The minimum CIT does not cover hospitals

Such a correction is included in the draft amendment to the Corporate Income Tax Act and certain other laws, which is aimed at public consultations. The draft also stipulates that the minimum CIT tax will be suspended in 2022.

Let’s not forget that the minimum CIT of 10% that companies have to pay when they lose or generate minimal income was introduced as part of the Polish deal. The provision was to force companies to pay taxes that hide their real income, and international companies that take them abroad.

Also read: Wirski Jakub, Some Notes on the Minimum Income Tax >>>

Hospitals in the form of companies had to pay the minimum CIT, but they don’t

However, there were concerns that the tax would also have to be paid by public hospitals operated in the form of loss-generating companies, as well as primary care or specialist care outpatient clinics.

The Ministry of Finance emphasizes that the proposed change responds to the voices of hospitals, which are characterized by a constantly low profitability due to the specificity of their operation.

Amendment of art. 24ca in seconds. 14 consists in extending the exemption from the minimum CIT supplementary (letter c) to taxpayers whose majority of income, excluding capital gains, obtained in a tax year is related to the conduct of medical activities within the meaning of the law of 15 April 2011 on medical activity (Official Gazette of 2022, item 633).

– When local government officials and presidents of hospital companies pointed out that the tax would also apply to hospitals, the Treasury Department stressed that the so-called minimum CIT does not apply to entities that carry out medical activities because the prices of their services are regulated. It now turns out that our fears were justified, that we need to change the regulations to be completely clear – says Krzysztof Strzałkowski, chairman of the Health Commission in the Mazovian parliament, as well as the mayor of the Warsaw district of Wola.

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The changes were demanded by the Association of Poviat Hospitals of the Silesia Voivodeship, the Union of Polish Metropolises, the Masovian Parliament and the Ministry of Health, among others.

Check the PROCEDURE: Polish Order – Minimum Income Tax – The procedure allows to determine whether the corporate taxpayer is obliged to pay the minimum income tax for a given tax year >>>

The law will be clarified in favor of hospitals

The Ministry of Finance emphasizes that in the light of the current wording of Art. 24ca of the Wet op de Wet Vpb, in the case of health services in the field of various benefits (and therefore not only hospital treatments) financed from public funds, the condition of Art. 24ca paragraph. 2 point 2 lit. and the Money Transport Act, ie their prices are regulated. – Consequently, if a capital company carrying out medical activities in the field of the above services incurs a loss or the profitability ratio does not exceed 1%, the income and costs associated with such activities are not taken into account for the calculation of the loss and the profitability ratio for the purposes of the minimum income tax – it was stated in the justification.

This would mean that medical activities financed from public funds (after the above conditions are met) are excluded from the minimum income tax.

However, industry representatives noted that, at best, this exclusion would only partially apply to hospitals that have contracts with the National Health Fund, as well as commercial services.

The Treasury Department listened to these voices.

– Healthcare entities, especially those in the form of limited liability companies, with the participation of the treasury or local government agencies, have repeatedly applied for exemption from the minimum income tax. It was pointed out that such entities currently bear higher operating costs, resulting, among other things, from an increase in minimum wages for work and the associated increase in the cost of external services, as well as dynamically increasing prices of fuels, electricity and heat – writes the Ministry of Finance in the motivation.

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He also emphasizes that the period of the COVID-19 pandemic forced medical entities to spend extra money on the purchase of materials and medicines, and consequently incur higher costs for their disposal.

The proposed amendment will allow to preserve the funds generated in public health care institutions, thus contributing to strengthening the stability of the financial and economic situation, in particular in terms of financial liquidity and reducing the dynamism of debt growth, and indirectly contribute to the availability of the medical services provided by these entities – underlines the Ministry of Finance in the justification for the draft.

Read also: Polish Order: Minimum CIT Tax – Guide >>>

Krzysztof Strzałkowski points out that the presidents of hospital companies are in a much more difficult situation than they were a few months ago. – The price wave affects companies in a different way than independent healthcare institutions. The companies are not subject to the regulations on the coverage of negative financial results by the management body. Therefore, the company can only be recapitalized. The Mazowieckie Voivodeship self-government has recapitalized its companies to cover liabilities. However, there are poorer local governments who cannot afford it. The increases were combined with the legal increase in the minimum wage in health care. – underlined.

The catalog of taxpayers’ exemptions has also been expanded, eg for municipal companies, small taxpayers.

Also read: Taxation of the minimum CIT on municipal companies >>>

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