In recent days, the leading media tax theme has become a tax on extraordinary profits. We don't know the details of this idea that came out of the Ministry of State Acts. The bill is expected to appear in about 2-3 weeks.
We know that it is intended to apply to CIT taxpayers who "increase profits through excessive margin increases", and that it is a modification of the EU's idea – to burden the profits of extraordinary energy companies at a rate 33% - only that after MAP improvements is to apply to all large companies and the rate is to be 50%.
The fact is that, in fact, this tax also called a tax may be retrospective, since the amount to be paid will depend on a comparison of the results achieved by the taxpayer in the year 2022 and 2021.
There is therefore doubt as to the admissibility of such a solution, as we may be dealing with retroactive tax burdens as well as double taxation - taxpayers' income has already been taxed on standard CIT rules.
Ultimately, on the admissibility of this tax under the basic law, I will be able to comment when we learn the content of the bill.
It is difficult not to see that such a system is aimed at promoting "entrepreneurship just in time". Entrepreneurs who do not incur extraordinary costs (e.g. investments, emergency costs) and do not earn too much (e.g. due to the excellent sense of market needs and timing) will not be exposed to additional tax burdens. Is it worth to lean out of a series of mediocrity?
Regardless of the formal correctness of a possible project, the idea itself sparks understandable opposition from entrepreneurs who, being exposed to the payment of an additional tax on profits they have developed and already taxed, feel cheated.
The decline in trust is already due to the very wording of "excess profit", suggesting that the state administration will verify and then punish those taxpayers who, according to the official criteria, have earned too much.
In this context, the question arises at which point this cross-border above which the company "makes too much money". Personally, I don't think there's a level, a value that's honest, someone will always be hurt.
At the same time, in the shadow of this tax spectrum dedicated to entrepreneurs achieving too much success, the minimum tax, which is already in force and will now be improved, is being developed in the "excess" amounts of profit. To keep the system tight on both sides.
It is difficult not to see that such a system is aimed at promoting "entrepreneurship just in time". Entrepreneurs who do not incur extraordinary costs (e.g. investments, emergency costs) and do not earn too much (e.g. due to the excellent sense of market needs and timing) will not be exposed to additional tax burdens.
Is it worth to lean out of a series of mediocrity?
Perhaps social opposition and loss of confidence in the project's authors will be so large and politically important that the authors will withdraw from the idea of taxing excess profits and the project will not see the light of day, or will be significantly changed in relation to the original idea. Looking forward to further developments in taxing too many earners, I present below an overview of the changes that are currently being made in the tax theme for under-profiters:
Introduction of an alternative tax base method and reduction of the tax base:
Based on Article 1(20) point (c) Changed Article 24ca(3), where the method of calculating the tax base with a minimum CIT has been changed, the tax base will be the sum of the amount corresponding to 1.5% (earlier 4%) the value of revenue from a source of revenue other than capital gains realised by the taxpayer in the tax year; and incurred for related entities within the meaning of Article 11a(1)(4) costs of debt financing within the meaning of Article 15c(12) in so far as those costs exceed the amount calculated in accordance with the following formula laid down in that provision.
(Simplified taxation) At the same time, the taxpayer can choose a simplified method of determining the tax base corresponding to the amount 3% the values achieved by the taxpayer in the tax year of revenue from a source of income other than capital gains, and the taxable person shall inform the taxpayer of such choice in the statement submitted for the tax year in which he made the choice. (added Article 24ca(3a)).
Change in methodology for calculating the profitability ratio
Among other things, they were excluded from the cost of obtaining revenue in the calculation of the profitability ratio - charges under the lease agreement on fixed assets, the value of commercial receivables disposed of to entities in the factoring industry, the exemption of excise duty. (Article 1(2) – addition Article 24ca(2)(3-8)) . The addition of additional exemptions from the cost-effectiveness ratio for obtaining revenue reflects the comments made in the public consultation.
Increase in profitability to 2% (earlier 1%)
Based on Article 1(20) the laws have been amended Article 24ca(1)(2), according to which the minimum tax applies to taxable persons and PGKs which in the tax year achieved a share of revenue from a source of income other than capital gains of not more than 2%
Increase in the number of CIT exempt entities
Based on Article 1(14) Act (Article 24ca(14)(4)(5) point (c) and d, 7-13)
In addition, entities whose shareholders, shareholders or shareholders are exclusively natural persons have been exempted and where the taxpayer does not have: 5%: – shares (shares) in the capital of another company or, in general, the rights and obligations of a company that is not a legal person, (b) other property rights related to the right to receive a benefit as a founder (founder) or beneficiary of a foundation, trust or other entity, or a legal relationship of a trust nature;’
In addition, entities whose majority of their income other than capital gains has been achieved due to: ‘(c) the exercise of the medicinal activity in question under Article 3 Act dated 15 April 2011 of therapeutic activity (Journal of Laws of 2022, items 633, 655, 974, 1079), (d) the transactions in question Under section 2 point 2;”, 7) small taxable persons; 8) companies operating the municipal economy referred to in the chapter 3 Act dated 20 December 1996 economy
municipal (Journal of Laws of 2021, item 679); 9) who have achieved the participation in question Under section 1 point 2, in one of the three tax years immediately preceding the tax year for which the minimum income tax is due, at least 2%; 10) in bankruptcy, liquidation or restructuring proceedings; 11) party to the cooperation agreement in question under Article 20s(1) Tax Ordinance; 12) as a financial institution within the meaning of Article 4(1)(7) Act dated 29 August 1997 – A banking law whose primary business is the provision of financial services consisting in the payment of claims arising from the conclusion of a contract for the sale of goods or the provision of services between that creditor and the debtor; 13) which are mining undertakings receiving state aid on the basis of Act dated 7 September 2007 on the operation of coal mining (Journal of Laws of 2022, item 1309).”, - Most of the redundancies have been introduced due to requests made in the public consultation.
Suspension of minimum tax — tax liability for minimum CIT is applicable from 2024
According to Article 1(34) the bill was added to the CIT bill Article 38hb, according to which taxable persons liable to pay a minimum income tax are exempt from their obligations under Article 24ca for the period from the date 1 January 2022 up to day 31 December 2023