If you are planning to open your business in Poland, you have probably already realized that Poland has become one of the countries that interest investors the most.
This is in particular due to the large and absorbent market (36.8 million people) as well as the actions of the authorities, which support the development of business in Poland through their policies. This also applies to tax issues, which include numerous facilities for investment activities.
Running a business in Poland inevitably involves the need to regulate Polish taxes.
This article provides an overview of key tax categories in Poland, shedding light on Personal Income Tax (PIT), Corporate Income Tax (CIT), Value Added Tax (VAT), Tax on Civil Law Activities (PCC), Property Tax, Excise Tax, Withholding Tax, Transportation Tax, Inheritance and Donation Tax.
Personal Income Tax (PIT)
Deadline for Reporting
April, 30th (reporting the income achieved during the previous year).
Tax Subjects
All natural persons earning income are subject to personal income tax. In this case, it is important to distinguish between limited and unlimited tax liability.
Unlimited tax liability applies to natural persons residing in the territory of the Republic of Poland. Having a place of residence in the territory of the Republic of Poland means that a given natural person:
- Has a center of personal or economic interests in the territory of the Republic of Poland (centre of vital interests)
- Stays in the territory of the Republic of Poland for more than 183 days in a tax year.
Scope of Taxable Income
All types of income are subject to income tax, except for tax-free income or income on which tax collection has been waived by regulation.
Income from a source of revenue is – unless specific provisions provide otherwise – the surplus of the sum of revenues from this source over the costs of obtaining them, achieved in the tax year. If the costs exceed the total revenues, the difference is a loss from the revenue source.
Tax Rates
The progressive tax rates range from 12% to 32%, with various deductions and allowances available.
Corporate Income Tax (CIT)
Deadline for Reporting
March 31st.
Tax Subjects
CIT taxpayers are legal persons (including limited liability companies, joint-stock companies, foundations, associations, and cooperatives) and capital companies in the organization.
Scope of Taxable Income
The subject of taxation is the income (the surplus of revenues over incurred costs) that the company obtained in a given tax year.
Income is the sum of:
- Income derived from capital gains
- Income obtained from other sources of income.
Some income of CIT taxpayers is exempt from tax, provided that it is transferred to the statutory activities of these entities: scientific, scientific and technical, educational, including those involving the education of students, cultural, physical culture and sports, environmental protection, support for social initiatives for the construction of roads and telecommunications networks in the countryside, as well as water supply in the countryside, charity, health protection and social assistance, professional and social rehabilitation of disabled people, and religious worship. Most often, such income is obtained by associations, associations, and foundations.
Tax Rates
The PIT rates are:
- 19% of the tax base
- 9% of the tax base on revenues (income) other than capital gains for small taxpayers and start-up companies.
You can find more information on CIT here
Withholding Tax (WHT)
Deadline for Reporting
(IFT-1R declaration)- February, 28th, (IFT-2R declaration) – March, 31st.
Tax Subjects
WHT applies to flat-rate income taxes collected by payers who have their place of residence, registered office, or foreign establishment in the country where the income arises. The taxpayer is the entity that receives the cross-border payment. The payer is the person who makes the payment to the taxpayer. Therefore, Polish entities paying receivables to foreign business partners, non-residents, are obliged to collect withholding tax.
Scope of Taxable Income
Flat-rate income taxes (from natural and legal persons) are collected by payers who have their place of residence, registered office, or the so-called foreign establishment in the country where the income arises. Polish withholding tax is collected by payers who have their place of residence, registered office, or foreign establishment in Poland.
Typically, withholding tax is referred to in the context of tax levied on certain income obtained in Poland by non-residents who are natural persons or other entities. In some cases, it is also collected from residents (e.g. when paying dividends to a domestic entity).
This includes, among others: the following revenues:
- In the field of corporate income tax
- Revenues obtained by non-residents, in particular from interest, copyrights, and related rights, fees for services provided in the field of entertainment, entertainment, sports, consulting, and accounting activities, as well as certain fees for the export of cargo and passengers accepted for transport in ports Polish by foreign maritime merchant shipping companies
- Obtained by both residents and non-residents, income from dividends, and other income from participation in the profits of legal persons that have their registered office or management in Poland
- In terms of personal income tax
- Income obtained by non-residents from maritime navigation
- Inland navigation and air transport
- Dividends and other income from participation in profits of legal persons
- License fees
- Income from freelance professions, remuneration directors
- Income from artistic or sports activities
- Income from pensions and other similar benefits.
Tax Rates
The Withholding rates are:
- 19% is the general national WHT rate for dividends. It also includes income from the liquidation of the company and redemption of shares (except for the profit from voluntary redemption, which is treated as a capital gain subject to the 19% CIT rate in Poland, if this profit is realized by a taxpayer from a country that is not a party to the agreement or the agreement contains the so-called real estate clause)
- 20% is the general withholding tax rate on interest and royalties paid to non-residents. (10% in the case of sea or air transport services). However, the above WHT values may be reduced by double taxation agreements. Withholding tax of 20%. also applies to payments made to non-residents for intangible services (e.g. consulting services).
Value Added Tax (VAT)
Deadline for Reporting
In the case of monthly settlements – by the 25th day of the following month, in the case of quarterly settlements – by the 25th day of the month following each subsequent quarter (April 25, July 25, October 25, January 25).
Tax Subjects
A taxpayer of the goods and services tax (VAT) is a natural person, a legal person, or an organizational unit without legal personality (e.g. civil partnership, general partnership, professional partnership, etc.) that independently conducts business activities, regardless of the purpose or result of such activity.
An organizational unit without legal personality constituting an inherited enterprise that continues to run the business of the deceased taxpayer from the opening of the inheritance until the date of expiry of the succession administration or until the expiry of the right to appoint a succession administrator, if the succession administration has not been established and an appropriate notification has been made in accordance with the Act, will also be a VAT payer on the principles of recording and identifying taxpayers and payers.
A VAT payer is also a legal person, an organizational unit without legal personality, and a natural person obliged to pay customs duties (even if the imported goods are exempt from customs duties or customs duties have been suspended or a preferential customs duty rate has been applied), entitled to use the inward processing procedure or temporary admission procedures.
Scope of Taxable Income
VAT regulations apply to the following taxable activities in Poland (the regulations specify the rules for determining the place of supply for the activities performed):
- Paid delivery of goods, understood as the transfer of the right to dispose of the goods as the owner (in some cases, the free transfer of goods by the taxpayer may be considered a paid delivery)
- Paid provision of services understood as any performance that is not a supply of goods (in some cases, services provided free of charge may be considered paid provision of services)
- Export and import of goods into the territory of the country
- Intra-community supply of goods
- Intra-community acquisition of goods for consideration within the territory of the country.
Tax Rates
Poland’s standard VAT rate is 23%, with reduced rates of 8% and 5% for certain categories of goods and services.
Tax on Civil Law Transactions (PCC)
Deadline for Reporting
Within 14 days from the date of tax liability, except for cases where the tax is collected by the payer or collective declaration.
Tax Subjects
The taxpayers of the tax on civil law transactions are natural persons and legal entities and organizational units without legal personality that are parties to civil law transactions subject to taxation.
Scope of Taxable Income
Civil law activities:
- Contracts for the sale and exchange of property and property rights
- Loan agreements for money or items marked only as to type
- Donation agreement – in the part regarding the recipient’s takeover of the donor’s debts, burdens, or obligations
- Annuity contracts
- Agreements on the division of inheritance and agreements on the abolition of co-ownership – in the part regarding repayments or subsidies
- Establishing a mortgage
- Establishing paid usufruct, including improper use, and paid easement
- Irregular deposit agreements
- Partnership agreements
- Changes to these contracts – if they increase the tax base for tax on civil law transactions
- Court decisions and settlements – if they produce the same legal effects as taxable civil law transactions.
Tax Rates
Rates vary depending on the transaction type, and taxpayers must adhere to the prescribed deadlines for PCC reporting and payment.
Real Estate Tax
Deadline for Reporting
January 31st (real estate tax for legal persons, organizational units, companies without legal personality).
Forest and agricultural taxes – for natural persons – 14 days from the date the obligation arises. Legal persons submit the declaration by January 15 of each tax year or within 14 days of the obligation arising (just like natural persons).
Tax Subjects
Property taxpayers are natural persons, legal persons, and organizational units, including companies without legal personality, which are:
- Owners of real estate or buildings
- Independent owners of real estate or building
- Perpetual usufructuaries of land
- Owners of real estate or parts thereof or buildings or parts thereof owned by the State Treasury, as well as local government units, if the possession:
- Results from an agreement concluded with the owner, the National Support Center for Agriculture, or from another legal title, except for the possession by natural persons of residential premises that do not constitute separate real estate
- Is without a legal title.
Scope of Taxable Income
The subject of real estate taxation is:
- Land
- Buildings, or parts thereof structures, i.e. objects that are not buildings, or parts thereof related to running a business.
Tax Rates
Local authorities determine the tax rates, which can vary between municipalities.
Excise Tax
Report deadline:
Reporting should be done:
- By the 25th day of the month following the month in which the tax obligation arose
- By the 25th day of the month following the month in which the excise duty suspension procedure ended, resulting in a tax liability.
Tax Subjects
Subjects of excise tax are natural persons, legal persons, and organizational units without legal personality who perform taxable activities or in respect of whom a taxable fact has occurred.
An entity that is not an importer is also a taxpayer if it is obliged to pay customs duties.
Since excise duty is an element of the price, the entity that actually bears the burden of this tax is the consumer.
Scope of Taxable Income
The subject of excise taxation is:
- Production of excise goods
- Introducing excise goods into a tax warehouse
- Import of excise goods (in principle)
- Intra-community acquisition of excise goods, excluding intra-community acquisition made to a tax warehouse
- Removing from a tax warehouse, outside the excise duty suspension procedure, excise goods that are not the property of the entity running the tax warehouse
- Dispatching, under the excise duty suspension arrangement, imported excise goods from the place of import by a registered consignor who is not the importer of these goods.
Tax Rates
Rates vary depending on the type of goods, and excise duty is typically included in the product’s retail price.
Inheritance and Donation Tax
Deadline for Reporting
Within one month from the date of tax liability.
Tax Subjects
Taxpayers of inheritance and donation tax are natural persons – Polish citizens or persons permanently resident in the territory of the Republic of Poland – who acquired ownership of goods and property rights through inheritance, adverse possession, or disposition of the contributor or donation.
Scope of Taxable Income
Inheritance and donation tax is subject to the acquisition by natural persons of:
- Ownership of things located in the territory of Poland or property rights exercised in the territory of Poland, by:
- Inheritance, ordinary legacy, further legacy, vindicatory legacy, testamentary order
- Donations, donor recommendations
- Adverse possession
- Free abolition of co-ownership
- Compulsory share if the entitled person did not obtain it in the form of a donation made by the testator or by way of inheritance or in the form of a legacy
- Gratuitous: annuity, usufruct and easement
- Rights to a savings contribution based on the instructions for a contribution in the event of death
- Participation units based on the instructions of a participant of an open-end investment fund or a specialized open-end investment fund in the event of his death
- Ownership of things located abroad or property rights exercised abroad, if at the time of opening the inheritance or concluding the donation agreement, the buyer was a Polish citizen or had permanent residence in the territory of Poland.
Tax Rates
The rates depend on the relationship between the donor/estate and the recipient, with spouses and direct descendants benefiting from lower rates or exemptions.
Transportation Tax
Deadline for Reporting
February, 15th (and if the tax obligation arose after that date – within 14 days from the date of occurrence).
Tax Subjects
Transportation Tax is levied on individuals, businesses, and entities that own transport vehicles with a permissible total mass exceeding 3.5 tons.
Scope of Taxable Income
The transportation tax encompasses a range of vehicles, including:
- Trucks
- Saddle tractors
- Trailers
with varying permissible total masses.
The tax obligation arises when a transport vehicle is:
- Registered
- Acquired
- Reintroduced into traffic after temporary withdrawal.
Tax Rates
The tax rates are determined by the municipal council within the limits set by the provisions of the Local Taxes and Charges Act.
The municipal council may differentiate the rates, taking into account, in particular: the vehicle’s impact on the natural environment, the year of production, or the number of seating places.
Conclusion
Understanding Polish taxes requires thoroughly analyzing each tax category and careful compliance with the associated regulations. Whether an individual taxpayer or a corporate entity, not staying informed about changes in tax laws and seeking professional advice can contribute to fiscal responsibility.
Adwisen offers you qualified and helpful assistance with any of the taxes mentioned in this article.
