New rules for entrepreneurs. Estonian CIT and IP Box with restrictions

IP Box relief, Estonian CIT, lump sum, donations. What does the Ministry of Finance want to do?

Let us briefly recall what changes are included in the draft amendment to PIT and CIT (list no. UD116). He was the one consulted with the business last week.

— IP Box relief — only taxpayers who employ at least three people can benefit from it. Currently, no employment is required, so programmers running a sole proprietorship also benefit from the relief.

— Estonian CIT — the project includes several changes, including: expanding the catalog of hidden profits whose withdrawal triggers the need to pay tax. The project also provides for a beneficial change, aid for companies that decided to switch to Estonian CIT during the tax year. We discussed other changes in Estonian in the article: Estonian CIT. Companies will lose due to sealing. We explain the consequences. In the case of companies listed on the Estonian CIT, the regulations were to apply retroactively. We informed about them in the article: Chaos with the Estonian CIT. The tax office verifies and requests the tax. Companies are afraid.

— Lump sum from recorded income – services provided by flat-rate taxpayers to related entities would be subject to a higher rate – 17%. Currently, a lower rate is possible, e.g. 8.5%.

– The person who will receive a post-lease car from a member of her immediate family, she will be able to sell it and not pay PIT only after three years. Currently, you just need to wait half a year.

— Housing relief in PIT – only a taxpayer who does not have another residential premises will be able to benefit from the relief. There is currently no such condition.

What proposals regarding IP Box did the Ministry of Finance present?

The Ministry of Finance has not abandoned the above changes. They are to enter into force on January 1, 2027. As Agnieszka Wnuk explains, almost all of the above changes will be maintained. — The conclusion from the consultation with the Ministry of Finance is that the ministry allows only certain clarification of the project. So basically, about 95 percent. the proposal will not change – says Agnieszka Wnuk. Moreover, according to the expert, representatives of the ministry explained during the meeting that the intention of the IP Box relief was not to support the smallest taxpayers, but rather larger entities.

— The Ministry of Finance indicated that the IP Box (allowing for taxation of qualified income from qualified intellectual property rights at the rate of 5%) is a particularly preferential solution, which is especially visible when compared to other taxpayers, e.g. full-time employees, who pay higher taxes. Therefore, the Ministry is reluctant to exempt smaller entrepreneurs from the obligation to employ at least three people, because this would be unequal treatment of taxpayers – explains Agnieszka Wnuk. He adds that The Ministry did not exclude only a minor correction, according to which a combination of different forms would be permissible to meet the employment condition – employment contracts and, for example, mandate contracts.

According to Agnieszka Wnuk, the Ministry of Finance's approach to IP Box is not very understandable. This is about support mainly for an industry whose development in Poland is particularly desirable and, at the same time, which provides special opportunities for a permanent change of tax residence in the event of unfavorable changes in the tax system. We should also not ignore the situation of programmers who establish their own companies (start-ups) and write software themselves and, especially at an early stage, do not need to employ employees and often do not have the funds to do so.

What proposals regarding the Estonian CIT have been presented by the Ministry of Finance?

— The Ministry also maintained proposals for changes to the Estonian CIT, including hidden profits and amnesty for companies that switched to this form of settlement but did not complete the formalities recently required by the National Tax Administration related to signing the financial statements. The ministry also upheld the proposals to specify the catalog of expenses unrelated to business activity in companies in the Estonian CIT. – explains Agnieszka Wnuk.

The expert admits that when it comes to amnesty, the Ministry allows its extension to companies that do not even have an accountant's signature on the financial statements. “These were also the demands of business,” says Agnieszka Wnuk. Let us add that the companies also proposed that the amnesty for companies in the Estonian CIT that did not complete the formalities be separated into a separate draft of amendments to the CIT Act and that they be adopted more quickly. Thanks to this – as our interlocutor explains – companies would not remain in uncertainty as to whether they can apply taxation in the form of Estonian CIT, and it would also increase the chances that the project will become applicable law. The amnesty for companies in the Estonian CIT is one of the few beneficial changes in the draft amendment to PIT and CIT.

— The Ministry of Finance did not agree with these proposals, says Agnieszka Wnuk.

The expert adds that proposals regarding hidden profits were also retained.

Let us recall that the project envisages expanding the catalog of such profits. They are also to be:

1) all kinds of fees and charges:

• arising from a lease, lease or other similar contract,
• for the use or the right to use the rights or values ​​​​referred to in Art. 16b section 1 points 4-7 of the CIT Act,
• for consulting services, accounting services, market research, legal services, advertising services, intermediation services, management and control, data processing, employee recruitment and staff acquisition services, guarantees and sureties, and similar services, and

2) remuneration paid to a partner for recurring non-cash benefits.

The ministry indicated that it did not intend to change the proposals regarding expenses unrelated to business activities.

Basically, such expenses are already subject to Estonian CIT taxation, just like hidden profits, but no provision of the CIT Act defines what specific expenses these are.

The Ministry proposes that these should be expenses that:

— are not related to generating revenues or securing or maintaining a source of revenues, and

— due to their nature, they should not reduce the tax base, e.g. penalties, fines or interest on late payment of tax liabilities.

The ministry announced during a meeting with business that the publication of a new version of the draft amendment to PIT and CIT (UD116) is planned for January 2026.

Author: Łukasz Zalewski, journalist of the Law section of Business Insider Polska