Changes to PIT and CIT from 2027 - what remains in the draft?

A revolution in income taxes - the draft amendment to PIT and CIT for 2027

The Ministry of Finance has published the third, significantly scaled-back version of the draft amendment to the PIT and CIT acts, which is due to come into force on 1 January 2027. This is good news for most taxpayers - the ministry has withdrawn from many controversial proposals that raised concerns among business owners and tax experts. Of the original 31 changes, mainly aimed at tightening the tax system, only 15 remain in the draft, and most of them are favourable.

The scale of the changes is best seen in the numbers. The April version of the draft was meant to bring the state budget an additional PLN 700 million a year. The current version, by contrast, means a loss of PLN 33 million for the budget. This is a fundamental shift in the approach of the Ministry of Finance, which, under the influence of public consultations, has decided to make far-reaching concessions to taxpayers.

In this article we discuss the most important changes - both those the ministry has withdrawn from and those that remain in the draft. We explain what this means in practice for business owners, individuals and companies using the Estonian CIT.

Which unfavourable changes has the Ministry of Finance withdrawn?

The list of withdrawn proposals is impressive and covers the solutions that provoked the greatest opposition from the business community. Dropping these changes means that the existing, more favourable tax rules will be retained in many key areas.

The most important withdrawn changes include:

• An increase in the flat-rate tax for related parties - the rate will not be raised from 8.5% to 17% for taxpayers providing services to related parties, e.g. partners providing services to their own company.
• An increase in the flat-rate tax on private rental income - rental income above PLN 100,000 will still be taxed at 12.5%, not the planned 15%.
• An increase in the flat-rate tax for people who do not employ staff - the 8.5% rate will remain unchanged, instead of the proposed 15% for revenue above PLN 100,000.
• Restriction of the IP Box relief - programmers and other business owners will still be able to use the preferential 5% rate without having to employ at least three people.
• Changes to donations of ex-lease cars - the current 6-month period will be retained, after which the recipient can sell the car without PIT.
• Restriction of the housing relief - there will be no requirement to use the relief no more than once every three years.
• A ban on depreciating investment property by real estate companies.

This is particularly important news for business owners operating as a sole proprietorship (JDG) on the flat-rate tax and for people who rent out property. The existing tax rules will remain intact.

Favourable changes that will take effect from 2027

In its current version, the draft contains a number of solutions that are positive for taxpayers. One of the most important is the settlement of losses in the solidarity levy. Until now there have been serious doubts of interpretation as to whether losses from previous years can reduce the base for calculating this levy. The amendment clearly settles that losses can be deducted from income from the same source of revenue. This is a significant change for high earners who are liable to pay the solidarity levy.

Another important change concerns the depreciation of cars with combustion engines. Currently the limit on depreciation charges (PLN 100,000 or PLN 150,000) depends on the level of CO2 emissions, and the only source of data is the CEPiK database, which often contains errors. The ministry proposes allowing the emission level to be established also on the basis of a certificate of conformity (CoC) or documents issued by the Transport Technical Inspection Director. This is a practical solution that eliminates problems arising from incorrect register data.

Among the other favourable changes, it is worth mentioning the exclusion from PIT of benefits meeting the needs of the family, regardless of the spouses' marital property regime, as well as the clarification of the safe harbour mechanism for loans between related parties, which will cover only variable-rate loans. For public benefit organisations, the modification of the CIT exemption, covering all tasks under Article 4 of the Public Benefit Activity Act, is also important.

Estonian CIT - liberalised conditions, but also restrictions

The changes to the Estonian CIT (the flat-rate tax on company income) are mixed. On the one hand, the ministry proposes favourable solutions - above all, a liberalisation of the employment condition. Until now, companies had to employ at least three individuals who are not partners. The amendment will allow the minimum amount of salary expenditure (three times the average monthly salary) to include the pay of people employed under an employment contract. This simplification will make it easier for many smaller companies to meet the employment condition.

Another positive change is the introduction of a clear definition of expenses unrelated to business activity that are subject to taxation. These will be expenses incurred for a purpose other than generating revenue or maintaining a source of revenue, as well as public-law charges of a punitive nature. In addition, companies that were late in filing their financial statements, or did not file them, by the end of 2026 will get a chance to remedy this failure - they will be able to file the statements by 31 January 2027.

Unfortunately, the draft also introduces two significant restrictions. First, the option to switch to Estonian CIT during the tax year will disappear - it will be possible only from the start of a new tax year. The ministry justifies this by numerous doubts of interpretation and disputes. Second, every profit distribution after opting out of Estonian CIT or losing the right to this form of taxation will be covered by a presumption of distribution from net profit, which entails an obligation to pay tax. Some exceptions to this rule are, however, provided for.

How to prepare for the tax changes from 2027?

Although the draft amendment to PIT and CIT in its current version is clearly more favourable than its earlier versions, business owners should start preparing for the upcoming changes now. This applies above all to companies using or planning to switch to the Estonian CIT - the removal of the option to change the form of taxation during the year means that the decision must be taken in advance, planned for the start of the tax year.

It is also worth analysing the impact of the new rules on your individual tax situation. This applies in particular to taxpayers paying the solidarity levy, owners of company cars with combustion engines, and companies in the energy and heating sector, which will gain an exemption from the national minimum CIT.

Remember that the draft may still change during further legislative work. Following the legislative process and analysing the rules on an ongoing basis is the key to managing tax burdens effectively.

Do you need an individual analysis of how the planned changes will affect your taxes? Contact our firm - our experts will help you prepare the optimal tax strategy for 2027 and the following years. Don't wait until the last minute - plan the changes in advance and be confident that your filings will comply with the new rules.