European Commission Takes Legal Action Against Poland Over Global Minimum Tax Implementation Delays

The European Commission has referred Poland to the European Court of Justice (CJEU) for delays in adopting EU regulations regarding a global minimum tax. Poland has until 2025 to comply with these rules.

The Commission has lodged a complaint against Poland, citing its failure to timely implement the second pillar of the global tax reform, specifically the introduction of a minimum income tax of at least 15% for international corporations.

Additionally, similar allegations have been made against Spain, Portugal, and Cyprus for not implementing an EU directive designed to standardize the minimum tax rate for large companies. This directive, approved on January 1, mandates that member states establish national rules for the so-called “Pillar II,” which aims to reduce tax competition among countries.

Pillar II is a critical aspect of this directive, imposing a minimum tax level on companies with an annual turnover exceeding €750 million. Consequently, corporations that pay less than a 15% effective tax rate in any member state will need to pay an additional top-up tax. These measures are intended to combat tax optimization strategies used by international firms that often shift profits to countries with lower tax rates.

While the European Commission acknowledges that Poland and other nations are making progress toward implementing these new regulations, they have yet to submit specific legal measures.

In April 2024, the Polish government released a draft law aimed at equalizing the taxation of large international and domestic groups. After public consultations in May, this draft was submitted to the Sejm at the end of September, indicating that the implementation process is underway. The planned regulations are expected to take effect in January 2025, allowing Poland to fulfill its EU obligations, albeit with some delay.

What This Means for Businesses in Poland

Tax policy changes in Poland have direct implications for both domestic and foreign-owned businesses. Companies operating in Poland must stay informed about regulatory developments to optimize their tax position and maintain compliance. The Polish tax system includes CIT (19% standard, 9% for small taxpayers), VAT (23% standard rate with reduced rates of 8% and 5%), and various sector-specific levies.

For international entrepreneurs and investors, understanding the Polish tax landscape is essential for business planning. Poland offers several attractive incentives including the Polish Investment Zone (up to 15 years of CIT exemption), R&D tax relief (up to 200% deduction), and the IP Box regime (5% effective CIT rate on qualified intellectual property income). Professional tax advisory can help identify the most beneficial structure for your specific situation.

The interplay between Polish domestic tax law and international tax treaties is particularly important for foreign-owned entities. Transfer pricing regulations, withholding tax provisions, and anti-avoidance rules (GAAR) require careful navigation to ensure both compliance and optimization.

If you are doing business in Poland or considering entering the Polish market, Zalewski Consulting can help. Learn more about our tax advisory services in Poland, or contact us for a free consultation.