Qualified Domestic Top-up Tax (QDMTT): implementation obligations in Poland

Since 1 January 2025, regulations implementing the global and domestic top-up tax have been in force in Poland as part of the reform referred to as Pillar 2.[1] In principle, the new regulations apply to all constituent entities of capital groups whose annual revenue disclosed in the consolidated financial statements of the ultimate parent company amounted to at least EUR 750,000,000 in at least 2 of the 4 tax years immediately preceding the tax year (i.e. in 2025, consolidated revenues reported in the years 2021-2024 should be taken into account, assuming  financial year of the group coincides with the calendar year).

As a result, all companies with their registered office in Poland and belonging to capital groups that have exceeded the aforementioned revenue threshold should analyse their status under the new regulations and identify the tax obligations they will have to meet in connection with their enforcement.

Constituent entities of capital groups subject to the provisions on top-up tax located in Poland should calculate the effective tax rate applicable to their income earned in Poland. The effective tax rate is the quotient of the amount of eligible taxes charged on the entity's financial result and the eligible income generated by the entity in a given year. The calculation of the effective tax rate is made at the level of the entire jurisdiction, i.e. the income earned and taxes paid by all entities from the group based in Poland are summed up.

If the effective tax rate calculated for all entities located in Poland is less than 15%, the companies that are part of the group may be required to pay a domestic top-up tax.

The income to be taken into account in the calculation of the effective tax rate and tax base is reduced by a certain part of the expenses incurred by taxpayers for employees salaries with surcharges and a part of the carrying value of property, plant and equipment.

As a consequence, the effective tax rate will be higher in the case of those groups that have significant property, plant and equipment in Poland (excluding rented real estate) and incur significant personnel costs (the so-called substance-based income exclusion). Thanks to the substance-based income exclusion, it is possible to avoid the obligation to pay the top-up tax or reduce its amount.

CBC-R Temporary Safe Harbour

During the first 2 years from the entry into force of the top-up tax, taxpayers  can use the so-called CBC-R temporary safe harbour.

Entities that are part of groups that choose to use the CBC-R safe harbour may not calculate the domestic top-up tax if at least one of the three tests is met:

• de minimis test – confirming that the average revenues and income achieved by the group in Poland in the last 3 years are below a certain threshold (EUR 10 million for revenues and EUR 1 million for income),
• effective tax rate test – confirming that the effective tax rate for Polish group companies, calculated according to simplified rules, is at least 16% in 2025 and 17% in 2026,
• routine profit test – confirming that the profit realised by Polish group companies (before tax) is equal to or lower than the amount of the substance-based income exclusion.

The simplification resulting from the use of the CBC-R temporary safe harbour consists in the possibility of using the data reported in the Country-by-country report (CBC-R), submitted for a given tax year by a designated entity from the group, to carry out the above-mentioned simplified tests in the context of top-up tax. In such a case there is no need to make a complicated calculation needed to compute the effective tax rate. However, the value of the substance-based income exclusion should be calculated on general rules.

In order to use the CBC-R safe harbour, the group entity filing the information on the top-up tax (the so-called GLoBE Information Return, GIR) should choose to use this safe harbour by selecting the appropriate option in the GIR.

De minimis exemption

In addition to the CBC-R temporary safe harbour, the law also provides for other facilitations. One of them is the so-called de minimis exemption, which consists in exempting from the obligation to calculate the top-up tax for group constituent entities located in Poland, if the following conditions are met for a given tax year:

1) the average three-year eligible revenue of all constituent entities located in Poland is less than EUR 10,000,000;

2) the average three-year jurisdictional qualified income of all constituent entities located in Poland is less than EUR 1,000,000 or the jurisdictional average qualified loss of all such entities has been incurred.

The permanent de minimis exemption  differs from the CBC-R safe harbor de minimis test in that the calculation of average jurisdictional revenues and income should be made according to general rules rather than in a simplified manner using data from the CBC-R report.

Exclusion in the initial period of the group's operations

Another facilitation is the exemption from the obligation to calculate the top-up tax for group constituent entities for the first five tax years of the initial period of the group's activity, if the following two conditions are continuously met during this period:

• the constituent entities of this group are located in no more than six jurisdictions,
• the sum of the carrying value of property, plant and equipment of all constituent entities of this group, excluding entities located in the country of location of property, plant and equipment with the highest value, does not exceed EUR 50 million.

However, this exemption does not apply to constituent entities of an international group for which the parent company applies the qualified income inclusion principle (i.e. it takes into account the income of these entities in the calculation of the global top-up tax in its jurisdiction).

Reporting obligations (compliance)

Entities subject to the provisions on top-up tax are obliged to submit to the tax office GLoBE Information Return, GIR) for the tax year, by the end of the 15th month following the end of that tax year, as well as the GLB-D1/GLB-D1P tax return, by the end of the 18th month after the end of the tax year (the deadlines for submitting information and tax returns for the first year have been extended by 3 months). The obligation to submit GLoBE Information may be fulfilled by another entity in the group. In this case, other entities should submit a notification to the tax office about the data of the entity submitting information on the top-up tax and about the jurisdiction in which the entity is located, on the GLB-Z2 form.

What should be done in connection with the application of the provisions on the top-up tax?

1)      It is necessary to check whether the ultimate parent company in the group reported revenues of at least EUR 750,000,000 in at least 2 of the 4 tax years immediately preceding 2025 in its consolidated financial statements.

2)      If the answer to question 1 is yes, it is necessary to determine whether the entity in the group submitting the GLoBE Information (GIR) has selected a CBC-R safe harbour.

3)      If the answer to question 2 is yes, it should be determined on the basis of the CBC-R report whether Polish group companies can benefit from the exemption from the obligation to calculate the top-up tax on the basis of one of the CBC-R safe harbour tests (de minimis test, effective tax rate test, routine profit test).

4)      It should be analysed whether it is possible to apply the exemption in the initial period of the group's operations.

5)      If the answer to questions 2, 3 or 4 is in the negative, the effective tax rate for all companies located in Poland should be calculated, including the correction of the net accounting income in accordance with the provisions of the new law, the amount of the substance-based income exclusion should be computed and the values obtained should be compared with the amount of eligible taxes charged on the financial result of Polish entities.

6)      If the effective tax rate is less than 15%, the entity may be required to pay QDMTT at a rate calculated as the difference between the minimum rate of 15% and the effective tax rate calculated for the Polish group entities.

7)      In 2027, Polish entities should submit a tax return for the QDMTT and the GLoBE Information, or a notification to the tax office that the GloBE Information was submitted by another entity from the group.

At this stage, we recommend, in particular, conducting a preliminary analysis of the impact of the provisions on the QDMTT on the tax obligations of Polish group companies, based on the information contained in the CBC-R reports and financial statements submitted for previous years. 

We are at your disposal when it comes to conducting such an analysis, as well as preparing calculations and submitting tax returns and information necessary to meet the obligations arising from the new law.

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[1] Act of 6 November 2024 on top-up taxation of constituent entities of international and domestic groups (Journal of Laws, item 1685).