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The Polish Deal: Changes to Estonian CIT

by Jakub Wajs

23 August 2022

A bill amending the Corporate Income Tax Act and certain other acts was published on 28 June 2022. This is another revision of the Polish Deal, following the amendment that came into force in July.

The new provisions are intended to simplify some of the settlement rules and clarify certain ambiguous regulations. The changes will affect flat-rate corporate income taxpayers, among others. Below we present the most important of those changes.

Expenses for the use of passenger cars

The new rules introduce a change to the manner of determining income derived from non-business expenses in cases where assets are used for business purposes and other non-business purposes. In the case of passenger cars used for business and private purposes, taxpayers will pay tax on 50% of the value of depreciation or permanent impairment charges and on 50% of the value of expenses related to their use.

Deadline for the submission of the ZAW-RD notification form

According to the bill, taxpayers opting for the flat-rate corporate income tax scheme should file the notification of the choice of this form of taxation before the end of the tax year adopted by the taxpayer based on Article 28j (1)(7) of the Act. This should only serve as a clarification to allow the filing of the notification on time by the end of the first tax year in which the taxpayer is to pay the flat-rate corporate income tax, but the announced line of interpretation for this provision raises doubts.

Extinction of tax liability arising from preliminary adjustment

As the wording of the provision was previously wrong, the new regulations clarify that the point at which the tax liability arising on the difference between the profit or loss for the tax and the accounting purposes expires is the end of one full period covered by the flat-rate corporate income tax scheme (four tax years).

Deadline for the payment of tax due on income from transformation

If a taxpayer is obliged to pay tax on income from transformation in its entirety, it will be obliged to pay the tax by the end of the third month of the first year of the period covered by the flat-rate taxation scheme.

Deadline for the payment of tax on distributed profit, profit appropriated for covering losses and tax on distributed income

The legislator intends to extend the deadline for the payment of tax on the above items to the end of the third month of the tax year following the tax year in which the tax liability arose. So far, when the taxable event occurred after the sixth month of the tax year and before the start of the following tax year, the taxpayer has always been considered, by definition, as being in default.

If you have any questions about the Estonian CIT taxation, you are welcome to contact our experts.

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Jakub Wajs

Attorney at law (Poland), Tax adviser (Poland)

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