A Warsaw-based IT services company received a notice from the Polish tax authority – the Krajowa Administracja Skarbowa (National Revenue Administration, KAS) – questioning whether it owed the corporate income tax (CIT) minimum levy for the prior fiscal year. The company had reported a small statutory loss and assumed it was safe. That assumption was wrong, and the consequences nearly triggered a back-tax assessment exceeding PLN 500,000.

Poland's CIT minimum tax applies to companies registered in the National Court Register (KRS) that either report a loss or whose income-to-revenue ratio falls below 2% in a given tax year. Certain categories of taxpayer are exempt by statute – including start-ups in their first three years, companies in financial restructuring, and entities whose revenue declined by at least 30% year-on-year. The tax base is calculated as 1.5% of operating revenue, with a flat rate of 10% applied to that base.

This case study traces how our team identified the client's true position, applied the correct exemption, and avoided a six-figure liability. The lessons are transferable to any Polish capital company navigating the minimum tax rules for the first time.

What was the client's situation?

The client was a mid-sized IT services firm incorporated in Warsaw. It had operated for six years and was therefore outside the three-year start-up window. In the relevant tax year it reported a net loss of PLN 120,000 on revenue of PLN 8.4m. Its income-to-revenue ratio was negative – well below the 2% threshold. On the face of it, the minimum tax applied.

The KAS inquiry arrived in spring 2025, covering the 2024 fiscal year. The company's in-house accountant had not flagged the minimum tax exposure at year-end. No provision had been set aside. The board contacted us after receiving the KAS letter, with roughly 14 days remaining to respond.

Two factors complicated the matter. First, the company had absorbed a smaller entity by merger in mid-year – a transaction recorded in the KRS. Second, a portion of revenues came from a related-party contract, raising transfer pricing questions. Both factors affected how the minimum tax base should be calculated under Polish tax law.

How did the strategy address the complexity?

Our tax team – drawing on experience across CIT advisory, transfer pricing, and KAS audit defence – began with a full reconstruction of the client's income statement. The goal was to identify whether any statutory exclusions reduced the minimum tax base before testing for outright exemptions. Polish corporate tax legislation lists specific revenue categories that are excluded from the base calculation, including revenues from certain financial instruments and intra-group dividends.

We identified that the related-party revenues, once properly documented under transfer pricing rules, qualified for a partial exclusion. This reduced the effective minimum tax base by approximately PLN 1.1m. The recalculated liability fell from an estimated PLN 126,000 to PLN 109,000 – a material reduction, but not yet zero.

The decisive finding came from the merger. Polish corporate tax legislation provides that a company that has undergone a qualifying merger or division in the tax year is exempt from the minimum tax for that year. The mid-year absorption of the smaller entity qualified. The client owed nothing. We secured a full reversal of the KAS assessment for this IT client in the Mazowieckie region (spring 2025).

  • Reconstruct the income statement before accepting any KAS figure
  • Check merger and restructuring history against the exemption list
  • Verify transfer pricing documentation before calculating the base
  • Apply revenue exclusions before testing the 2% income ratio
  • Respond within the statutory deadline – typically 14 days for KAS queries

What does the process look like in practice?

The minimum tax procedure follows a defined sequence. A company first determines whether it falls within the scope – loss or sub-2% ratio. It then checks each statutory exemption in turn. If no exemption applies, it calculates the base using operating revenue and applies the 10% rate. The resulting amount is declared in the annual CIT return filed with the KAS by the end of the third month after the fiscal year closes – typically 31 March for calendar-year taxpayers.

Exemptions cover a broad range of situations. Companies in formal restructuring proceedings before a Polish court pay nothing. Entities whose revenue dropped by 30% or more versus the prior year are exempt. Simple joint-stock companies (prosta spółka akcyjna) in their first three years also fall outside the scope. A family foundation – fundacja rodzinna – conducting only permitted activities is likewise not subject to the levy.

For a German investor entering the Polish market through a newly incorporated subsidiary, the three-year start-up exemption offers meaningful breathing room. The subsidiary can report losses during the ramp-up phase without incurring minimum tax exposure until year four. Planning the entry structure with a tax advisor Warsaw-based or otherwise – before incorporation avoids surprises later. The KSeF Poland rollout adds a parallel compliance layer for the same entities, making integrated planning essential. For cross-border context on compliance timelines, see our analysis of the KSeF deadline timeline for companies in Spain and the KSeF deadline timeline for companies in Switzerland.

What are the transferable lessons?

The Warsaw IT case illustrates three recurring errors. First, companies conflate the minimum tax trigger with the general CIT loss position. A loss triggers the minimum tax; it does not exempt from it. Second, finance teams overlook the merger exemption because it is buried in a list of conditions rather than prominently flagged. Third, transfer pricing documentation is treated as a separate workstream – disconnected from minimum tax base calculations, where it directly affects the outcome.

IP Box users face a specific nuance. Revenues qualifying for the preferential 5% IP Box rate are not automatically excluded from the minimum tax base. A company running an IP Box structure must verify whether its qualifying IP revenues affect the income-to-revenue ratio calculation. Failure to do so can result in a minimum tax liability running alongside an IP Box benefit – a combination that erodes the economics of the structure. We obtained a favourable interpretation for a software developer in Małopolska (autumn 2024), confirming the correct treatment of IP Box revenues in the minimum tax base.

ESG reporting obligations are reshaping how Polish companies document their financial performance. Entities subject to CSRD-aligned reporting under Polish law now produce granular revenue and cost data that directly supports minimum tax calculations. For a practical overview of those obligations, see our guide on ESRS implementation steps for Polish reporting entities. Aligning tax and ESG data flows reduces duplication and strengthens audit readiness.

Frequently asked questions

Q: Does the CIT minimum tax apply to a company that breaks even – neither profit nor loss?

A: Yes, if the income-to-revenue ratio is below 2%, the minimum tax applies even without a formal loss. A company earning PLN 100,000 on PLN 8m of revenue falls below the 2% threshold and is within scope. Breaking even on a nominal basis does not guarantee exemption – the ratio test is what matters under Polish tax law.

Q: How long does a KAS audit of minimum tax compliance typically take?

A: A standard KAS inquiry – as opposed to a full audit – is usually resolved within 60 to 90 days of the initial letter. A formal tax audit can run for up to six months, with possible extension. Responding promptly and with complete documentation shortens the process materially. Engaging a tax advisor at the inquiry stage – before a formal audit is opened – is almost always more cost-effective.

Q: Can a company use the minimum tax paid in one year to reduce its regular CIT liability later?

A: Yes. The minimum tax paid is credited against regular CIT liability in the following three tax years. If the company returns to profitability, the credit offsets future CIT due. This mechanism prevents permanent double taxation but requires accurate tracking of minimum tax payments across years – a common gap in companies without dedicated tax function support.

Bridge: Every company's specific situation carries details that determine whether an exemption applies or a liability crystallises. Missing one condition – a merger, a revenue decline, a related-party exclusion – can mean the difference between zero liability and a six-figure assessment that forfeits the right to object if the deadline passes.

If your company reported a loss or a sub-2% income ratio in 2024 or 2025, our team will review your position, apply each exemption test in sequence, and prepare the KAS response within the required timeline: info@kordeckipartners.com.

KORDECKI & Partners is a law firm based in Warsaw and Krakow, advising business clients across 30 jurisdictions. Our team combines expertise in Polish and international law with a practical approach to CIT compliance, minimum tax planning, and KAS audit defence. We work with Polish entrepreneurs, foreign investors, and in-house legal teams. To discuss your situation, contact info@kordeckipartners.com.

Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. KORDECKI & Partners assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@kordeckipartners.com.