Poland to exempt reinvested profits from corporate income tax to boost investment and jobs

The Polish government has unveiled plans to exempt companies from paying corporate income tax (CIT) until they pay out a profit. The aim is to boost private sector investment and jobs.

The policy, dubbed “Estonian CIT” because Estonia has a similar system, was announced by Prime Minister Mateusz Morawiecki, who said the government was introducing “the newest” and “very flexible” tax solutions, reports Business Insider Polska.

The exemption will apply to companies with annual sales below 50 million zloty (€11 million). Over 200,000 firms, or 97% of all limited and joint-stock companies registered in Poland, are expected to be eligible.

“Polish or foreign businesses, which decide to conduct business in Poland, will have ideal conditions to develop,” said Morawiecki.

In the current tax regime, companies pay income tax on the profit they turn each year. However, the new rules will allow eligible companies to avoid CIT payment until they decide to distribute the company’s earning (such as through dividends payed to shareholders), allowing for profits to be reinvested tax-free.

The government believes that the new tax rules, which are to be introduced later this year or at the start of 2021, could boost private investment by 2 percentage points next year and spur the creation of 120,000 new jobs.

“This is a pro-market and pro-worker solution. We want to respond to the needs of workers and entrepreneurs,” said Morawiecki.