Poland cuts copper extraction tax from 2026

Executive Summary

The Polish Ministry of Finance has announced a major reform of the copper extraction tax, which will come into effect on January 1, 2026. This new system introduces significant deductions linked to investment expenditures, aimed at stimulating capital spending in the mining sector, which is essential for the country.

This reform is expected to result in a reduction in state tax revenues estimated at 10 billion zlotys (approximately $2.66 billion, based on an exchange rate of $1 = 3.7545 zlotys) over a ten-year period. At the same time, it aims to reduce copper producers' operating costs by an equivalent amount. KGHM Polska Miedź S.A., Poland's main copper producer and strategic supplier to the European market, will be the primary beneficiary of these changes. The expected savings should be reinvested by KGHM in strategic projects, particularly the development of new mining shafts, essential for increasing production capacity and ensuring operational sustainability.

This initiative should strengthen Poland's investment attractiveness, particularly in the mining sector, and consolidate its strategic role in the European raw materials supply chain.

Fundamentally, this tax reduction constitutes a strategic maneuver aimed at correcting historical investment disincentives that have long hindered the sector. By promoting a more favorable tax environment, Poland intends to improve the competitiveness of its mining industry and secure the supply of essential raw materials for the European Union, particularly in the face of looming global copper deficits. The long-term success of this reform will largely depend on continued regulatory stability and the efficient use of freed capital for substantial capacity expansion.

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Introduction

This study examines the reform of the mining tax regime in Poland, which aims to reduce the copper extraction tax starting in 2026.
The three key messages are:

• correction of a historical fiscal imbalance
• strengthening KGHM's investment capacity
• improving the European Union's strategic security in the face of tensions in the global copper market.

1. Context and Issues

Since 2012, the copper extraction tax in Poland has proven to be a major brake on investment. Introduced to capture significant mining rent, it was based on a complex formula founded on extracted value rather than actual revenues.

This mechanism, non-deductible from corporate tax, has heavily penalized producers, particularly KGHM, a key player representing 50% of copper mining production in the European Union. In 2024, this tax represented 3.87 billion zlotys, more than KGHM's annual net profit (2.87 billion zlotys), compromising its ability to invest in production expansion. This tax pressure has discouraged foreign investment and blocked the opening of new mines for more than a decade.

This situation has been denounced by both industrialists and international observers as a case of regulatory instability harming the country's competitiveness. In a context where global copper demand is expected to grow by 30% by 2040, and while the European Union depends on 80% imports for its copper consumption, this fiscal rigidity also compromised the strategic security of European supply chains.

2. Detailed Analysis

The reform, which will come into effect on January 1, 2026, provides for a gradual reduction of the tax calculation coefficient from 0.85 to 0.64 by 2028. This change is accompanied by deductions for investment expenditures: companies will be able to deduct 50% of their qualified investments, with a monthly ceiling set at 40% of the tax amount. These deductions will be carried forward from one year to the next, which responds to the needs of heavy mining projects with long investment cycles.

The government estimates that this reform will result in a reduction in tax revenues of 10 billion zlotys over ten years, in exchange for an equivalent reduction in costs for producers. These reliefs will notably allow KGHM to undertake the construction of new shafts, estimated between 3 and 4 billion zlotys.

The company's stated objective is to increase its annual production from 400,000 to one million tons of copper in ten years. This trajectory is reinforced by KGHM's strategy focused on innovation (SMR, digitalization) and sustainability, with Copper Mark certification for its processing facilities. Furthermore, the Minister of State Assets has described this reform as a direct contribution to the collective security of the Union, thus anchoring the mining issue in a geopolitical perspective.

3. Summary & Recommendations

The new tax regime constitutes a strategic break. It makes the sector more attractive to investors while ensuring controlled budgetary rebalancing. It complements existing tax incentives in other sectors (R&D, automation) and aligns Polish taxation with international practices.

In comparison, effective royalty rates in other producing countries vary between 0.5% and 5%, well below previous Polish levels. The reform should favor a more stable investment climate, vital for planning the heavy investments required by rising global demand.

Furthermore, it strengthens European resilience against geopolitical and environmental risks on critical value chains. Success will depend on consistency in implementing the reform, clarity of the future legislative framework on eligible expenditures, and the tax administration's ability to ensure efficient implementation. In the medium term, it is recommended to closely monitor the evolution of production, investment levels and sectoral attractiveness, to adjust the system as needed. Finally, regular dialogue between authorities and companies will be essential to maximize the impact of this reform on economic growth and European industrial sovereignty.

4. Conclusion

The reform of the copper extraction tax in Poland represents a major strategic advance. It offers a powerful investment lever to a key player in the European sector, while strengthening the security of critical materials supply. Its coherent implementation and regulatory stability will condition its economic and geopolitical success.

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