global minimum tax (GloBE rules). It is a solution that assumes that the largest multinationals will be subject to a check each year to see if they meet the requirement of a minimum effective level of taxation: 15%. As long as the effective level of income taxation for a particular international group, in a particular jurisdiction, is below 15% (the so-called effective rate of 15%), such group will be required to pay the corresponding top-up tax.
Types of global equalization tax:
The global minimum tax system being introduced into Polish tax law by the bill is to be based on three types of compensatory tax:
- global compensatory tax – in the directive as the principle of inclusion of income in taxation (IIR),
- national compensatory tax – depending on the context also with the attribute “qualified” (QDMTT),
- tax on under-taxed profits – in the directive as the under-taxed profits rule (UTPR).
The design of the tax on under-taxed profits:
The directive adopts a formula of different rules for collecting a compensatory tax and captures the system of rules as a single tax system. It does not define “separate” taxes as adopted in the draft – however, this difference should not have a significant practical impact. The system introduced is analogous to the foreign controlled entity (CFC) taxation regime operating in many countries, including Poland. QDMTT recognizes similar to IIR, however, with the significant difference that the right to collect the equalization tax remains in the jurisdiction where the low-taxed group entities are located, so most often, it will be paid in the State where the low-taxed income was located (and not necessarily where the parent company is). In line with OECD, IIR and QDMTT standards, the directive has been extended to large domestic groups, i.e. groups of entities operating in only one member state. The UTPR, on the other hand, imposes an offsetting tax on the parent entity, on group entities located in a particular jurisdiction, when that parent operates in another jurisdiction where there is no IIR.
Opinion on compensatory taxation:
The bill introduces Chapter 1b, in which the legislator provided for the introduction of a new legal institution like an opinion on compensatory taxation. An interested party may apply for an interpretation of the law on compensatory taxation. The application shall be submitted to the Director of National Tax Information.
A request for an opinion on compensatory taxation may relate to future events, including, in particular, planned activities or activities that have been started and not completed.
The interested party is obliged to make a statement under penalty of criminal liability for false testimony that the elements of the future event covered by the request for an opinion on compensatory taxation on the date of filing the request are not the subject of pending tax proceedings, tax inspection, customs and fiscal inspection, and that in this regard the matter has not been resolved on its merits in a decision or order of the tax authority. If a false statement is made, the opinion issued shall have no legal effect.
It shall be refused, by means of a decision, to issue an opinion on compensatory taxation with respect to those elements of a future event which; on the date of submission of a request for an opinion, are the subject of pending tax proceedings, tax inspection, customs and fiscal inspection, or when in this respect the matter has been resolved on its merits in a decision or order of the tax authority, agreed in a tax agreement, investment agreement, or when they are already covered by an opinion on compensatory taxation that has not expired.
The Director of National Tax Information may request clarification of doubts about the content of the request for an opinion on compensatory taxation or hold a reconciliation meeting to clarify such doubts. Minutes of the reconciliation meeting shall be drawn up. The course of the reconciliation meeting may, in addition, be recorded by means of video and audio recording equipment or on computer data storage media.
The opinion on compensatory taxation and its amendment are valid for a period of 5 years from the date of their issuance.
A request for an opinion on compensatory taxation is subject to an initial fee and a main fee. The amount of the preliminary fee is PLN 25,000. The initial fee shall be paid to the account of the National Fiscal Information within 7 days from the date of submission of the application. The amount of the main fee may not exceed PLN 75,000.
An opinion on compensatory taxation shall be issued without undue delay, but no later than within 6 months from the date of payment of the main fee.
Compliance with a valid opinion on compensatory taxation, which was subsequently amended or which was not taken into account in the settlement of a tax case, results in exemption from the obligation to pay tax to the extent arising from the event subject to the opinion, if; the obligation was not properly discharged as a result of adherence to an opinion that has been amended or an opinion that has not been taken into account in the settlement of a tax case, and the tax consequences related to the event to which the future event that is the subject of the opinion on compensatory taxation corresponds occurred after the publication of the general interpretation or after the delivery of the opinion on compensatory taxation.