Last modified: 31/10/2024 09:44

Corporate taxation

* Companies whose turnover (including VAT) did not exceed the equivalent in PLN of EUR 2,000,000 in the previous tax year and for companies starting business activity – if the company isn’t a result of merger (conversion) and there are no other exclusions provided for in the CIT Act. Conversion of amounts expressed in euros is made at the average exchange rate of the euro announced by the National Bank of Poland for the first working day of October of the previous tax year, rounded up to PLN 1,000.

**a reduced tax rate applies to taxpayers who meet the legal conditions specified in the CIT Act.

Residence: A company is tax-resident in Poland if it has its registered office or management board within that territory.

Basis: A company which is a Polish tax resident is subject to taxation on its total income regardless of where it is earned. A company which is not a Polish tax resident is subject to taxation only on income earned in the territory of Poland, e.g. from business activities conducted there or from real estate situated there. A non-resident’s tax obligations may be limited if Poland has concluded a double taxation treaty with the country of his/her residence.

Taxable income: The taxable base is the income which is the excess of the sum of the revenues derived from the source of revenues over the costs of obtaining them in the tax year, after deducting any donations made. If the tax deductible costs exceed the total revenue, the difference is a loss from the source of revenue.

Significant local taxes on income: None

Alternative minimum tax: Minimum income tax was introduced into the Polish tax system on 1st January 2024. It is paid by taxpayers who suffered a tax loss or the proportion of their revenue to income is no more than 2%. Minimum income tax doesn’t apply for example to financial companies and taxpayers starting a business in given tax year. The rate of this tax is 10% of the tax base which depends on the sum of the amount of specific revenues, debt financing costs, deferred income tax and other costs provided in the CIT Act. The amount of the minimum tax paid for given year may be deductible for consecutive three tax years immediately following the year for which the taxpayer paid the minimum income tax.

Taxation of dividends: Dividends are income from capital gains. Income tax on dividends and other revenue (income) from a share in the profits of legal persons with their registered office or place of management in Poland is 19% of the income earned. The payers of this tax are entities that make dividend payments. In certain cases, if legal conditions are met, it is possible to exempt dividends from tax. Dividend payments made by Polish entities to non-residents of countries with which Poland has concluded agreements for the avoidance of double taxation are taxed at the rate provided for in the agreements. Under certain conditions, individuals may pay tax on dividends at a 15% or 5% rate.

Capital gains: In Poland, income from the sale of shares and other securities is subject to 19% CIT. It is worth noting, however, that with respect to double tax treaties concluded by Poland, if the sale of shares or securities takes place during a transaction with a country with which Poland has signed such a convention, such sale is subject to taxation in the country of the seller’s registered office. An exception is a situation where the assets being sold consist mainly of real estate located in Poland, in which case the gains may also be taxed in Poland.

Losses: A tax loss is a loss from a given source of income. A taxpayer may: • reduce income from that source by the amount of the loss in the next consecutive five tax years (but the amount of the reduction in any one of those years may not exceed 50% of the loss) or • reduce income from that source once by the amount of the loss in one of the next consecutive five tax years by an amount not exceeding PLN 5,000,000 (the amount not deducted is subject to settlement in the remaining years of the five-year period, but the amount of the reduction in any one of those years cannot exceed 50% of the amount of the loss).

Foreign tax relief: As a rule, a taxpayer is entitled to deduct the tax paid abroad from the value of calculated Polish CIT, but the amount of the deduction cannot exceed the amount of CIT corresponding to the part relating to that foreign income (credit method). It also happens that a taxpayer may use the exemption method. However, it is always necessary to check the clauses of double taxation conventions concluded by Poland with certain countries in order to verify which method of avoiding double taxation is applicable in a given situation.

Participation exemption: Income (revenue) earned by taxpayers from dividends and other revenue from participation in profits of legal persons with their registered office or management board outside the territory of Poland is exempt from income tax if all of the following conditions are met: 1) the entity paying out dividends and other revenue from a share in the profits of legal persons is a company which in a European Union member state other than Poland, or in another state of the European Economic Area, is subject to income tax on its total income, regardless of where it is earned; 2) a company which receives income (revenues) from dividends and other revenues from participation in profits of legal persons is a company which is a taxpayer of income tax and has its registered office or management board within the territory of Poland; 3) the company referred to in point 2 holds directly not less than 10% of shares in the capital of the company referred to in point 1; 4) the company referred to in point 2 does not enjoy exemption from income tax on its total income, irrespective of the source from which it is derived.

Holding-company regime: Tax regime introduced from 1st January 2022. A holding company within the meaning of the CIT Act is a limited liability company or a joint stock company subject to unlimited tax liability, which meet the following conditions:

• it owns, continuously for a period of at least 2 years directly on the basis of ownership of at least 10 shares (in the capital of the subsidiary),

• it is not a company constituting a tax capital group

• a company does not use tax exemptions, indicated in detail in the CIT Act,

• a company conducts actual business activity

• shares in this company does not have, directly or indirectly, a shareholder having its registered office or management board or registered or located in a territory or countries which are specifically indicated in the CIT Act, in particular countries applying harmful tax competition. Income from dividends obtained by the holding company from a domestic or foreign subsidiary in a part corresponding to 95% of the amount of such dividends is exempt from income tax. It is worth noting, however, that this exemption cannot be applied in certain situations.

The income earned by a holding company from the paid disposal of shares (of a domestic subsidiary or a foreign subsidiary) to an unrelated entity is exempt from income tax on condition that the holding company submits to the appropriate head of the tax office, at least 5 days before the day of the disposal, a statement on the intention to use the exemption.

Tax-based incentives:

1. Tax relief for R&D – a taxpayer who takes up a relief for R&D may deduct from the tax base up to 200% of expenses related to conducting the R&D works,

2. IP BOX – IP BOX consists of preferential taxation of income from intellectual property rights subject to legal protection, e.g. patent, copyright to a computer programme, which were created, developed or improved as part of R&D activity of such a taxpayer. The tax rate amounts to 5% of the tax base.

3. Innovative employees tax relief – a taxpayer who is a payer of personal income tax and incurred a loss or income for the tax year lower than the amount of the R&D relief deduction due to him in the tax year, may reduce the amount of tax by the multiple of the non-deductible amount and the tax rate applicable to the taxpayer in a given tax year – upon meeting statutory conditions.

4. Relief for Robotization – is available to taxpayers who will incur costs associated with the purchase of robots and peripheral equipment between 2022 and 2026. The definition of an industrial robot, which is included in the CIT Act, indicates that it is an automatically controlled, programmable, multi-tasking machine with at least 3 degrees of freedom, having manipulative or locomotory characteristics for industrial applications. The robotization relief allows a deduction from the tax base of 50% of the deductible costs incurred by the taxpayer for robotization in a given year.

5. Relief for Prototypes – a taxpayer is entitled to deduct from his tax base an amount constituting 30% of the sum of the costs of test production of a new product and introduction of a new product on the market (but the amount of the deduction cannot in a given year exceed 10% of the income earned from sources other than capital gains).

6. Relief for Expansion – a taxpayer may deduct from the tax base tax deductible costs incurred in order to increase revenue from the sale of products up to the amount of income earned by the taxpayer in the tax year, but not more than PLN 1,000,000 in a tax year.

7. Relief for CSR – a taxpayer may deduct from the tax base an amount equal to 50% of tax-deductible expenses incurred for sports, culture, supporting education and science, however, the amount of the deduction cannot exceed the amount of the income obtained by the taxpayer from income other than capital gains in the tax year.

8. Relief for IPO – a taxpayer may reduce the tax base by amounts representing • 150% of expenses on preparation of a prospectus, notary fees, court fees, stamp duty, stock exchange fees, preparation and publication of announcements required by law, • 50% of expenditure on legal, tax and financial advisory services (VAT excluded, but not exceeding PLN 50,000).

9. Relief for Consolidation- a taxpayer may deduct expenses on purchase of shares (stocks) in a company having legal personality from the tax base up to the amount of income earned by the taxpayer in the tax year from revenues other than capital gains, but not more than PLN 250,000 in the tax year after meeting legal conditions.

10. Polish Investment Zone – is a tool thanks to which it is possible to be exempt from income tax in connection with the realization of a new investment. The exemption limit is calculated as a percentage of the cost of the new investment or the 2-year cost of employing new staff. The percentage of public support received also depends on the size of the company (micro, small, medium, large) and the chosen location in Poland.

Group relief/fiscal unity: Capital companies may form a tax capital group if the average capital of each company is at least PLN 250,000, the parent company holds a direct 75% share in the capital of the other companies, there are no tax debts in the companies and the companies do not use CIT tax exemptions. A tax capital group is an individual entity subject to income tax.

Small company/alternative tax regimes: See above: “Tax Table”.

Corporate taxation: compliance

Tax year: The tax year is the calendar year, unless the taxpayer decides otherwise in the statutes or in the articles of association, or in any other document properly regulating the rules of organisation of other taxpayers. In that case, the tax year shall be the period of twelve calendar months.

Consolidated returns: A consolidated return is possible, inter alia, in the case of a tax capital group which, once established, is treated as a single CIT taxpayer.

Filing and payment: Taxpayers are required to submit CIT-8 declaration electronically within 3 months of the end of the tax year. CIT is payable by the 20th of each month. Small companies pay CIT quarterly. It is also possible to choose to pay simplified month taxes, i.e. to pay the tax in fixed amount every month. The tax amount is then determined based on the income earned in thevprevious year.

Penalties: In the case of late payment of tax, a taxpayer is obliged to pay the amount of tax plus interest. Interest on late payment of taxes is not tax-deductible. A taxpayer is also subject to a penalty for e.g. not submitting the tax declaration or other obligatory documents on time.

Rulings: A tax interpretation is an official interpretation of a specific problem in the context of tax law. The interpretation is intended to help taxpayers correctly read and apply regulations. In Polish tax law there are individual and general tax interpretations. General interpretations are issued by the Minister of Finance to standardize application of legal regulations. In particular, it is issued in situations where e.g. taxpayers receive conflicting decisions or individual interpretations. Individual tax ruling is issued by the Director of National Fiscal Information at the request of an interested party, and refers to the answer to the question whether the factual and legal situation presented by taxpayers is correct.

Taxation of individuals

In certain cases, individuals are obliged to pay a solidarity tax of 4% of the basis for calculating this tax. The basis for calculating the solidarity tax is the excess over PLN 1,000,000 of the sum of income.

Residence: Natural persons who are domiciled in Poland. A person with domicile in Poland is a natural person who: • has the centre of his/her life interests on the territory of Poland or • resides in Poland for more than 183 days in a tax year.

Basis: Residents are taxed in Poland on all their income, regardless of where it is earned. Non-residents are subject to taxation on income earned in the territory of Poland, e.g. from work performed in the territory of Poland, activity performed personally, business activity, from real estate situated in the territory of Poland.

Taxable income: The taxable base is income (which is the difference between revenues, e.g. from work, and the costs of obtaining them), which is reduced by, inter alia, the amount of social security contributions paid, employee relief, contributions to an individual retirement security account, membership fees to trade associations, expenses for rehabilitation purposes, donations made.

Capital gains: They are a separate source of revenue under the PIT Act. The scope of this category includes, inter alia, interest on loans, interest on savings deposits, interest on securities, dividends and other revenue from participation in the profits of legal persons, revenue from the disposal of shares and derivative financial instruments against payment. The tax rate is 19%.

Deductions and allowances: In addition to the deductions listed under “Taxable income”, it is also worth pointing out the possibility of making a joint return with a spouse, taking the child tax relief and the R&D tax relief.

Foreign tax relief: If Poland has concluded a double tax treaty with a given country, it should be considered which method is indicated therein – the credit method or the exclusion method. In case there is no double tax treaty with a given country, the credit method is applied.

Taxation of individuals: compliance

Tax year: The tax year is the calendar year.

Filing and payment: Employers are obliged as payers to calculate and collect during the year advance payments of income tax from persons who receive income from the employment relationship, contract work, cooperative employment relationship or cash benefits from social insurance paid by these employers. Other types of income are self-assessed. Individuals are required to submit an annual tax declaration by 30 April of the following tax year.

Penalties: Polish law provides for penalties, inter alia, for not submitting a tax declaration, for not disclosing or incorrectly indicating the amount of the tax base or the subject of taxation.

Rulings: See above under ‘Corporate Taxation’.

Withholding taxes

This is a form of lump-sum tax imposed on payments made abroad, e.g. on dividends, interest, licence fees or certain intangible services. Under the CIT Act, the basic tax rate is 19% for dividends and 20% for e.g. interest, legal or advisory services. In certain cases, tax may be charged at a lower rate, in particular when a double tax treaty concluded with a non-resident state provides for the possibility of charging a lower tax rate on the given revenue.

Branch remittance tax: No

Anti-avoidance legislation

Transfer pricing: The taxpayer should have documentation showing that the transfer pricing has been determined in accordance with the arm’s length principle. A taxpayer should have appropriate documentation for a controlled transaction of a homogeneous nature, the value of which exceeds in a tax year the following documentation thresholds: 1) PLN 10,000,000 – in the case of a commodity transaction; 2) PLN 10,000,000 – in the case of a financial transaction 3) PLN 2 000 000 – in the case of a service transaction 4) PLN 2 000 000 – in the case of another transaction.

Interest restriction: CIT taxpayers exclude from expenses those costs of debt financing in the part in which the surplus of debt financing costs exceeds the amount of PLN 3,000,000 or the amount of 30% of tax EBITDA*. It is unacceptable combining these limits is not allowed. * the surplus of the sum of revenues from all sources subject to income tax less interest income over the sum of deductible expenses minus depreciation and amortisation charges and debt financing costs not included in the initial value of tangible and intangible assets.

Controlled foreign companies: CFC legislation in force since 1st January 2015. PIT/CIT payers on profits earned by foreign controlled companies are Polish natural and legal persons. Tax laws define a CFC as: • a foreign entity having its registered office or management or being registered or located on the territory/ in a country that is a tax haven or a place of non-cooperative taxation or with which Poland or the EU have not ratified international agreements, in particular double taxation conventions, providing the basis for obtaining tax information from the authorities of these countries, • another foreign entity, on its own or jointly with related entities or other taxpayers which have their place of residence or seat or management board within the territory of Poland, holds, directly or indirectly, over 50% of shares in the capital or over 50% of voting rights in the controlling, constituting or managing bodies, or over 50% of the right to participate in profit or exercises actual control over the foreign entity, • at least 33% of the entity’s revenue is derived from passive sources, • the tax actually paid by the entity is at least 25% lower than the corporate income tax that would be payable by the entity if it were a Polish resident. The tax rate on income of a foreign controlled entity earned by a Polish tax resident is 19%. The above does not apply if the foreign controlled entity is subject to taxation on its entire income in an EU or EEA member state, if it conducts substantial and actual business activity in that state.

Hybrid mismatches: The regulations introduced in Poland follow the implementation of Council Directive (EU) 2017/952 (the so-called ATAD II Directive) into the Polish legal order. The primary objective of these regulations is to counter situations that take advantage of the different tax treatment of given entities or payments in different tax jurisdictions.

Disclosure requirements: MDR – Mandatory Disclosure Rules. They follow the introduction of EU Directive 2018/822 of 25 May 2018. However, it is worth pointing out that the Polish regulations are much broader than the Directive indicated. The regulations apply to both cross-border and domestic contracts. There are significant penalties for non-reporting or other non-compliance with the MDR, so companies should comply with their tax obligations.

Exit taxes: Exit tax has been in force in the Polish legal system since 2019. According to the regulations that result from it, in the event that a taxpayer transfers assets from Poland to another country, there is taxation of unrealized capital gains arising in the period when these assets were in the territory of Poland. As a rule, the tax rate is 19%. In the case of income of natural persons who change their place of residence, a 3% tax rate may be applied.

General anti-avoidance rule: The general anti-avoidance rule – GAAR, applies to those legal structures whose purpose is to obtain a tax advantage that is contrary to the object/purpose of a provision of the Tax Act. This is the case, in particular, when the structure created is artificial. A course of action is not artificial if, on the basis of the existing circumstances, it must be assumed that an entity acting rationally and with legitimate aims would apply this course of action for predominantly legitimate economic reasons. The reasons referred to in the first sentence do not include the objective of obtaining a tax advantage contrary to the object or purpose of the tax law or a provision thereof. In assessing whether the attainment of a tax advantage was the main or one of the main purposes for carrying out the act, the economic purposes of the act indicated by the party shall be taken into account.

Digital services tax and Other significant anti-avoidance legislation: See above: “General anti-avoidance principle” and “Disclosure requirements”.

Value-added tax/Goods and services tax

Type of tax: The tax on goods and services is subject to: 1) supply of goods and services for consideration within the territory of the country; 2) export of goods; 3) importation of goods on the territory of the country; 4) intra-Community acquisition of goods against payment within the territory of the country; 5) intra-Community supply of goods.

Standard rate: 23%

Reduced rates: 8% (e.g. construction works, renovation, maintenance works, residential buildings), 5% (e.g. agricultural products, books), 0% (for intra-community supply of goods and export of goods)

Registration: The VAT Act specifies which companies are obliged to register for VAT, as well as which companies may use a tax exemption. Mandatory registration concerns, inter alia • entities that in the previous tax year exceeded the amount of PLN 200,000 on account of sales, • provide services of lawyers, consultants, jewelers, debt collectors, • sell cosmetics, hygienic articles, electronic devices, machines, land intended for construction, parts for passenger cars and motorbikes.

Filing and payment: Companies are required to electronically submit a JPK file and pay VAT by the 25th of each month for the previous month. In some cases, it is possible to meet these obligations quarterly.

Social security contributions

Self-employed

Contribution values depend on a number of factors. Below are the basic rules: A. Basic amounts in 2024 (so-called in Poland “duży ZUS”) , where the amount of contributions to be paid is on average 1600,32 PLN. B. Preferential contributions in 2024 (so-called in Poland “preferencyjny ZUS”), where the amount to be paid is on average PLN 402,65. Preferential contributions may be paid by persons starting a sole trader’s business for the first 24 months, counting from the month in which the business was started or the “relief for start-up” provided for under C. C. „Relief for start-up” (so-called in Poland “ulga na start”). The relief exempts you from paying social security contributions for the first six full months after you start your business. It does not exempt you from paying health insurance contributions. D. „Small social security plus” (so-called in Poland „Mały ZUS plus”) The tool makes it possible to determine the amount of contributions in relation to the income received. As a result, the entity can pay low contributions, which depend on its financial capacity. However, the reduction does not cover the amount of health insurance contributions. Lower social insurance contributions may be paid for a maximum period of 36 months during the last 60 calendar months of business activity. E. Health insurance – is dependent on the form of taxation chosen: – tax scale – 9% of income, but not less than PLN 381,78 – flat tax – 4,9% of income, but not less than PLN 381,78 – tax card – 9% of minimum salary, – there are 3 thresholds for lumpsum: – for an annual income of up to PLN 60,000 the contribution is PLN 419.46 per month, – for an annual income of more than PLN 60,000 up to PLN 300,000 the contribution is PLN 699.11 per month, – for an annual income of more than PLN 300,000, the contribution is PLN 1,258.39. – 50% of the health insurance premiums paid can be deducted from the income.

Other taxes

Capital duty: In Poland, certain transactions are subject to the tax on civil law transactions: – agreements for the sale and exchange of goods and property rights, – a loan agreement – of money or items specified only according to their type, – a gift agreement – in the part concerning the assumption by the recipient of debts and burdens or obligations of the giver, – life-tenancy contracts, – agreements on division of inheritance and agreements on dissolution of co-ownership – in the part concerning repayments or additional payments, – establishment of a mortgage, – establishing usufruct for a consideration, including irregular use, and easement for a consideration, – irregular deposit agreements, – partnership agreement. The amendments to these contracts shall also be taxable. Taxation shall occur provided that their subject matter is: • items located in the territory of Poland or property rights exercised in the territory of Poland, or • property situated abroad or property rights exercised abroad, in the event that the purchaser has his place of residence or registered office in the territory of Poland and the civil law transaction was performed in the territory of Poland. Activities are not subject to this tax to the extent that they are subject to value added tax.

Immovable property taxes: The subject of real estate tax is • land, • buildings or parts thereof and • structures or parts thereof intended for carrying out an economic activity. Agricultural land and forests are not subject to real estate tax unless they are intended to be used for business activities. Real estate tax payers are natural persons, legal persons and organisational units without legal personality, which are: • owner, • perpetual usufructuary, • individual holder, • in some cases – beneficial owner of real estate or their parts owned by the State Treasury or local government bodies. The Act on Local Taxes and Fees indicates the tax rates applicable to particular taxable objects. However, they may be varied by local authorities up to the maximum amount specified in the Act. This Act also contains many exemptions from this tax.

Transfer tax: See above under ‘Capital duty.

Stamp duty: In certain individual matters of an official character, e.g. the issuance of a certificate, a permit, a concession, the granting of a power of attorney, it is necessary to pay stamp duty.

Net wealth/worth tax: No

Inheritance/gift taxes: An entity that has received an inheritance/gift whose value exceeds the tax-free amount is subject to inheritance and gift tax. The following acquisitions are subject to taxation in Poland: • acquisition of real estate located in Poland, • acquisition of property rights exercised in Poland. The free amount and tax rates depends on which tax bracket you can assign the testator/giftee to. These result from the Inheritance and Gift Tax Act.

Other: excise duties, customs duties, local fees (local fee, spa tax, market fee), vehicle tax, agricultural tax, forestry tax

Tax treaties

Poland has concluded 91 double taxation treaties.