Budget for 2021 – the government maintains social programmes, reduces taxes and introduces Estonian CIT

The government of Prime Minister Mateusz Morawiecki adopted a safe and realistic draft budget for 2021. Despite the crisis caused by the COVID-19 pandemic, we maintain important social programmes - such as 500 Plus and Good Start. As promised, we also reduce taxes and support economic recovery. Thanks to the so-called Estonian CIT, adopted today, companies will be able to invest more and develop their businesses. Enterprises with a revenue of up to PLN 100 million will pay the tax only at the time of profit distribution.

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Photo: Krystian Maj / Chancellery of the Prime Minister of Poland

The government’s motto is credibility

The government is fulfilling further promises related to the so-called Piątka dla przedsiębiorców (Five for entrepreneurs), which were announced by Prime Minister Matusz Morawiecki. The so-called Small ZUS, which has already been introduced, has just been expanded to include other solutions beneficial for business owners: the so-called Estonian CIT, increased possibility of settling accounts at 9% CIT and a greater limit of revenue in the case of lump sum taxation.

Our goal remains unchanged said Prime Minister Matusz Morawiecki. It is to provide well-paid jobs for Poles and to support small and medium-sized enterprises he explained.

The Prime Minister also reminded that the government led to a significant tax reduction for all Poles, i.a. lowering of the PIT rate from 18 to 17 percent, introduction of the zero PIT for people under the age of 26, lowering of the CIT rate to 9 percent, and lower VAT on bread, fruit and baby products.

I believe that 2021 will be a year of economic recovery - emphasised the head of the government. This will be a very good year for Poland, for Polish entrepreneurs and all Poles he added.

Estonian CIT – a chance for investing companies

From 1 January 2021, companies will be able to settle accounts with the tax authorities under the so-called Estonian CIT. The essence of the solution will be to postpone the time of tax collection until the distribution of profits of the company. Companies searching for funds for new investments and wanting to develop their businesses will be able to benefit from the change.

The so-called Estonian CIT is a modern way of taxation which will allow companies to invest and reduce the formalities of tax settlement. The new system will create equal conditions for access to financing for large and smaller enterprises and will restore fair competition between companies regardless of their size.

How to benefit from the so-called Estonian CIT?

Corporations (limited liability or joint stock companies), the shareholders of which are exclusively natural persons will be able to benefit from this form of taxation.
The company's revenues shall not exceed PLN 100 million per year (as a result of consultations, the limit was increased from PLN 50 million).
The condition for using the so-called Estonian CIT will be the employment of at least 3 employees (on the basis of an employment contract) or the incurrence of monthly expenses on salaries under other contracts, in an amount at least three times higher than the average monthly salary (subject to PIT and ZUS). This condition does not have to be met immediately. For taxpayers commencing their business activity, it is sufficient to increase the employment by at least one employee each year – starting from the second tax year – until the required level of 3 employees is reached.

Tax reduction for entrepreneurs

Today, the government has also decided to increase the attractiveness of lump sum taxation of companies. The aim is to increase the revenue limit – from EUR 250 thousand to EUR 2 million – which determines the choice of this form of taxation.

In 2021, the revenue limit entitling to benefit from the reduced 9% CIT rate will also be increased – from EUR 1.2 million to EUR 2 million.

Safe budget for 2021

The draft adopted by the Council of Ministers assumes that next year's state budget revenues will amount to PLN 404.4 billion, while expenditures will amount to PLN 486.7 billion. The deficit will amount to PLN 82.3 billion.

In 2021, all important social programmes, such as "Family 500+" (cost: PLN 41.0 billion) or "Good Start" (cost: PLN 1.4 billion), will be maintained. Health care expenditures will also increase by over PLN 11 billion, and pensioners will receive an adjustment of 103.84% (cost: PLN 9.6 billion). Moreover, in 2021, Poland's defence needs will be financed at an increased level (up to 2.2% of GDP).

The ratio of the public debt to GDP will remain at a safe level. At the end of 2020, it will be 50.4%, and in 2021, it will increase to 52.7%.

More information about the decisions made today by the Council of Ministers can be found on the website: https://www.premier.gov.pl/wydarzenia/decyzje-rzadu.html


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