Taxes in Poland and their impact on the business sector
According to the applicable tax law, binding and gratuitous regular payments made by legal entities and individuals to the state treasury are conventionally considered as taxes. Taxes in Poland are paid both by the locals and foreigners who derive revenues in the territory of the country. Based on the official migration statistics data, the number of business immigrants in the Republic is annually increasing, which is an indication of favorable economic conditions for doing business. Flexibility of the tax system very often becomes a determining factor in choosing of a country for doing business for foreign entrepreneurs. Poland is able to provide a transparent and clear system of tax levies calculation, which guarantees an honest interaction with the state for foreign investors, as well as a high legitimate income.
The taxation system in Poland includes two types of taxes: direct and indirect.
The first ones shall be paid directly to the public tax authorities by each of tax-payers on an individual basis (whether it is motor vehicle, property or income tax, etc.),
The latter shall be paid automatically, as they are already included in the price of the majority of goods and services (e.g. like VAT is included in the product price).
There is also an important advantage for representatives of large- and small-scale business from CIS countries who have decided to set up their own business in Poland, which is lack of double taxation. That is, if you work abroad, in particular in Poland, and pay the income tax, as stipulated by the law, you are exempt from paying income taxes on the territory of your home country.
The main taxes in Poland: what is worth considering for foreigners
Taxation in Poland is subdivided into several varieties:
Corporate income tax in Poland (CIT)
• Corporate income tax in Poland (CIT) is 19% and applies to the entrepreneurs who have a legal address or the companies registered in the territory of the Republic. The reporting period shall be chosen at the discretion of a legal entity, whether it is a month or quarter; the fiscal year may coincide with the calendar year and last up to 18 months. The income tax in Poland can be significantly reduced if the company is engaged in charity or scientific and technical developments, or research activities for the benefit of the country. There are some agriculture and forestry industries which are exempt from paying taxes. Corporate taxes in Poland also extend to legal entities. These include the taxes applying to the revenues of foreign resident companies; or rather all of their earning sources, including foreign ones. Non-resident companies shall only pay the taxes applying to the earning sources that are directly located in Poland.
Withholding tax in Poland
• Withholding tax in Poland applies to the legal entities and natural persons who are founders of companies. The dividends obtained by foreign investors are 20% taxable at the source of payment, as well as author's right payments, but it is not uncommon that the convention of double taxation cancellation reduces the rate up to 5-15% . Since Poland is a party of a multilateral agreement on the abolition of the double tax system, the withholding tax amounts to the maximum of 15% for the majority of foreign companies.
Personal income tax in Poland (PIT)
• Personal income tax in Poland (PIT) applies to the persons who are engaged in labor activity and earn an income in the form of salary, or conduct business activity (private law, medical practice, etc.). This law applies to residents and non-residents of the country. Like in other countries, the income tax in Poland depends on the value of each taxpayer's income; the more the income is, the higher the tax percentage rate will be. If your annual income is less than 3091 PLN, in this case, you don't have to pay the tax. To simplify the calculation of income taxes, there is a double-stage system in Poland - if your annual income is not over 85,528 PLN, you shall pay 18% tax to the state budget; in case your annual income exceeds this figure, the whole excess amount shall be taxable with a rate of 32% (progressive tax).
Inheritance and gift tax in Poland
Inheritance and gift tax is provided for the cases related to the assumption of ownership of any property; it shall be paid in case of:
• inheritance, regular record, subsequent record, recovery record, intention of one's will
• a gift deed, donator's orders
• acquisitive prescription
• free cancellation of common property
• share in one's inheritance, if the heir has not received it from the testator in the form of a gift deed or by way of inheritance, or in the form of a record
• free: pension, use or servitude
The amount of tax depends both on the family relations and the value of acquired inherited objects.
Real estate tax in Poland
• Real estate tax in Poland applies to such types of formations as land plot, building / part of building and the constructions involved in the commercial activity. The amount of tax shall be set by local communities. The rates are assessed per square meter and cannot exceed the rates that have been approved by the Ministry of Finance for the current year.
Excise duty in Poland
• Excise duty in Poland is a kind of indirect tax. It is included in the price of goods and services paid by the consumer at the time of purchase. Excise taxes apply to: cars, tobacco products, alcohol, electric energy and energy / oil products.
VAT in Poland
• VAT in Poland (value added tax of goods and services), as mentioned above, this tax shall be paid by us automatically, when being served in various stores and supermarkets, different medical institutions, law firms, etc. In rare instances, commodity prices sometimes do not include VAT, and it should be considered when calculating the final cost of goods / services. The Polish VAT includes several rates, which range based on the type of goods or services:
- 0% - export products, socially important services (bank, medical, mail), etc.;
- 5% - certain food-stuff items, etc .;
- 8% - passenger transfer service, hotel service, medicines, etc.;
- 23% - basic tax rate.
If you are an entrepreneur, the VAT amount, which was included in the price of your products at the time of their disposal, shall be paid to the state tax authorities of Poland.
The applicable Polish law also provides for the cases when legal entities and natural persons are exempt from paying taxes, or granted tax benefits. Purchase of a land plot, housing, or construction thereof can significantly affect the reduction of the income tax, since you as a taxpayer shall bear significant financial costs.
For individual advice or consulting concerning special aspects of the taxation system in Poland, please contact our representatives by phone or online.