A company considering the lump-sum corporate income tax (ryczałt od dochodów spółek, “Estonian CIT”) usually asks how much it will pay when it distributes profit. According to the explanatory notes of the Minister of Finance (Minister Finansów), the total at company and shareholder level combined is 20% or 25% of the net profit earmarked for distribution. What happens before that is more difficult: the lump-sum regime is available only with a strictly defined shareholder structure, and a benefit provided to a shareholder may be taxed like a dividend before a resolution on the distribution of profit. We explain who can elect the lump-sum regime, how to enter and leave it, and which payments are hidden profits.
Company form and shareholders – who can elect the lump-sum regime
The lump-sum regime can be elected by a spółka z ograniczoną odpowiedzialnością (sp. z o.o.), the Polish limited liability company; a spółka akcyjna (S.A.), the Polish joint-stock company; a prosta spółka akcyjna (PSA), the Polish simple joint-stock company; a limited partnership (spółka komandytowa); or a limited joint-stock partnership (spółka komandytowo-akcyjna) – if its shareholders are exclusively natural persons.
Article 28j(1)(4) of the CIT Act (ustawa o CIT) permits as shareholders “exclusively natural persons” (translation by the author) who have no rights to benefits as founders or beneficiaries of a foundation or trust, “with the exception of founders and beneficiaries of a family foundation”. Point 5 prohibits the company from holding shares in another company, participation titles in an investment fund or all rights in a company without legal personality.
Consequently, the lump-sum regime cannot be elected by a subsidiary of a foreign company, by a company with a shareholder that is a family foundation (fundacja rodzinna) or by a limited partnership whose general partner is a sp. z o.o. Nor can a company under the lump-sum regime set up a subsidiary. A breach of the conditions in points 4–6 means that the right is lost at the end of the year preceding the year of the breach (Article 28l(1)(4)(a)), so the whole year of the breach is taxed under the general rules.
The availability of the lump-sum regime to a limited partnership is confirmed by an individual tax ruling of the Director of the National Revenue Information Service (Dyrektor Krajowej Informacji Skarbowej, the Director of the KIS) of 19 May 2025, no. 0111-KDIB1-1.4010.174.2025.1.SG, issued to a limited partnership taxed under the lump-sum regime since 2022: “If taxation under the lump-sum regime was begun by a limited partnership and the partnership is converted into a sp. z o.o., the sp. z o.o. may continue the taxation under the lump-sum regime begun by the limited partnership […]”.
Before filing the notification, check the company’s shareholding structure and financial assets. A shareholder may be a founder or beneficiary of a family foundation, but benefits provided to such a foundation and its beneficiaries fall within the catalogue of hidden profits (Article 28m(3)(2)(a)).
Employment, passive revenue and the point at which the right is lost
The company must meet the employment and revenue-structure conditions in every lump-sum tax year, and a breach of them removes the right at the end of that year (Article 28l(1)(3) of the CIT Act).
Article 28j(1)(3) requires the employment, under employment contracts, of at least 3 persons who are not shareholders, in full-time equivalents, for at least 300 days in the year (point (a)). The alternative is remuneration of at least 3 such persons engaged on a different basis, amounting monthly to at least three times the average monthly wage in the enterprise sector, if the company is the remitter of PIT or of contributions (point (b)). Point 2 requires that less than 50% of the previous year’s business revenue, calculated including VAT, come from, among other things, receivables, interest on loans, copyright, financial instruments and transactions with related entities that create no added value or only negligible value.
A taxpayer starting business activity meets the revenue-structure condition in its first lump-sum tax year, and the employment condition does not apply to it in the year in which it starts business activity or in the two following years. From the second year onwards, however, it must increase employment by at least one full-time position every year (Article 28j(2)).
Each variant of point 3 requires at least three persons, so the provision does not allow two employment contracts to be combined with one contract of mandate. This is indirectly confirmed by the announcement of the Ministry of Finance (Ministerstwo Finansów, MF) of 22 September 2026, which signals an amendment that would permit such a combination. Until such an amendment enters into force, meet one variant in full and check the full-time equivalents and the revenue structure every quarter.
Entry – notification, election during the year and the initial adjustment
Entry requires the notification electing the lump-sum regime (ZAW-RD) to be filed on time and, where the regime is elected during the year, also financial statements whose original electronic version must be retained.
The notification is filed by the end of the first month of the first year of taxation under the lump-sum regime (Article 28j(1)(7) of the CIT Act); the lump-sum regime covers a period of four consecutive tax years (Article 28f(1)). It can also be elected during the year if, as at the last day of the month preceding the first month under the lump-sum regime, the company closes its books and draws up financial statements in accordance with the accounting rules (Article 28j(5)).
In a ruling of 19 August 2026, no. 0111-KDIB1-1.4010.313.2026.2.SG, the Director of the KIS, assessing a company that had kept only a paper version of the statements, held that “the failure to archive the financial statements in electronic form (in the original form) […] constitutes a breach of the obligation, laid down in Article 28j(5) of the CIT Act, to draw up the financial statements in accordance with the accounting rules”. Draw up and sign the statements within three months of the balance sheet date and keep their original electronic version for at least five years (Article 74(2)(8) of the Accounting Act (ustawa o rachunkowości)).
As at the last day of the year preceding the lump-sum regime, the company prepares information on the initial adjustment and separately identifies in equity the profits and uncovered losses from previous years (Article 7aa(1)). The tax on income from the adjustment (a 19% rate, Article 7aa(4)(1)) is payable at the end of the first month after the last lump-sum tax year if the lump-sum regime lasted less than four years. After four uninterrupted years under the lump-sum regime, the liability “expires in full” (Article 7aa(5)(1)), which the authority confirmed in the ruling of 19 May 2025 cited above.
Also check the exclusions in Article 28k(1)(5) and (6) – among other things, for a company formed through a merger or division, or for a company to which an enterprise worth more than EUR 10,000 was contributed in the year of its formation or in the following year. We discuss the consequences of converting a sole trader’s business (jednoosobowa działalność gospodarcza) into a company in the article Converting a sole trader into a sp. z o.o. — what actually happens to the tax position.
Hidden profits – what the Act treats as a distribution of profit
Under the lump-sum regime, tax arises not only on a dividend but on every benefit provided to a shareholder or a related entity in connection with the right to participate in profit.
Article 28m(3) of the CIT Act covers benefits that are “monetary, non-monetary, for consideration, free of charge or partly for consideration, performed in connection with the right to participate in profit, other than distributed profit”.
In a ruling of 12 May 2025, no. 0111-KDIB1-1.4010.131.2025.2.AND, the Director of the KIS cited the judgment of the Supreme Administrative Court (Naczelny Sąd Administracyjny, NSA) of 11 July 2023, case ref. II FSK 93/23: benefits provided to a shareholder in connection with the right to participate in profit, other than distributed profit and other than remuneration under the titles in Article 28m(4)(1), constitute a hidden profit in full.
Benefits provided to a shareholder under the lump-sum regime – classification under Article 28m of the CIT Act
| Benefit | Consequence under the lump-sum regime | Legal basis |
|---|---|---|
| Loan granted to a shareholder | Hidden profit in the amount of the loan | Article 28m(3)(1) |
| Interest and fees on a loan from a shareholder | Hidden profit in full; repayment of the loan amount is not | Article 28m(3)(1) and (4)(3) |
| Remuneration from employment, an appointment, a contract of mandate, a contract for specific work or a management contract | Not a hidden profit up to the five-times limit; the excess – a hidden profit | Article 28m(4)(1) |
| Remuneration for managing the company’s affairs granted by a shareholders’ resolution | Hidden profit in full | Article 28m(3); Article 10(1)(9) of the PIT Act (ustawa o PIT) |
| Rent for letting from a shareholder | Not a hidden profit at a market price and with a genuine need; the excess over market value – a hidden profit | Article 28m(3)(3) in conjunction with Article 11c |
| Profit allocated to an increase in share capital | Hidden profit | Article 28m(3)(6) |
The lump-sum tax on a hidden profit is payable by the 20th day of the month following the month of the payment or benefit (the Ministry of Finance’s explanatory notes, point 86). So assess each payment before it is made.
Remuneration, loans and letting from a shareholder
The three most common flows to a shareholder are subject to different rules: remuneration – to a limit, interest – to full taxation, rent – to a test of arm’s length nature and need.
Remuneration under the titles listed in Article 12(1) and Article 13(7), (8) and (9) of the PIT Act is not a hidden profit to the extent that its monthly total does not exceed five times the average monthly remuneration paid by the company under those titles. The limit may not exceed five times the average monthly wage in the enterprise sector; both values are determined for the previous month (Article 28m(4)(1) of the CIT Act; explanatory notes, example 48). Hypothetical example: a shareholder-president of the management board receives PLN 40,000 a month, the average remuneration in the company in the previous month was PLN 6,000, and the national limit is higher. The limit is PLN 6,000 × 5 = PLN 30,000, the hidden profit is PLN 40,000 − PLN 30,000 = PLN 10,000, and the small taxpayer’s lump-sum tax is PLN 10,000 × 10% = PLN 1,000.
In the ruling of 12 May 2025 cited above, the authority classified the remuneration of a partner in a limited partnership for managing its affairs, granted under the articles of association and by a resolution, as revenue from other sources and therefore as a hidden profit in full: “Remuneration of this kind could not be granted to any outside person and relates directly to the partner’s influence on the functioning of the partnership and on the decisions it takes”. So base a shareholder’s remuneration for work on a genuine title under Article 28m(4)(1) and monitor the limit.
Interest and fees on a loan granted to the company by a shareholder are a hidden profit in full, regardless of whether the interest rate is at arm’s length; repayment of the loan amount is not (Article 28m(3)(1) and (4)(3)). A comparison of a loan with an additional contribution (dopłata) is presented on the e-book card Financing a company by its shareholders: additional contributions (dopłaty), loans, debt conversion and debt forgiveness.
Letting from a shareholder may remain outside hidden profits. In a ruling of 16 April 2025, no. 0114-KDIP2-2.4010.32.2025.3.IN, the Director of the KIS accepted a market rent for premises used in the company’s core business activity. However, the Director added a caveat: “The assessment of whether a transaction could have been concluded between unrelated entities should not be limited solely to an assessment of the agreed transaction price […] but should also take into account whether the transaction would have been concluded at all had related entities not participated in it”. The authority may argue that the letting substitutes for providing the company with assets and, taken as a whole, is a hidden profit. This argument is not decisive if the premises serve the core business activity, the rent is at market level, the relationship did not affect the terms of the agreement and the company has the necessary assets – document each of these circumstances.
How much a distribution of profit really costs
According to the Ministry of Finance’s explanatory notes, the combined burden on a distribution of profit is 20% (a small taxpayer and a taxpayer starting business activity) or 25% (other taxpayers) of the net profit earmarked for distribution.
The company’s income is the net profit earmarked for distribution by resolution (Article 28m(1)(1)(a) of the CIT Act), taxed at a rate of 10% or 20% (Article 28o(1)). The same amount is the shareholder’s revenue, taxed at a rate of 19% (Article 30a(1)(4) of the PIT Act). The PIT is reduced by 90% or 70% of the lump-sum tax attributable to the shareholder if the distribution comes from profit for the lump-sum period that has been separately identified in equity (Article 30a(19)). The small taxpayer threshold for 2026 is PLN 8,517,000 (Article 4a(10) of the CIT Act).
This is how the Minister of Finance calculates it in the tax explanatory notes of 23 December 2021: “The combined CIT and PIT burden on the company’s net profits paid to Ms X amounts to PLN 80,000, which represents 20% of the net profits attributable to her” (example 50). For other taxpayers the result is 25% (example 51).
Distribution of PLN 100,000 of net profit – calculation according to the Ministry of Finance’s explanatory notes (hypothetical example, one shareholder)
| Item | Small taxpayer or taxpayer starting business activity | Other taxpayers |
|---|---|---|
| Net profit earmarked for distribution (company’s income, shareholder’s revenue) | PLN 100,000 | PLN 100,000 |
| Lump-sum tax paid by the company | PLN 100,000 × 10% = PLN 10,000 | PLN 100,000 × 20% = PLN 20,000 |
| PIT before the reduction | PLN 100,000 × 19% = PLN 19,000 | PLN 100,000 × 19% = PLN 19,000 |
| PIT reduction | PLN 10,000 × 90% = PLN 9,000 | PLN 20,000 × 70% = PLN 14,000 |
| PIT payable | PLN 19,000 − PLN 9,000 = PLN 10,000 | PLN 19,000 − PLN 14,000 = PLN 5,000 |
| Combined burden | PLN 10,000 + PLN 10,000 = PLN 20,000 (20%) | PLN 20,000 + PLN 5,000 = PLN 25,000 (25%) |
| Company funds for the dividend and the lump-sum tax | PLN 110,000 | PLN 120,000 |
| Net amount received by the shareholder | PLN 90,000 | PLN 95,000 |
The lump-sum tax does not reduce the dividend – the company pays it from its own funds. Relative to those funds, the taxes represent PLN 20,000 / PLN 110,000 ≈ 18.18% and PLN 25,000 / PLN 120,000 ≈ 20.83%. A calculation in which the lump-sum tax is computed on the whole profit and the PIT on the profit after deducting that tax combines two different bases and gives a wrong result. When comparing the lump-sum tax with standard CIT, calculate both variants on the same base.
The reduction applies only to distributed profit, not to hidden profits. In a ruling of 24 March 2025, no. 0114-KDIP3-1.4011.73.2025.2.BS, the Director of the KIS stated that the preference “may be applied exclusively where a company covered by the lump-sum regime earns so-called income from distributed profit”. A dividend paid out of profit from before the lump-sum regime is subject to 19% PIT without the reduction (explanatory notes, example 49).
Exit – net profit, the initial adjustment and the waiting period
Leaving the lump-sum regime does not close the settlements: undistributed profit from the lump-sum period becomes income, and a return to the lump-sum regime is deferred.
The lump-sum regime is extended for further four-year periods unless the company files information on withdrawal in the CIT-8E return (Article 28f(2) of the CIT Act); it then loses the right at the end of the tax year (Article 28l(1)(1)). The income is the total of the net profits from the lump-sum years to the extent not distributed and not allocated to covering a loss (Article 28m(1)(5)). According to the explanatory notes, the lump-sum tax on that income may be paid by the end of the third month of the year following the last lump-sum tax year or by the deadline applicable to the later distribution of profit (points 79 and 86).
Leaving before four years have elapsed also triggers payment of the tax on the initial adjustment (Article 7aa(5)(1)). After the right has been lost, a new notification may be filed once 3 tax years have elapsed, but not earlier than after 36 months following the calendar year in which the right was lost (Article 28l(2); explanatory notes, point 90). Point 113 of the explanatory notes links the waiting period to a breach of the conditions, but Article 28l(1)(1) also treats withdrawal as a loss of the right. When planning, assume that the waiting period may apply to withdrawal as well.
A dividend paid after exit out of profit from the lump-sum period retains the PIT reduction if that profit has been separately identified in equity (Article 30a(19) of the PIT Act; explanatory notes, point 108).
Amending bill – changes from 2027
On 22 September 2026 the Council of Ministers (Rada Ministrów) adopted a bill amending the PIT, CIT and Lump-Sum Income Tax Acts (ustawy o PIT, CIT i ryczałcie). Among other things, it provides for an amnesty for taxpayers who, when electing the lump-sum regime during the year, committed formal irregularities in connection with the financial statements, and for clarification of the rules on changing the form of taxation, the allocation of income, hidden profits, expenses unrelated to business activity and the employment condition. According to the Council of Ministers’ list of legislative work, the amnesty is to cover a missing or late signature on the financial statements, and the catalogue of hidden profits is to include, among other things, receivables from letting and usufructuary lease (dzierżawa), without the requirement of a connection with the right to participate in profit. Planned entry into force: 1 January 2027.
Until the act is passed and promulgated, the provisions described above apply. If the company rents assets from a shareholder, reassess the agreement once the act has been promulgated, and do not base settlements for the period before its entry into force on the bill.
The most common mistake
The most common mistake is to carry habits from standard CIT over into the lump-sum regime: a payment to a shareholder is assessed as if it were enough for it to be at arm’s length and documented.
Under standard CIT the question is whether an expense is a tax-deductible cost; under the lump-sum regime it is whether a benefit is a hidden profit. The remuneration of a general partner granted by resolution, the salary of a shareholder-president of the management board above the limit, arm’s length interest on a loan from a shareholder and rent above the market rate give rise to the lump-sum tax in the month of payment. The mistake usually comes to light at the year-end close or during an audit, when the lump-sum tax is overdue and the shareholder cannot deduct it from PIT – the PIT reduction applies only to distributed profit.
How to avoid it: before entering the lump-sum regime, draw up a register of flows to shareholders and related entities and update it every month. For each item, record the legal title, the source of the shareholder’s revenue, the limit or the market rate, and the decision on the lump-sum tax.
Summary
- Check the conditions of Article 28j(1) of the CIT Act at the level of shareholders and assets: exclusively natural persons, in a limited partnership also the general partner, and no shares in other entities.
- File the ZAW-RD by the end of the first month of the lump-sum tax year; when electing the regime during the year, draw up and sign the financial statements on time and keep their original electronic version.
- Calculate the cost of a distribution using the method in the Ministry of Finance’s explanatory notes – 20% or 25% of the net profit earmarked for distribution – bearing in mind that the company pays the lump-sum tax on top of the dividend amount.
- Assess every payment to a shareholder under Article 28m(3) and (4) before it is made, not at the year-end close.
- Plan the exit before withdrawing: calculate the initial adjustment, the lump-sum tax on undistributed profit and the waiting period, and keep profits from the lump-sum period separately identified in equity.
Sources cited
All quotations from Polish-language sources — statutes, tax rulings and court judgments — are given here in the author's translation; the Polish wording is authoritative.
- Individual tax ruling of the Director of the National Revenue Information Service of 19 May 2025, no. 0111-KDIB1-1.4010.174.2025.1.SG – a limited partnership taxed under the lump-sum regime since 2022 continues the lump-sum regime after conversion into a sp. z o.o. without a new notification; the tax on the initial adjustment is not payable where the lump-sum regime is applied without interruption for at least four years. https://eureka.mf.gov.pl/informacje/podglad/640205
- Individual tax ruling of the Director of the National Revenue Information Service of 12 May 2025, no. 0111-KDIB1-1.4010.131.2025.2.AND – the remuneration of the general partner and the limited partner for managing the affairs of a limited partnership, granted by a partners’ resolution, is a hidden profit; market-rate remuneration of a related entity for services necessary to the company is not. https://eureka.mf.gov.pl/informacje/podglad/639260
- Individual tax ruling of the Director of the National Revenue Information Service of 16 April 2025, no. 0114-KDIP2-2.4010.32.2025.3.IN – market rent for premises rented from a shareholder and used in the company’s business activity is not a hidden profit. https://eureka.mf.gov.pl/informacje/podglad/635824
- Individual tax ruling of the Director of the National Revenue Information Service of 19 August 2026, no. 0111-KDIB1-1.4010.313.2026.2.SG – failure to keep, in their original electronic form, the financial statements drawn up when electing the lump-sum regime during the year breaches Article 28j(5) of the CIT Act. https://eureka.mf.gov.pl/informacje/podglad/706379
- Individual tax ruling of the Director of the National Revenue Information Service of 24 March 2025, no. 0114-KDIP3-1.4011.73.2025.2.BS – reduction of the flat-rate PIT on dividends by 90% of the lump-sum tax attributable to the shareholder; the preference applies only to income from distributed profit. https://eureka.mf.gov.pl/informacje/podglad/631706
- Judgment of the Supreme Administrative Court of 11 July 2023, case ref. II FSK 93/23 – benefits provided to a shareholder in connection with the right to participate in profit, other than distributed profit and other than remuneration under the titles listed in Article 28m(4)(1) of the CIT Act, constitute a hidden profit in full (the proposition as cited in ruling no. 0111-KDIB1-1.4010.131.2025.2.AND).
- Tax explanatory notes of 23 December 2021 on the lump-sum corporate income tax – “Guide to the lump-sum corporate income tax” (Przewodnik do Ryczałtu od dochodów spółek) – method for determining the combined burden on a distribution of profit (examples 50–53), dividend from profit from before the lump-sum regime (example 49), limit on the shareholder’s remuneration (example 48), deadlines for paying the lump-sum tax (points 79 and 86), exit from the lump-sum regime and the waiting period (points 90, 108 and 113). https://eureka.mf.gov.pl/informacje/podglad/481345
- Ministry of Finance announcement of 22 September 2026 “The Government has approved a bill that will reduce interpretative doubts and make tax settlements easier” (Rząd zaakceptował projekt, który ograniczy wątpliwości interpretacyjne i ułatwi rozliczenia podatkowe) – scope of the bill in the part concerning the lump-sum corporate income tax, including the amnesty and the employment condition. https://www.gov.pl/web/finanse/rzad-zaakceptowal-projekt-ktory-ograniczy-watpliwosci-interpretacyjne-i-ulatwi-rozliczenia-podatkowe
- Council of Ministers’ list of legislative work – bill amending the Act on personal income tax, the Act on corporate income tax and certain other acts – description of the solutions concerning the lump-sum corporate income tax (scope of the amnesty, catalogue of hidden profits). https://www.gov.pl/web/premier/projekt-ustawy-o-zmianie-ustawy-o-podatku-dochodowym-od-osob-fizycznych-ustawy-o-podatku-dochodowym-od-osob-prawnych-oraz-niektorych-innych-ustaw6
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Why we do this
As a tax advisor I take care of the substantive quality of our free materials. My aim is to educate the market through reliable analyses that allow entrepreneurs to apply the law safely in practice.
Get in touch →Legal basis: Act of 15 February 1992 on corporate income tax (consolidated text: Dz.U. z 2026 r. poz. 554, as amended): Article 4a(10), Article 7aa(1), (4) and (5), Article 11c, Article 28f(1) and (2), Article 28j(1), (2) and (5), Article 28k(1)(5) and (6), Article 28l(1) and (2), Article 28m(1), (3) and (4), Article 28o(1), Article 28r(1), Article 28t(1); Act of 26 July 1991 on personal income tax (consolidated text: Dz.U. z 2026 r. poz. 592, as amended): Article 10(1)(9), Article 12(1), Article 13(7), (8) and (9), Article 30a(1)(4) and (19); Act of 29 September 1994 on accounting (consolidated text: Dz.U. z 2026 r. poz. 522): Article 12(2)(7), Article 45(1) and (1f), Article 52(1), Article 74(2)(8).