Income tax report

Although the obligation to publish the tax strategy has recently been abolished, it is worth reminding that some entities should still report income tax issues.

However, this is an obligation resulting from the accounting regulations, which are an implementation of EU regulations (EU Directive 2021/2101).

The Polish Accounting Act (hereinafter: the Act) imposes on certain entities the obligation to prepare, publish and make available income tax statements. This obligation arises from Articles 63m–63n of the Act and is aimed at ensuring tax transparency by disclosing information about where individual entities conduct business, generate profits and pay taxes.

The report shall include, in particular, data on:

• pre-tax revenues, profits or losses;
• the number of employees employed;
• the nature of the business conducted;
• the amount of income tax due and paid in each country;
• place of business and location of subsidiaries.

The aim is to reveal where profits are actually generated and where taxes are paid, in order to counteract the transfer of income to tax havens.

In accordance with Article 63m sec. 1 of the Act, the obligation to prepare, publish and make available an income tax report rests with:

• the ultimate parent entity;
• an independent entity, if the income included in the annual consolidated or separate financial statements, respectively, exceed PLN 3,500,000,000 for each of the last two financial years.

The legislator limited this obligation to entities with a specific legal form, i.e.:

• capital companies;
• limited joint-stock partnerships;
• partnerships in which the partners with unlimited liability are only capital companies or limited joint-stock partnerships.

Thus, the obligation applies only to structures of a corporate nature.

The so-called national groups, i.e. situations in which:

• the parent company of the highest level;
• all subsidiaries and their branches have their registered office or permanent place of business exclusively in the territory of the Republic of Poland.

This means that even if such a group exceeds the income threshold, there is no obligation to publish an income tax report.

The exemption is also provided for entities that disclose income tax information in the activity report in accordance with Article 111a of the Polish Banking Law. In practice, this is about banks.

The provisions of Article 63n et seq. of the Act extend the reporting obligation to Polish subsidiaries and branches of foreign entities having their registered office or place of management outside the European Economic Area.

In such a case, the report should be published in Poland in relation to the capital group of the ultimate parent company.

This obligation applies to m.in:

• capital companies;
• limited joint-stock partnerships;
• general partnerships and limited partnerships, in which the partners with unlimited liability are only capital companies or other entities with a similar legal form.

The condition for its creation is the joint fulfilment of two conditions:

1. Scale of operations in Poland – in the last two financial years, the entity exceeds at least two of the three values:

1. PLN 33 million of the balance sheet total;
2. PLN 66 million in net sales income;
3. 50 people of average annual employment in full-time equivalents.

1. Scale of the Parent Group’s operations – the revenues of the ultimate parent entity exceed EUR 750 million in each of the last two financial years.

The Act also provides for the possibility of exemption from the obligation to publish and make the report available by Polish subsidiaries or branches if:

• the report has been prepared by a parent company of the highest level or an independent entity in accordance with the requirements of the Act;
• it is made available free of charge in a machine-readable format on the entity’s website for a period of at least five years;
• the report indicates the name and registered office of one subsidiary or branch in the European Economic Area designated to submit the report to the register.

The obligation ceases if:

• A Polish subsidiary or branch does not exceed two of the three thresholds:

1. PLN 33 million in assets;
2. PLN 66 million in revenues
3. 50 employees or

• when the parent group does not achieve revenues exceeding EUR 750 million.

The report should be prepared within 12 months of the balance sheet date and published on the entity’s website, where it must remain available for at least five years. Failure to comply with the obligation may result in liability for breach of the provisions of the Accounting Act, including the liability of members of management bodies.