When a company begins business operations for the first time, it may take advantage of a specific tax incentive available in Poland: a tax credit. What exactly is this tax credit, and what conditions must a company meet to qualify for it? We address these and other questions in this article.

What is a tax credit?

A tax credit is a tax incentive designed for companies that are just starting their business operations. It allows for the deferral of income tax payments for a chosen year.

How does this tax benefit work?

When a company begins business operations, it is not required to pay income tax on the income generated during that first year. In effect, the company is exempt from making advance income tax payments throughout that year.

Instead, the total tax amount due on the income from that year is spread out over the following five years. This means the tax is paid in five equal installments (20% each) when filing tax returns for the five consecutive tax years immediately following the year in which the exemption was applied.

How is the "year of commencement of business activity" defined?

An application for this tax incentive may be submitted in the year following:

1) the year in which business activity began, provided that the activity was carried out for at least 10 full months during that initial year;

or

2) the two-year period following the year in which the business activity began, if the condition specified in point 1 was not met.

What qualifies as a company that is just beginning its business operations?

A company is considered to be in the initial stage of its business operations if it has been established as an entirely new legal entity and is currently within its first tax year.

The company must not have been formed as a result of the merger, division, or transformation of other legal entities. Furthermore, the company’s assets must consist solely of cash or have a value of less than 10,000 euros (denominated in Polish zlotys, based on the average euro exchange rate as determined by the National Bank of Poland).

What conditions must a company meet when applying for a tax credit?

A company applying for this benefit must:

• Hold the status of a small taxpayer;
• Employ at least 5 people under employment contracts;
• Have an average monthly income equivalent to at least 1,000 euros (denominated in Polish zlotys), calculated based on the average euro exchange rate set by the National Bank of Poland;
• Possess assets valued at more than 10,000 euros (denominated in Polish zlotys), calculated based on the average euro exchange rate set by the National Bank of Poland. Furthermore, these assets must not include equipment classified under groups I or II of the Fixed Assets Classification (Klasyfikacja Środków Trwałych).

How can this benefit be utilized?

A company must submit a written statement of its intent to use this tax benefit to the tax office no later than the 20th day of the first month of the tax year in which it plans to apply the exemption.

Which tax return must be filed?

At the end of the tax year, the company is required to file an annual tax return using the CIT-8 form.

Is this benefit considered *de minimis* aid?

Yes, this benefit is classified as *de minimis* aid; its value is counted toward the limit established for the company regarding the receipt of such aid.

What are the advantages of the tax credit?

Taxpayers who utilize this credit pay their income tax for the relevant tax year over the course of the following five years – effectively deferring payment compared to the timeline required under standard tax rules.

Using this tax credit does not incur any additional fees or interest, making it a more advantageous option than a bank loan.

The conditions for obtaining an income tax credit in Poland for sole entrepreneurs are discussed in our separate article.

Basis: Art. 25, paragraphs 11–13 of the Corporate Income Tax (CIT) Act.