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Poland: Delay in Adoption of New Law on Hydrocarbon Tax and Amendment of Law on Mineral Extraction Tax

(June 13, 2014) It was recently reported that in a first reading on May 7, 2014, Poland’s Parliament failed to reach consensus on draft legislation proposing a new Law on Hydrocarbon Tax, amendments to the Law on Mineral Extraction Tax, and some other laws. The draft was therefore sent to the relevant parliamentary subcommittees for further discussion. The proposal had been submitted to the Parliament by the Council of Ministers (the Cabinet) in June 2013. (Magdalena van Doorn-Olejnicka, Poland: Hydrocarbon Tax – Bill Submitted to Parliament, TAX NEWS SERVICE (June 10, 2014), International Bureau of Fiscal Documentation (IBFD) online subscription database; Ustawa o specjalnym podatku weglowodorowym, o zmianie ustawy o podatku od wydobycia niektórych kopalin oraz o zmianie niektórych innych ustaw [Law on a Special Hydrocarbon Tax, on Amending the Mineral Extraction Tax Law, and on Amending Certain Other Laws] [shows the legislative process of the draft law, with links to the Feb. 2013 text, etc.], Rzadowy Proces Legislacyjny website (last updated June 11, 2014).)

Highlights of the 2013 draft version of the Law on a Special Hydrocarbon Tax adopted by the Council of Ministers and then submitted to the Parliament have been characterized as follows:

• payers of the tax would be limited liability companies or joint stock companies, because they are the only types of companies eligible to obtain concessions for oil and gas extraction;

• the tax would be levied on profits derived from shale gas and oil exploration; and

• the tax rate would vary from 0% to 25%, depending on the ratio of income to qualified expenses, i.e., if the ratio is under 1.5, the 0% rate would apply; if between 1.5 and 2.0, the rate would be determined by the formula (25 x the ratio – 25)/100); and if 2.0 or above, the 25% rate would apply. The initial proposal for the tax rate before the final Council of Ministers version was adopted had been a range of from 12.5% to 25%. (Magdalena van Doorn-Olejnicka, Poland: Hydrocarbon Tax from 2020, TAX NEWS SERVICE (June 25, 2013), IBFD.)

Under the proposed amendments to the Law on Mineral Extraction Tax, a tax would be imposed on shale gas and crude oil (in addition to the tax already imposed on silver and copper). Computation of the tax is based on the value of the extracted gas or oil; the tax rate depends on the type of the deposit. For conventional (easily accessible) deposits, the rates are 3% for gas and 6% for oil and for other deposits (in the sea), the rates are 1.5% for gas and 3% for oil. (Id.)

According to the draft legislation put forward in 2013, the Law on Hydrocarbon Tax would come into force in 2015 and be applicable to profits derived as from the year 2020, and the new mineral tax would similarly apply from 2020. (Id.)