How the New Polish CIT Tax Exemption Will Attract New Investors to the Country

High-net-worth individuals and multinational brands are always in search of investment opportunities. Poland’s recent changes to its CIT tax exemption should help attract these investors.

CIT Was Introduced in 2021

The new CIT (corporate income tax) structure was first introduced in 2021 in Poland. It is commonly called the Estonian CIT.

Who Can Use the Estonian CIT?

It is worth noting that the changes to the Polish CIT apply to individuals. These include Polish taxpayers as well as foreign investors. The caveat is that the foreign investors must be individuals who invest using a Polish company. So, international companies cannot take advantage of this change. But individual foreign investors can take full advantage of it.

You can choose an Estonian CIT as long as your company has a real investment that generates non-passive income. So, it cannot only generate royalties or interest.

How Foreign Investors Can Use the Exemption

This means that foreign investors can create a Polish company and use it to take advantage of this special taxation. So, they could create an LP, LLC, or joint stock company in Poland. Then, they would use this Polish company to invest or complete business operations.

This is the same course of action that Polish citizens would take.

It Is Now Even More Favorable

For 2022, the Polish regulations surrounding the CIT structure became even more favorable. Overall, the incentives became even better, with lower tax rates. At the same time, the biggest restrictions were either completely removed or became less severe.

The Largest Advantage: When Taxes Are Paid

Arguably the largest advantage of this corporate income tax is when the taxes are payable. That is now when the profits are distributed. This is a very important change, as it means you don’t have to pay the taxes monthly or annually. As you don’t have to pay the Estonian CIT until you receive the profits, you may not have to pay for five years or even more.

The Other Significant Advantage: Lower Tax Rates

The other major advantage of the Estonian CIT is the lower tax burden. This is important as Poland’s tax rates for sole entrepreneurs and companies using the regular tax structure increase.

With the Estonian CIT, investors can pay just 18 to 25% tax as their effective rate. It applies to social securities, personal income tax (PIT), and CIT.

Foreign Investors Can Get an Extra Benefit

While either Polish or foreign investors can take advantage of the Estonian CIT, there is an extra advantage for foreigners. This is because of the special relief that taxpayers receive in their personal income tax when the dividends/profits of their Estonian CIT company occur.

This relief reduces the PIT on dividends by 70 to 90%. For reference, the Polish tax rate for PIT on dividends is 19%. But if a Polish company pays dividends to a foreign investor, the withholding tax or tax rate is closer to 5 to 15%.

And Activities Aren’t Limited to Poland

Notably, you can create a Polish company with the Estonian CIT structure but still do business outside Poland. Those activities outside of the country would still only be subject to the Estonian CIT rate. The exception is if the activities are taxed somewhere else as well. If the company pays taxes elsewhere, it can subtract those paid taxes from its Estonian CIT rate.


Poland first introduced the Estonian CIT structure in 2021 and expanded it in 2022. With this structure, there are lower tax rates, and you don’t pay taxes until the profits are distributed. This makes the structure an appealing option for foreign investors.


photo credit: Jernej Furman

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