Understanding the multifaceted tax system in Poland is essential for any business operating within its jurisdiction. This article provides a detailed exposition of the Polish tax framework, focusing on key areas that affect corporate activities.
We will examine the implications of various taxes, including Corporate Income Tax, Value Added Tax (VAT), Personal Income Tax (PIT), and the Tax on Civil Law Transactions (PCC).
Our analysis will extend to specific tax obligations that are pertinent to corporate entities and individual entrepreneurs alike, such as the conditions for company incorporation and share acquisition, VAT registration, and the innovative Split Payment Mechanism (SPM).
As legal professionals, we recognize the importance of staying abreast of the latest tax regulations to ensure compliance and optimize tax liabilities. This guide serves as an essential resource, providing clarity on tax rates, deductions, and credits that are instrumental in strategic financial planning.
An overview of taxes in Poland
|Tax on Civil Law Transactions (PCC)
|Company Incorporation Tax
|0.5% transfer tax on share capital at registration
|Shares Acquisition Tax
|1% of the market value
|Sales, property exchanges, loans, etc. subject to PCC
|Added Value Tax (VAT)
|Standard VAT Rate
|Reduced VAT Rates
|8%, 5%, and 0% for specific goods and services
|Input VAT deduction available for VAT taxpayers
|VAT Split Payment Mechanism (SPM)
|Voluntary split payment for sensitive goods and services
|Corporate Income Tax (CIT)
|Standard CIT Rate
|Rate for Small Taxpayers
|9% for revenues not exceeding the equivalent of 2 million EUR
|0% unless profit is distributed as dividends
|Personal Income Tax (PIT)
|Unlimited for Polish residents, limited for non-residents
|12% up to 120,000 PLN, 32% above that, 20% for non-resident board members
|IP BOX Credit
|Preferable rate of 5% for qualified intellectual property rights
|Varies, can be per unit, percentage of tax base, or retail price
Taxes in Poland. Tax on Civil Law Transactions (PCC)
If you decide to start doing business in Poland by incorporating a Company or acquiring shares, this will be first tax you will have to pay.
Taxes in Poland. Company incorporation tax
The value allocated to the share capital is subject to a 0.5% transfer tax upon registration of a company in Poland. Newly incorporated company has to pay this tax in 14 days period from the moment of incorporation. In case of forming company by signing articles of association before notary, the transfer tax will be paid by the notary on behalf of the company at the moment when the notary deed is done.
Taxes in Poland. Shares acquisition tax
Acquiring shares is taxed at the rate of 1% of the market value. Purchaser is obliged to pay this tax within 14 days. In case of signing the sale agreement before the notary , the notary will remit the tax when notary deed is to be sign.
Besides articles of associations and acquiring of shares following civil law transactions are subjected to Transactions Tax:
- sells and exchange of property and property rights
- a loan of money or goods delimited only according to type;
- life annuity agreement;
- inheritance division agreements and agreements of annulment regarding joint ownership;
- Establishment of the mortgage;
- Establishing usufruct for a consideration, including irregular, and easement for a consideration;
- irregular deposit agreements;
- company agreements.
Taxes in Poland. Added Value Tax (VAT)
VAT is a consumption tax on goods and services that is levied at each stage of the supply chain where value is added, from the initial production to the point of sane.
European union requires its state member to establish theirs standard VAT rate at the minimum of 15% and reduced rate can not be lower than 5%.
VAT regulations verry between member states in terms of rates and actions subjected to it.
In Poland VAT is imposed on:
- Imports of goods from non-member states of European Union
- Imports of goods from member states of EU
- Export of good outside the EU
- Export to the member states of the EU
- Payable services and supplies of goods inside the Polish borders
Poland impose the standard VAT rate of 23% and 3 following reduced rates:
- 8% VAT – applies to services and goods listed in Appendix 3 of VAT Act (example common agricultural goods, magazines, books) and services related to building construction.
- 5% VAT – applies to goods mentioned in Appendix 10 to VAT Act.
- 0% VAT – applies to goods listed in Appendix 8 to VAT Act and to intra-Community delivery and export of goods.
Taxes in Poland. Deduction on VAT in Poland
It is possible to benefit from the deduction of input VAT in Poland, but being registered as VAT taxpayer is required.
Procedure of registration as VAT Taxpayer begins with filling the application on the official tax form. Companies registered in Poland should register as VAT Taxpayer no later than on the day before the day on which taxed with VAT sale of goods or provision on services took place.
Taxes in Poland. VAT split Payment Mechanism (SPM)
What is split payment of VAT? In simple words, it’s splitting payment to two accounts, regular one to which the net value is transferred and special VAT account where tax amount is send.
In Poland split payment of VAT is voluntary in most of the cases. Only taxpayers who trade with so called sensitive goods and the total amount receivable from the invoice is greater than 15 000 PLN.
Sensitive goods and services are listed in Annex 15 to the VAT act. For example steel, silver, gold, telephones, hard drives all are sensitive goods and raising of steel constructions can be used as example of sensitive service.
Taxes in Poland. Corporate Income Tax
CIT is the income tax paid by legal entities. It applies to capital companies, limited partnerships and limited joint-stock partnership, tax capital groups and other similar legal entities.
Taxes in Poland. CIT rates
In Poland legal entities income is taxed at 3 different rates:
- standard rate of 19%
- rate for small taxpayers – 9%
- Estonian CIT – 0%
In Poland taxpayers whose revenues earned in a tax year did not exceed an amount of PLN equal to 2 million EUR are considered “Small Taxpayers” – and they are subjected to 9% CIT.
It is a famous way of not paying CIT in Poland at all. In the nut shell you do not pay any corporate income tax on the company’s profit unless you pay out a dividend. If the distribution of the profit take place the rate of tax imposed on withdrawing the profit will be preferential set at 20% for the small taxpayer and 25% for all other. For comparisons this rates on standard CIT this rates are set on 26,29% for small taxpayers and 34,39% for others.
PIT – Personal Income Tax
Income of private individuals in Poland is subjected to taxation. In context of doing business in Poland the taxation of members of the board is an important aspect of this tax.
Taxes in Poland. PIT for Polish residents and other individuals
In accordance to PIT Act – the Polish Resident is defined as a person who has a center of personal or economic interest (center or life interest) in Poland or resides in Poland for more than 183 days in tax year.
Polish residents are subjected to so called “unlimited tax obligation”. It means all theirs revenues are subjected to PIT regardless of where revenue was earned.
Revenues of people not classified as Polish residents are subjected to “limited tax obligation” i.e. only the revenues earned on territory of Poland are taxed.
In terms of taxation of members of the board, entities which pays the Polish residents on ground of the management activity, are obliged to collect PIT tax advanced payments at following rates:
– 12% up to 120 000 PLN of profit
– 32% above 120.000 PLN of profit, in addition to that Polish residents may be taxed with 4% solidarity tribute if they income exceeds 1 000 000 PLN
For payments made to members of the board who aren’t Polish residents companies are obliged to collect PIT at rate of 20% regardless of amount of revenue gain by this individuals.
Taxes in Poland. IP BOX Credit
IP BOX Credit is a tax credit meant to encourage entrepreneurs to undertake research and development activities. It allows to tax revenue from so called “qualified intellectual property rights” with preferable rat of 5 %.
“Qualified intellectual property rights” are listed respectively in PIT and CIT acts. For example: copyright of a computer program.
Both tax payers of CIT and PIT can benefit from IP BOX if they decided to pay income tax on flat rate.
Taxes in Poland. Excise Tax
Excise Tax is as well as VAT required by European Union. European law sets a structure and minimal rates of excise duty for listed excised goods. Member states retains ability to impose higher excise rates. Because of that excise rates verry between member states. At the day of this article there are 40 excise goods in Polish Tax Law.
Unlike most of Polish taxes excise duty is not always expressed in percentage. Excise rate can be expressed in:
– PLN per unit of the product, for example excise of 1413 PLN is imposed for each 1000 liters of unleaded petrol.
- The percentage of the tax base – cars for the transport of persons with motor capacity > 2000cm3.
- The percentage of the maximum retail price (currently not imposed on any goods)
- PLN per unit of the product and the percentage of maximum retail selling price – cigarettes 1000 pieces + max. retail selling price = 228,10 + 32,05%
In accordance with Polish Excise Duty Act the maximum retail price is the price fixed and printed on a single packaging unit of cigarettes or smoking tobacco b the producer, importer or trader making the intra-community acquisition.
Taxes in Poland. Summary
Above introduction includes basic information required to navigate the Polish taxation system. Polish taxes have been subjected to many changes in recent years. It is recommended for companies operating in Poland to benefit from services of professional legal advisors in order to settle tax affairs.
FAQ on taxes in Poland. Taxation in Poland in questions and answers
What are the main types of taxes applicable to businesses in Poland?
The primary taxes include Corporate Income Tax (CIT), Value Added Tax (VAT), Personal Income Tax (PIT), and the Tax on Civil Law Transactions (PCC).
What is the Tax on Civil Law Transactions (PCC) in Poland?
PCC is a tax imposed on civil law transactions like company incorporation, share acquisition, and other specific transactions such as property sales and loans.
What are the standard rates for Corporate Income Tax (CIT) in Poland?
The standard CIT rate is 19%, with a reduced rate of 9% for small taxpayers (revenues not exceeding 2 million EUR) and an Estonian CIT model offering 0% unless profits are distributed as dividends.
How is VAT applied in Poland?
VAT is a consumption tax levied at each stage of the supply chain on goods and services. The standard VAT rate in Poland is 23%, with reduced rates of 8%, 5%, and 0% for specific items.
What is the VAT Split Payment Mechanism (SPM)?
SPM is a system where payments are split into two accounts: a regular account for the net value and a special VAT account for the tax amount. It’s voluntary for most transactions but mandatory for sensitive goods and services.
What are the obligations and rates for Personal Income Tax (PIT) in Poland?
PIT obligations are unlimited for Polish residents and limited for non-residents. Tax rates are 12% up to 120,000 PLN and 32% above that, with a special 20% rate for non-resident board members.
How does the IP BOX Credit work in Poland?
The IP BOX Credit allows for a preferable rate of 5% on qualified intellectual property rights, encouraging research and development activities.
What is Excise Tax, and how is it applied in Poland?
Excise Tax varies by product and can be a per-unit rate, a percentage of the tax base, or a percentage of the retail price. It’s applicable to 40 excise goods in Polish Tax Law.
Are there any specific conditions for company incorporation and share acquisition in terms of taxation?
Company incorporation is subject to a 0.5% transfer tax on share capital, and share acquisition incurs a 1% tax on the market value.
Is VAT registration mandatory for companies in Poland?
Companies must register as VAT taxpayers before conducting VAT-taxed sales of goods or services. The registration process begins with filling out an official tax form.