Pillar Two – practical steps for Polish subsidiaries

A German-owned manufacturing group with a Polish subsidiary generating EUR 12m in annual revenue receives a memo from its parent's tax team: "Pillar Two applies from 1 January 2025 – confirm local compliance steps." The Polish finance director forwards it to legal. Nobody in Warsaw is certain what to do next. That scenario is playing out across Poland right now.

Pillar Two – the global minimum tax framework developed by the OECD – requires multinational groups with consolidated annual revenue of EUR 750m or more to pay a minimum effective tax rate of 15% in every jurisdiction where they operate. Poland transposed the relevant EU directive into domestic law with effect from 1 January 2025. Polish subsidiaries that are constituent entities of in-scope groups must now calculate their effective tax rate, determine any top-up tax liability, and file a dedicated information return within 15 months of the fiscal year end – or 18 months for the first transitional year.

This guide walks through the practical compliance steps for Polish subsidiaries: who is in scope, what calculations are required, which safe harbours are available, and where groups most commonly go wrong. It covers three business scenarios – manufacturing, IT, and foreign investor entry – and closes with a checklist and FAQ.

Which Polish subsidiaries fall within Pillar Two scope?

The threshold question is whether the ultimate parent entity's consolidated group revenue reached EUR 750m in at least two of the four fiscal years preceding the year in question. If yes, every constituent entity in the group – including Polish subsidiaries, branches, and permanent establishments – is drawn into the framework. The Polish National Tax Administration (Krajowa Administracja Skarbowa, KAS) treats each Polish entity as individually responsible for its local compliance obligations, even where the top-up tax itself may be collected at group level.

Size alone does not determine exposure. A Polish subsidiary with modest local revenue can still trigger a top-up liability if its effective tax rate falls below 15%. Polish corporate income tax stands at 19% for standard taxpayers, which superficially suggests no shortfall. However, reliefs such as the IP Box regime (5% rate on qualifying IP income), special economic zone exemptions, and research and development deductions can push the effective rate well below the 15% floor.

Three categories of Polish entities deserve particular attention. First, subsidiaries using the IP Box regime need to model whether qualifying income, stripped of the preferential rate, produces a Pillar Two shortfall. Second, entities operating in special economic zones under tax exemption decisions may face a top-up tax equal to the exempted amount. Third, holding structures that receive dividend income from subsidiaries outside Poland should map those flows carefully – certain income inclusions affect the effective tax rate calculation at Polish level.

• Check whether the group crossed EUR 750m revenue in two of the last four years
• Identify all Polish constituent entities, including branches and permanent establishments
• Flag any Polish entities benefiting from IP Box, SEZ exemptions, or R&D super-deductions
• Confirm the fiscal year end – the filing deadline runs from that date

We advised a technology client in the Mazowieckie region (spring 2025) whose parent had just cleared the EUR 750m threshold for the second consecutive year. The Polish subsidiary was using IP Box on 40% of its income. Early modelling showed a top-up exposure that the group had not budgeted. Identifying this in Q1 rather than at year-end gave the finance team time to restructure the IP holding arrangement before the liability crystallised.

How is the effective tax rate calculated under Polish law?

The Pillar Two effective tax rate (ETR) for a Polish constituent entity is calculated as adjusted covered taxes divided by net qualifying income. Both inputs require adjustments that diverge from standard Polish CIT mechanics. The calculation follows the OECD's Global Anti-Base Erosion (GloBE) rules, which Poland incorporated by reference into its domestic statute. Understanding those adjustments is the core technical challenge for Polish finance teams.

Covered taxes start with the Polish CIT charge but then require additions and subtractions. Deferred tax assets and liabilities are treated differently under GloBE than under IFRS or Polish accounting standards. Certain taxes paid in other jurisdictions by the same entity may be included. Taxes on distributed profits – relevant for Polish entities paying dividend withholding tax – are only partially creditable. The Ministry of Finance (Ministerstwo Finansów) has published guidance clarifying several of these adjustments, though gaps remain in areas such as hybrid instruments.

Qualifying income requires its own set of adjustments. Excluded items include dividends received from ownership interests of 10% or more held for at least 12 months, gains from qualifying equity disposals, and certain pension fund income. After applying all exclusions, the substance-based income exclusion (SBIE) allows a deduction equal to 5% of the carrying value of tangible assets plus 5% of payroll costs attributable to the Polish entity. For asset-heavy manufacturers, the SBIE can materially reduce or eliminate any top-up liability.

The practical consequence: Polish subsidiaries cannot rely on a headline CIT rate of 19% as a safe proxy. A manufacturing entity with significant fixed assets and payroll may find its ETR comfortably above 15% after the SBIE. An IT subsidiary running on IP Box with minimal physical assets and outsourced staff may find itself below the floor. Every entity needs its own calculation.

What safe harbours reduce compliance burden for Polish subsidiaries?

Three transitional safe harbours are available to Polish subsidiaries for fiscal years ending before 31 December 2026. Each provides a full top-up tax exemption if the relevant test is met, dramatically reducing the compliance burden for qualifying entities. Groups should assess all three before committing to a full GloBE calculation – in many cases, one harbour will apply and the detailed ETR work can be deferred.

The first is the simplified ETR test. A Polish entity qualifies if its ETR under the jurisdiction's standard financial accounting rules equals or exceeds a transitional rate – 15% for 2025, rising to 16% for 2026. This test uses data already available in consolidated financial statements, making it the fastest to apply. For Polish subsidiaries taxed at the standard 19% CIT rate without significant reliefs, this test will typically be satisfied without further analysis.

The second is the routine profits test. If the Polish entity's pre-tax income does not exceed the SBIE amount – that is, 5% of tangible assets plus 5% of payroll – the entity is treated as having no excess profit and therefore no top-up liability. Asset-intensive subsidiaries in sectors such as manufacturing, logistics, or energy often clear this test. For a Silesian automotive parts manufacturer we assisted (autumn 2025), the routine profits test eliminated a projected top-up liability of over PLN 800,000 that the group had provisioned.

The third is the de minimis test. If the Polish entity has average revenue below EUR 10m and average income below EUR 1m over the relevant period, it is exempt. This harbour primarily benefits smaller subsidiaries that happen to sit within a large group. It does not require any ETR or income calculation – revenue and income figures from the consolidated accounts suffice.

What are the filing obligations and deadlines for Polish entities?

Polish law imposes two distinct reporting obligations on constituent entities. The first is the GloBE Information Return (GIR), which provides the full jurisdictional data underlying the ETR calculation. The second is a domestic top-up tax return, filed only where a Polish entity has a top-up liability after applying any safe harbours. Both are filed with the Head of the National Revenue Administration (Naczelnik Krajowej Administracji Skarbowej).

The GIR deadline is 15 months after the end of the fiscal year for years from 2026 onward. For the transitional first year – fiscal year 2025 – the deadline is extended to 18 months. For a calendar-year group, this means the first GIR is due by 30 June 2027. Missing that deadline triggers a penalty of up to PLN 1m per return. The top-up tax itself, where applicable, is due on the same date as the GIR.

One important procedural point: a Polish subsidiary does not file the GIR if the ultimate parent entity or a designated filing entity files on behalf of the entire group in another jurisdiction that has a qualifying competent authority agreement with Poland. In practice, most large groups will centralise filing at parent level. However, the Polish subsidiary must still confirm that centralised filing has occurred and must retain supporting documentation for at least 5 years. KAS auditors can request that documentation during a tax inspection.

• Identify the designated filing entity within the group structure
• Confirm whether a qualifying competent authority agreement covers the parent jurisdiction
• Retain all GloBE calculation workbooks and source data for at least 5 years
• Calendar the 18-month transitional deadline for fiscal year 2025
• Assess all three safe harbours before committing to a full ETR calculation

For cross-border groups, the interaction between Pillar Two and Poland's existing controlled foreign company (CFC) rules, transfer pricing documentation requirements, and the mandatory disclosure regime (MDR) adds procedural complexity. Each regime has its own documentation standards and filing deadlines. Groups should map all three alongside Pillar Two to avoid duplication of effort and gaps in coverage. For context on how digital reporting obligations interact with tax compliance in the region, see our analysis of what KSeF means for your business in Romania.

Pillar Two compliance also connects to broader sustainability reporting obligations. Groups subject to the Corporate Sustainability Reporting Directive may need to disclose their effective tax rate and country-by-country tax data under ESRS E1 and related standards. For practical steps on that parallel process, see our guide on ESRS implementation steps for Polish reporting entities.

Specific situations your Polish subsidiary may face vary significantly depending on group structure. For a fuller treatment of how the Polish rules interact with different holding configurations, see our earlier analysis at Pillar Two – practical steps for Polish subsidiaries.

To receive an expert assessment of your group's Pillar Two exposure in Poland, contact info@kordeckipartners.com.

Three business scenarios: manufacturing, IT, and foreign investor

Practical compliance looks different depending on the Polish entity's business model. Three scenarios illustrate the range of outcomes and the decisions each finance team must make before the first filing deadline.

Manufacturing scenario. A Polish subsidiary of a German industrial group produces components at a Silesian plant. It employs 400 staff and holds EUR 30m in tangible assets. Its effective CIT rate is 18.5% after a modest R&D deduction. Applying the routine profits test: 5% of EUR 30m plus 5% of the EUR 8m payroll gives an SBIE of EUR 1.9m. Pre-tax income is EUR 2.3m – slightly above the SBIE. The routine profits test does not apply. However, the simplified ETR test at 18.5% easily clears the 15% threshold. Safe harbour confirmed. Full GloBE calculation avoided for the transitional period.

IT scenario. A Warsaw-based software subsidiary uses the IP Box regime on 60% of its qualifying income, reducing its blended effective rate to approximately 11%. Tangible assets are minimal – EUR 500,000. Payroll is EUR 3m. SBIE is EUR 175,000. Pre-tax income is EUR 4m. None of the three safe harbours apply. A full GloBE calculation is required. The top-up tax exposure is approximately EUR 600,000 for the year. The group must decide whether to restructure IP ownership, increase local substance, or accept and fund the liability.

Foreign investor scenario. A Dutch holding company establishes a Polish operating subsidiary in 2024, intending to benefit from a special economic zone (SEZ) exemption on income from the new investment. The exemption covers PLN 5m of annual income over 10 years. Under Pillar Two, that exempted income is still counted as qualifying income, but no covered tax is allocated to it – driving the ETR sharply below 15%. The top-up tax effectively claws back the SEZ benefit. The investor must model this before committing to the SEZ structure, not after.

Frequently asked questions

Q: Does Pillar Two apply to Polish subsidiaries whose parent is below the EUR 750m threshold?

A: No. The EUR 750m consolidated group revenue threshold is the entry point to the entire framework. If the ultimate parent group has not crossed that threshold in at least two of the four preceding fiscal years, no Polish entity in that group has any Pillar Two obligation – no calculation, no filing, no top-up tax. Polish tax law on this point tracks the OECD model rules directly, with no lower domestic threshold.

Q: How long does a full Pillar Two compliance project take for a Polish subsidiary?

A: For a Polish subsidiary without complex reliefs or cross-border flows, a safe harbour assessment takes two to four weeks if the consolidated financial data is available. A full GloBE calculation for an entity with IP Box, SEZ exemptions, or significant deferred tax positions typically takes six to ten weeks. Groups should begin no later than the third month after fiscal year end to leave adequate time for review, group sign-off, and filing. Waiting until month 12 of an 18-month window forfeits the ability to address errors without penalty.

Q: Is the Polish Pillar Two top-up tax deductible for CIT purposes?

A: No. The domestic top-up tax paid under the Pillar Two framework is not deductible in computing the Polish entity's standard CIT base. This is a common misconception among finance teams accustomed to treating tax payments as deductible costs. The non-deductibility is explicit in Polish tax law and means that the top-up tax represents a full cash cost with no CIT offset. Groups should model this correctly in their effective tax rate forecasts and budget provisions.

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 Pillar Two compliance, transfer pricing, and tax structuring for multinational groups. 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.