Incentivizing Growth: New Tax Structure for Copper Extraction

Poland is set to overhaul its copper mining tax framework, aiming to stimulate increased production and investment in the sector. The changes, spearheaded by the Ministry of Finance (MF), introduce a phased reduction in the tax rate and a novel deduction mechanism for eligible investment expenditures.

Currently, the tax on copper mining is pegged to market prices. When the price surpasses PLN 2,3878 per ton, the tax rate is calculated using a formula that includes the market price multiplied by a factor of 0.85.

Phased tax Rate Reduction: A Gradual Shift

The core of the reform lies in a gradual reduction of the multiplier applied to the market price in the tax calculation.According to the Ministry of Finance, this factor will decrease from 0.85 to 0.71 in 2026, followed by further reductions to 0.64 in both 2027 and 2028. This phased approach aims to provide the copper mining industry with increasing financial relief over time.

Investment Deductions: Rewarding Capital Expenditure

Beyond the rate reduction, a notable innovation is the introduction of a tax deduction mechanism, slated to begin in 2029.This mechanism allows companies to deduct a portion of their investment expenditure from their tax liability. Expenses incurred as early as 2026 will be considered, up to a limit of 50% of eligible expenses.

Unused deductions can be carried forward to subsequent years, providing flexibility for companies with fluctuating investment cycles. Though,the monthly tax deduction is capped at 40% of the calculated tax. The specific types of investments that qualify for the deduction will be detailed in the updated legislation.

Projected Impact: Billions in Revenue and Production Growth

The Minister of Finance projects that these changes to the copper tax regime will result in PLN 10 billion in revenue over a decade. More significantly, the reforms are expected to incentivize a substantial increase in copper mining output, possibly rising from 400,000 tons to 1 million tons within the next 10 years.The goverment aims for the new regulations to take effect from January 2026.

We estimate that as a result of a change in copper tax revenues over 10 years will amount to PLN 10 billion. Changes in copper tax will allow you to increase mining to 1 million tons from 400 thousand. within 10 years. We want the project to come into force from January 2026
Minister of Finance

Background: The Mineral Tax and its Evolution

The mineral tax, including the copper tax, was initially introduced in 2012 as part of a broader effort to bolster government revenues. The tax was designed to capture a larger share of mining profits without impacting dividend payments to shareholders.

Initially, the tax generated an average of PLN 1.5 billion annually. Though,as 2021,annual revenues have surged to PLN 3.6 billion. The tax structure is designed to be progressive, meaning that the tax rate increases with higher levels of copper extraction.

industry Outlook: A Necessary Update

The need to revise the copper tax has been a topic of discussion for some time. Andrzej szydło, president of KGHM, Poland’s largest copper producer and effectively the sole payer of the copper tax, has emphasized the importance of updating the tax framework. He noted that the company has provided the ministry of Finance with data to assess the extent to which the tax has become outdated.

We are in constant contact with the Ministry of Finance.From my personal perspective,we have already transferred all data to assess the degree of outdating this tax… this tax requires at least update
Andrzej Szydło, president of KGHM

In February, the head of MF Andrzej Domański indicated the possibility of reducing the copper tax by PLN 500 million from 2026 and PLN 700 million in the following year, foreshadowing the current reform proposal.