On 7 November 2022, the President of the Republic of Poland received the Act on Equalisation Taxation of Constituent Entities of International and Domestic Groups, which implements into the Polish legal system the provisions of Council Directive (EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for international groups of enterprises and large domestic groups in the European Union, i.e m.in regulations on the minimum 15% global minimal tax, the so-called Pillar 2.
The main objective of implementing the above-mentioned regulations is to eliminate the tax practices of multinational companies, which allow them to transfer profits to countries where they are not subject to any or very low taxation.
According to the explanatory memorandum to the Act implementing the Pillar 2 Directive, the effect of the introduced rules is to create a “level playing field”. This is due to the fact that in a situation where the effective rate of 15% will apply in all jurisdictions that will introduce this system, the tax attractiveness of given countries will no longer be an important factor in the location of investments.
In order to achieve these goals, the implemented regulations establish several key assumptions:
- setting a minimum tax rate of 15% (the so-called equalization tax);
- covering a specific group of entities, i.e. enterprises with annual revenues exceeding EUR 750,000,000 (large entities);
- obliging taxpayers to report on revenues generated and taxes paid in the jurisdictions in which they conduct business activity (country-by-country reporting).
In other words, the equalization tax at the rate of 15% will apply to the largest business entities whose revenues exceed EUR 750,000,000. Thus, when taking into account the revenues generated, the revenues generated also by the capital group of which the entity is a member should be taken into account.
What is equally important, the obligation to pay (surcharge) the tax will arise only if the so-called effective tax rate for a given country for a given tax year is less than the discussed 15%.
The Polish equalization tax will take one of three forms:
- global equalisation tax;
- domestic top-up tax;
- equalization tax on under-taxed profits.
The calculation of the effective tax rate is expressed by the formula:
(Sum of adjusted taxes of qualified constituents located in the jurisdiction / jurisdictional qualified net income) * 100%.
In terms of reporting, it is also worth adding that due to the global nature of the regulations, in the case of Polish entities that are members of foreign capital groups, global information on the entire group will probably be submitted by the parent company. In such a case, the Polish entity will only be obliged to provide the local tax authorities with information resulting from this general declaration for the entire group.
To sum up, the Pillar 2 Directive, which is being implemented into the Polish system, implements the global equalization tax, which has been developed for a long time by EU institutions, i.e. a tax aimed at the largest, international economic entities, aimed at eliminating tax practices that allow the transfer of profits to countries without taxation or with a very low level of taxation.
The effect of this implementation will be, first of all, additional reporting obligations and the need to verify the revenues generated in the capital group on an ongoing basis due to the specific threshold of EUR 750,000,000 to which the liabilities in question are related.
