Minimum tax or tax license and Implementation of minimum tax

Tax license is a term that will not evoke enthusiasm among many entrepreneurs. Below, we explain what the term tax license means, who is required to pay it, and what exceptions exist. It is referred to in the Income Tax Act as the Minimum Tax for Legal Entities.

What is a tax license?

A tax license is a minimum tax that legal entities must pay regardless of whether they have made a profit or incurred a loss during the tax period, i.e., during the year. This tax applies exclusively to legal entities. It will be first applied in the corporate income tax return for the year 2024.

Who has to pay the tax license – minimum tax?

Practically every legal entity is obligated to pay the minimum tax if their tax liability calculated in the tax return is lower than the amount of minimum tax set for the respective taxpayer. This type of tax also applies to entities that have incurred a tax loss. Therefore, regardless of whether the company did not report any activity and did not achieve a profit in a given year, or incurred a loss, it always has to pay at least the minimum tax.

What is the amount of the tax license – minimum tax?

The amount of the minimum tax varies depending on the taxable income of the taxpayer, which means that it is derived from the annual turnover. This amount ranges from 340 EUR to 3,840 EUR according to the following criteria:

• Annual income up to 50,000 EUR = minimum tax of 340 EUR
• Annual income from 50,000 to 250,000 EUR = minimum tax of 960 EUR
• Annual income from 250,000 to 500,000 EUR = minimum tax of 1,920 EUR
• Annual income over 500,000 EUR = minimum tax of 3,840 EUR

Legal entities (companies) that employ disabled individuals who represent at least 20% of the total average number of employees are eligible for preferential treatment. These entities will have their minimum tax reduced by 50% for that specific period.

Who doesn’t have to pay the minimum tax?

Yes, there are exceptions in minimum tax payment obligation. These apply to:

• Newly established legal entities, which are obligated to submit a tax return for the first time for the taxation period in which they were established. Therefore, a company established in 2024 that did not generate a profit or it was below 2266.67 EUR in its founding year will not have to pay the tax license for the year 2024.
• Certain types of organizations such as foundations, non-profit organizations, nor political parties.
• Protected workshops, protected workplaces.
• Land communities with income not exceeding 10,000 EUR.
• Legal entities in bankruptcy or terminated without liquidation.