Polish Taxes Types

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Polish Taxes Types

The Polish tax system distinguishes 12 types of taxes, including:

  • Nine direct taxes:
    • corporate income tax (CIT),
    • personal income tax (PIT),
    • tax on civil law transactions,
    • real estate tax,
    • tax on means of transport,
    • inheritance and donations tax,
    • agricultural tax,
    • forestry tax,
    • tax on dogs
  • Three indirect taxes:
    • tax on goods and services (VAT),
    • excise duty,
    • Game tax.

Set out below are the key features of the main taxes in Poland:

Corporate income tax (CIT)

 

Overview

The 19-per cent corporate income tax is the only corporate income tax. As a rule, the provisions of EU directives have been implemented into the Polish taxation system.

CIT rate 19 %
Withholding tax:
dividends 19 %
interest 20 %
licence fees 20 %
intangible services 20 %
Branch profit tax N/A

Corporate income tax payers include:

  • limited liability companies, joint-stock companies and other legal entities;
  • corporations in formation;
  • limited joint-stock partnerships having its registered office or management board in territory of the Republic of Poland;
  • companies without legal personality having its registered office or management board in another state, if pursuant to the tax laws of another country are treated as legal entities and are subject to taxation in that state on their total income regardless of where it is earned;
  • Organizational units without legal personality except for civil partnerships, general partnerships, professional partnerships and limited partnerships.
  • Tax capital groups.

Partnerships (excluding limited join-stock partnerships) are not subject to CIT. Income earned by partnerships is allocated to the partners and subject to CIT at their level, together with other earnings.

Taxpayers with offices or management boards in Poland are subject to CIT in Poland on their total income. Taxpayers who do not have offices or management boards in Poland are subject to CIT only on income earned in Poland.

Comparison of taxation on different types of activity (branch/company):

Branch Company
Tax 19 % 19 %
Profit distribution No tax on branch profit distribution. 19% WHT, with the option of an exemption or lower rate.
Rules of taxation It is important to accurately allocate revenues and costs to the branch’s activity, which in practice may cause problems due to the absence of detailed provisions. The company is a separate taxpayer subject to CIT in accordance with general principles.
Introducing separate accounting Yes Yes
Other comments Possibility of deducting the CIT paid in Poland in the home country of the holding company. Some treaties provide for an exemption on income taxed in Poland. Possibility of deducting WHT paid in Poland. In the case of a parent company with its registered office in the European Union, it is typically possible for dividends to be exempt.

The Taxable base is the difference between revenue and the costs incurred in earning it; if the difference is negative, the taxpayer declares a tax loss. In certain cases, revenue may be the taxable base.

Tax Loss

  • may be deducted from income during five subsequent tax years (“loss carry-forward system”); the deduction in a single year cannot exceed 50 per cent of the value of the loss;
  • The following losses are not taken into account: losses of business subject to transformation, merger, acquisition or division – in the event of a transformation of the legal form, a business merger or a division, with the exception of a transformation of a company which is a taxpayer of CIT into another company which will be a taxpayer of CIT.

Profit distribution

Dividends disbursed by corporations with offices in Poland are subject to withholding tax at the 19-per cent rate, (the tax is collected by the company making the disbursement). Dividends disbursed between Polish companies, are not further subject to CIT at the shareholder level.

Tax treaties stipulate a lower withholding rate for dividends (5%, 10% and 15%) if certain conditions are met (inter alia, the company disbursing the dividend should hold the shareholder’s tax residency certificate).

There is possibility of exempting dividends from tax, when entity receiving income (revenue) from dividends, as well as other revenues qualified as dividends, is a company which is subject to taxation on the entire of its income in the Republic of Poland or in a European Union member state other than the Republic of Poland, or the Swiss Confederation or in another state of the European Economic Area, regardless of where it is earned.

The condition of the exemption is continuous, two-year holding period by the company receiving the dividends required 10% (in the case of Swiss – 25%) of shares in the capital of the company paying the charge. The prerequisite is also met, if this period has elapsed after the date of receiving the dividend.

Exemptions and deductions shall apply on condition that legal grounds exist, whether resulting from an agreement for the avoidance of double taxation or a different ratified international treaty to which the Republic of Poland is party, for the tax authority to receive tax information from a tax authority in the state where the registered office of the taxpayer is located or where the income was earned.

An entity interested to make use of this exemption should submit:

  • a current certificate of tax residence or a document of the existence of a foreign permanent establishment, the obligation to submit a current certificate of residence does not apply to companies resident in Polish territory;
  • Written statement of not being benefit from exemption from income tax on the entire income, regardless of where it is earned.

The definition of dividend also applies to income earned, among other cases, on a mandatory or automatic redemption of shares or a company liquidation.

Tax on foreign earnings

Income earned by a Polish taxpayer from sources located abroad is subject to 19-per cent CIT and should be cumulated with income earned in Poland, unless the tax treaty states otherwise. The tax paid abroad may be deducted from Polish CIT, but the deduction cannot exceed the amount of CIT due under Polish legislation (for the part classified as foreign income).

Dividends obtained from foreign sources may be exempt from CIT in Poland:

  • if they are disbursed by companies with offices in an EU or EEA state or in Switzerland
  •  The Polish company has held at least 10 per cent (or 25 per cent for companies with their registered office in Switzerland) of the shares in the company disbursing the dividends for at least two years.

The 2 year period may also elapse after the dividend disbursement date.

The company disbursing and the company collecting the dividend must be subject to CIT on their total income in Poland and in the EU/EEA state or in Switzerland. Income on the liquidation of foreign legal entities is not eligible for exemption.

Dividends obtained from companies with offices in a state with which Poland has concluded a tax treaty (other than EU/EEA states or Switzerland) are subject to 19-per cent CIT. However, withholding tax paid abroad and, if other specific conditions are met, foreign CIT paid by a foreign subsidiary, can be deducted from Polish CIT (underlying tax credit). The deduction cannot exceed the CIT amount due under Polish law.

CFC (Controlled Foreign Corporation)

Polish entities are liable to 19% income tax on the profits earned by their controlled foreign companies (CFC).

A CFC is defined as:

  • a foreign company having residence in a tax heaven or
  • a foreign company having residence in a state, with whom the Republic of Poland or European Union has not concluded the international treaty on the exchange of tax information or
  • a foreign company:
    • in which the Polish resident has at least 25% of the shares or 25% of the voting rights or 25% of the shares related to the right to participation in profits;
    • in which at least 50% of income is of the passive nature (financial), ie. dividends, capital gains, interest, royalties;
    • in which at least one type of passive income is subject to tax at a rate lower by 25% than the Polish CIT (which gives a rate of 14.25% limit) or tax exempt (with the exception of exemptions under EU parent-subsidiary directive).

Polish resident is obligated to:

  • maintain a register of controlled foreign corporations;
  • keep records of economic events in CFC;
  • Submit CFC tax return and pay a tax on CFC income.

The CFC taxation regime does not apply to entities if they carry out actual economic activity (mainly relates to UE entities) or their annual revenues do not exceed EUR 250 000.

Capital gains

Earnings from the sale of shares and other securities are subject to 19-per cent CIT in accordance with general principles. A tax loss in this respect is accounted for in accordance with general principles and may be used to reduce other earnings subject to CIT).

As a rule (in accordance with tax treaties) – sales of shares/securities by foreign entities are subject to taxation in the country where the seller has its registered office. Exceptions may apply if the sale concerns shares in a company whose assets comprise primarily properties located in Poland- in such a case, the profits may also be subject to taxation in Poland. The so-called “property clause” is found in agreements concluded by Poland with Austria, Belgium, Denmark, Germany and Sweden, Luxembourg among others.

Poland is bound by agreements without a property clause (e.g. agreement with Cyprus, the Netherlands).

As a rule, a sale of shares/securities is subject to a 1-per cent tax on civil law transactions on the market value of the instruments sold, unless it is conducted through a brokerage house. The acquiring party is the taxpayer with respect to the tax on civil law transactions.

Real estate

Earnings from the sale of real estate are subject to 19-per cent CIT in accordance with general principles.

Restructuring efforts

Poland has implemented the directive on a common system of taxation applicable to mergers, divisions, and transfers of assets and exchanges of shares concerning companies of different Member States. Mergers, divisions and exchanges of shares concerning companies with seats in the EU may be CIT-neutral, provided that certain requirements are met (a specific degree of capital ties).

Restructuring is often conducted using partnerships or closed-end investment funds, because of its effect of consolidating performance and reducing or eliminating CIT.

Withholding tax

Withholding tax applies to income disbursed in Poland resulting from share in the profits of legal entities, interest, license fees and remuneration for some intangible services.

As a rule, the rate of withholding tax on dividends is 19 per cent, but tax treaties may stipulate a lower rate (5, 10 or 15 per cent).

CIT exemption in Poland are possible: see “Distribution of profits” and “Tax on foreign earnings”: (above).

Interest and license fees are subject to 20-per cent withholding tax in Poland, but tax treaties may stipulate a lower rate (5, 10 or 15 per cent). Some tax treaties also stipulate a 0-per cent rate on interest (e.g. those with Sweden, the United States or France).

Interest and license fees are exempt from withholding tax in Poland if they are disbursed by a corporation with its registered office in Poland to a company with its registered office in an EU/EEA state other than Poland or in Switzerland, and if:

  1. the company disbursing the interest/license fees holds a minimum of 25 per cent of the shares in the capital of the company collecting the interest/license fees, or
  2. the company collecting the interest/license fees holds a minimum of 25 per cent of the shares in the capital of the company disbursing the interest/license fees, or
  3. the company subject to taxation on its total income in an EU/EEA state holds at least 25 per cent of the shares in the capital of the disbursing company and in the capital of the company collecting the interest/license fees; and
  4. A minimum 25 per cent share has been held directly and continuously for at least two years – this requirement does not need to be met at the time of the disbursement of the above fees/interest.

The application of exemption is depends on whether the Polish company has the recipient’s tax residency certificate and a statement that the recipient or the company referred to in c) is subject to CIT on its total income in its country of residence, regardless of where the income is earned, and is not taking advantage of an exemption from CIT on its total income regardless of source.

Payments for intangible services, such as advisory services, advertising, data processing, etc. are subject to 20-per cent withholding tax unless otherwise stated by tax treaties (treaties concluded between Poland as a rule do not provide for withholding tax on payments for intangible services).

The 20 per cent withholding tax exemption in Poland is conditional upon the disbursing entity holding the recipient’s tax residency certificate.

Anti-abuse clause

An implementation of the change of EU Directive regarding exemption from taxation of dividends between related companies, i.e. so called anti-abuse clause, is expected to be introduced to the Polish law by the end of 2015. Draft amendments are at the government consultations stage (as of July 2015).

The purpose of directive is to eliminate non-genuine arrangements, usually involving foreign jurisdictions and typically applied by multinationals to avoid paying taxes.

The anti-abuse clause will not exempt dividends and other profit distributions from tax, if:

  • receipt of dividends occurs in connection with the transactions or activities, which are not genuine, meaning that arrangements have been introduced to obtain a tax advantage only;
  • and these transactions have been put into place without reflecting economic reality.

Tax-deductible costs and depreciation

Tax-deductible costs are costs incurred to earn or maintain or secure a source of revenue that are not excluded by statute from the tax-deductible cost category. Taxpayers must document the costs incurred. Tax costs also include expenditures for discontinued investments. The legislation contains a list of more than 60 items that are not regarded as costs for tax purposes. These include, inter alia, accrued but unpaid interest, business entertainment costs (i.e. essentially costs of meeting contractors), administrative penalties and interest on overdue statutory payments, as a rule provisions established in accordance with accounting principles, car wear and tear allowances or car insurance premiums in the portion of the car value that exceeds the equivalent of EUR 20,000. Expenditures for the purchase of fixed assets and intangible assets do not constitute costs either, but depreciation write-downs made in accordance with applicable laws.

As of 2012, an expenditure may not be considered to be a tax cost (including depreciation write-down) if the cost invoice was not settled within deadlines as prescribed by the tax legislation (60 and 90 days), regardless of the payment due date stemming from the contractor agreement. The foregoing limitations are expected to be abolished as of 2016.

Interest

As a rule, the tax cost related to interest can be deductible at the time of its payment (cash method) – other than for accounting purposes where the rule is to allocate interest to costs at the time of accrual (accrual method). Exceptions include interest accrued until the date of handover of an asset for use.

Exchange rate differences

May be accounted for at the time they are incurred (tax method) or at the time of their accrual (accounting method). If the accounting method is selected, it applies for at least three tax years. Exceptions include exchange rate differences accrued until the date of handover of an asset for use.

Depreciation

As a rule, depreciation write-downs are based on the cost of acquisition or manufacturing of the depreciated asset. The legislation stipulates the following depreciation methods:

  • linear method (as a rule);
  • Reducing balance depreciation method – means higher costs in the initial depreciation period (applicable to some components: boilers and power generation machinery, basic and specialized machinery, devices and equipment, technical devices, movables and equipment and vehicles other than cars);
  • one-off depreciation (for assets under PLN 3,500);
  • custom rates (applicable to used or improved fixed assets, for example a non-residential building in use for more than five years may be depreciated over forty years minus the full number of years elapsed from the date of its initial handover for use until the date of entering it in the fixed asset and intangible asset register kept by the taxpayer, but the depreciation period cannot be shorter than ten years).

Entrepreneurs who in a given tax year launched economic activity and small taxpayers, can make use of the privilege, which is a one-time depreciation. As part of the relief entrepreneurs can make write-offs up to EUR 50 000 in a given tax year.

For assets depreciated using the linear method, the rate may be decreased in a given tax year by no more than the rate prescribed by tax legislation.

In the case of a transformation, division, merger, in-kind contribution including a business or its organized part, buyers of fixed assets and intangible assets must carry on using the depreciation methods applied by the seller.

Depreciation does not apply to:

  • the land and right of perpetual usufruct of land;
  • Expenditure incurred on their acquisition constitute tax deductible cost at the time of non-free of charge disposal (sale).

Depreciation rates and periods for tax purposes may differ from depreciation for accounting purposes.

Examples of depreciation rates and methods for selected assets

Linear method Reducing balance method
Type of fixed asset Depreciation period Annual depreciation rate (%) Depreciation period Annual depreciation rate (%)
Car – PLN 50,000 60 months 20% (PLN 10,000) n/a
Truck – PLN 100,000 60 months 20% (PLN 20,000) 30 months 40% (PLN 40,000 in the first year)
Computer – PLN 5,000 3 years 30% (PLN 1,500) 18 months 60% (PLN 3,000 in the first year)
Construction equipment – PLN 1,000,000 60 months 20% (PLN 200,000) 30 months 40% (PLN 400,000 in the first year)
Office building – PLN 10,000,000 40 years 2.5% (PLN 250,000) n/a

 

Leases

Income from leases is subject to 19-per cent CIT in accordance with general principles. Tax laws set out in detail two types of leases: operating leases and financial leases. Leased objects may include fixed assets, intangible assets and land (or the right of perpetual usufruct of land). Lease settlement for tax purposes may be different than for accounting purposes.

For both types of leases, upon contract termination, ownership may be transferred to the beneficiary. Since it is possible to enter the entire lease payment under tax costs, operating leases may be more favorable in terms of tax.

Major differences between operating leases and financial leases:

Operating leases Financial leases
Lease payments Lease payments, in their entirety, are a cost for the beneficiary and revenue for the financing party. Lease payments are a cost for the beneficiary and revenue for the financing party only in the interest portion.
Depreciation The financing party effects depreciation. The beneficiary effects depreciation.
Term At least 40 per cent of the statutory depreciation period (or at least 5 years for real properties). Fixed term – no minimum or maximum.

 

Thin capitalization

As a rule, interest on loans constitutes a tax deductible cost at the time of payment. However, interest on loans extended to the company by certain related parties is not a tax cost if the following requirements are met (thin capitalization rules):

  • a loan is granted by: entity holding directly or indirectly at least 25 per cent of the shares in the company receiving the loans or
  • a loan is granted jointly by entities holding directly or indirectly at least 25 per cent of the shares in the company or
  • a loan is granted by another company, and in both companies the same entity directly or indirectly holds not less than 25% of the shares and
  • The amount of the company’s total debt (loan and other liabilities) toward related parties exceeds equity of the company, in proportion in which debt exceeding equity remains to the total amount of debt.The value of non-deductible interest is determined by the proportion of:

Company’s debt – equity

_______________________

Company’s debt

 

Share in the capital is determined on the basis of votes held.

The value of debt and equity is calculated on the last day of the month preceding the payment of interest.

Polish law provides for a broad definition of loan for the purpose of thin capitalization, a loan is also understood as, among others, bonds and deposits.

As a rule, loan agreements are subject to 2-per cent tax on civil law transactions.

Examples of civil law transaction tax exemptions for loans

  • loans extended to a corporation by its (shareholders);
  • loans extended by foreign companies conducting lending activity;
  • Loans that are eligible for VAT exemptions (as financial intermediation services).

Tax capital groups (PGK)

It is possible to consolidate results for tax purposes within a PGK. However, due to the stringent requirements of the applicable laws, capital groups are not a popular means of consolidation for tax purposes in Poland.

Some of the requirements for establishing a capital group are as follows:

  • having a registered office (for companies that belong to a group in Poland);
  • average capital of each group company of PLN 1,000,000 (approximately EUR 250,000; assuming that 1 EUR = 4 PLN);
  • minimum share in subsidiaries by the parent company – 95 per cent;
  • group companies do not take advantage of income tax exemptions under other acts (the use of an exemption due to activity conducted within a SEZ – does not preclude from establishing a PGK);
  • minimum share of income in the revenue of the tax group – 3 per cent;
  • specific requirements regarding the form and wording of the agreement;
  • minimum term of the agreement – 3 years;
  • no option to expand the agreement to include other companies (and other restrictions).

Partnerships

Conducting business via partnerships (excluding joint stock limited partnership) may be an alternative to tax capital groups. Income earned by partnerships is allocated to the partners and subject to CIT at the partner level, together with their other earnings. There are no additional administrative requirements such as those applicable to tax capital groups.

Tax exemptions and credits

Legislation provides for a number of CIT exemptions, both subjective and objective. For instance, investment funds, pension funds, public service organizations, church organizations and special economic zone companies are exempt from tax upon meeting appropriate requirements. Furthermore, CIT does not apply to agricultural business, with the exception of income from special departments of agricultural production.

Funds

The income of Polish investment funds is exempt from CIT. The same applies to funds investing in real estate. Moreover, foreign investment funds may also be exempt from CIT if they meet the requirements set forth in the CIT Act.

Special Economic Zones (SEZs)

SEZs will apply in Poland until the end of 2026.

Companies operating in SEZs may typically be exempt from CIT. The rate of exemption depends on the region/province, and currently ranges from 30 per cent to 50 per cent of:

  • investment costs incurred during the completion of an investment in the SEZ, or
  • The sum of two-year employment costs for newly-created jobs.

A CIT exemption is available if the taxpayer:

  • obtains a business permit for activity in the SEZ;
  • incurs eligible expenses after the date of obtaining the permit;
  • incurs eligible expenses for a new investment;
  • shall not transfer the ownership of the assets subject to capital expenditures during three or five years (depending on whether the taxpayer is a large, medium-sized or small enterprise) from the date of entry in the register of fixed assets and intangible assets;
  • Will conduct business for no less than three or five years (depending on whether the taxpayer is a large, medium-sized or small enterprise).

As a rule, SEZ business permits are issued for manufacturing activity. However, in most SEZs, it is also possible to provide the following services: accounting, other than tax returns, bookkeeping, call centers, IT services, technical surveys and analyses, research services.

The exemption applies solely to the company’s activity within the SEZ.

Companies operating in SEZs may also take advantage of property tax exemptions.

Returns/filing requirements

As a rule, the tax year covers twelve consecutive months, but in the course of business, taxpayers may modify the tax year pattern adopted.

Returns/CIT withholdings

No requirement to file returns. CIT withholdings must be paid by the 20th of every month.

Annual tax return CIT-8 is filed by the end of the third month after the end of each tax year. The CIT set forth in the annual return must also be paid by the above deadline.

From 2015 onward submission of the tax return CIT-8 in a different way than electronically will be invalid.

 

Personal income tax (PIT)

 

Unlimited tax obligation in Poland

Individuals with their place of residence in Poland are taxed on their total income, regardless of where the income is earned (unlimited tax obligation in Poland). Individuals who do not have a place of residence in Poland are taxed solely on income earned in Poland (limited tax obligation in Poland).

An individual with a place of residence in the Republic of Poland is a person who:

  • is physically present in the Republic of Poland for more than 183 days during a tax year, or
  • has a center of personal or economic interests in the Republic of Poland (center of vital interests).

The above rules are applied taking into account the provisions of relevant tax treaties. Therefore, even if, in the light of Poland’s national legislation, a person passes the residence test for Poland, the appropriate criteria contained in an international treaty must be applied to determine what country is that person’s actual place of residence for tax purposes.

Sources of revenue subject to PIT:

  • a labor-based relationship and an employment relationship, including a cooperative employment relationship, retirement or disability pension;
  • personal services,
  • non-agricultural business activity;
  • special departments of agricultural production;
  • lease, sublease, tenancy, subtenancy and other similar agreements;
  • monetary capital and property rights;
  • paid disposal of, among other things, real property or parts thereof and real property interests, movables;
  • activity conducted through controlled foreign company (CFC);
  • Other sources.

The Personal Income Tax Act does not apply to revenue subject to the provisions on tax on inheritance and donations, actions that cannot be the subject of a legally binding agreement, or revenue subject to tonnage tax.

Tax scale

Natural persons in Poland are subject to personal income tax calculated, as a rule, according to a progressive tax scale. Tax rates vary depending on the income earned, defined as the total revenue minus tax deductible costs, earned in a given taxable year.

In 2015, personal income tax is calculated according to the following tax scale:

Taxable base in PLN Tax
more than up to
85,528 18 per cent minus tax-reducing
amount of PLN 556.02
85,528 PLN 14,839.02 + 32 per cent
of the surplus over PLN 85,528

 

Business activity

Natural persons conducting business activity are taxed according to the tax scale.

These individuals, at their request, may tax their income with the 19-per cent flat-rate tax, taking into account restrictions on services for former/current employers and management services.

Depending on the scale of business conducted, upon meeting specific criteria, the taxpayer may request the application of simplified taxation forms, i.e.:

  • tax on registered income (tax calculated without deducting tax-deductible costs);
  • Fixed tax rate (tax determined by the tax office depending on the type of business).

Tax rates – special types of revenue

Certain income (revenue) categories are taxed in accordance with separate rules. The special tax regimes are applicable to inter alia:

  • private lease (at the taxpayer’s request – 8.5 per cent tax on registered income);
  • dividends (19 per cent flat tax),
  • interest on savings (19 per cent flat tax),
  • gains from capital funds (19 per cent income tax);
  • gains from the sale of securities (19 per cent income tax);
  • selling private properties (as a rule, 19 per cent income tax);
  • awards in competitions, gambling, premium sale (10 per cent flat tax);
  • Income of CFC (19 per cent income tax).

Some revenue categories disbursed by Polish withholding agents to non-residents are subject to a flat-rate tax of 20 per cent of the revenue.

These include proceeds from:

  • serving on management or supervisory boards;
  • civil law agreements;
  • entertainment or sports activity;
  • accounting benefits;
  • legal and advisory services;
  • advertising services;
  • License fees, know-how, or copyrights.

In the case of non-residents, tax rates resulting from a tax treaty may be applied and withholding tax may be exempted if the non-resident furnishes a certificate confirming its place of residence for tax purposes.

In the case of taxpayers who do not disclose their sources of revenue, income determined by the tax authorities is taxed at the penalty rate of 75 per cent.

Tax credits

In 2015, personal income tax payers may take advantage of a number of tax credits, such as:

  • deduction of mandatory social security contributions paid in Poland or abroad (if the additional conditions are met),
  • Internet tax credit (with significant limitations for taxpayers claiming Internet tax credit in previous tax years);
  • a credit for charitable donations;
  • tax credit for an individual retirement security account;
  • deduction of mandatory health insurance contributions paid in Poland or abroad (if the additional conditions are met);
  • a child tax credit;
  • Special tax relief for the Polish tax residents who earn certain kinds of income on the territory of foreign countries, where the double taxation is avoided by using the proportional tax credit method (so-called tax abolition relief).

Tax returns

The deadline for filing an annual tax return is 30 April of the year following the reference tax year. This rule does not apply to revenue subject to tax on registered income or a flat rate tax.

As a rule, taxpayers file separately. Spouses who are tax residents in Poland may, upon meeting certain requirements, file a joint tax return on taxable income according to the tax scale.

The following individuals are also permitted to file jointly:

  • spouses with a place of residence in an EU Member State or European Economic Area Member State or Switzerland,
  • spouses of whom one is subject to an unlimited tax obligation in Poland and the other has a place of residence outside Poland, but in another EU or EEA Member State or in Switzerland,

-if (in both cases) they have reached the revenue threshold taxable in Poland in a total amount of at least 75 per cent of the total revenue earned by both spouses in a given taxable year and have documented, with a certificate of residence, their place of residence for tax purposes.

Special rules of taxation apply also to individuals filing as single parents and non-Polish tax residents who intend to leave Poland before the deadline for submitting annual tax return.

Social security contributions

Poland’s social security system comprises retirement and disability insurance, accident insurance and illness insurance. Insurance covers, among others, employees, the self-employed and contractors. These individuals are also subject to mandatory health insurance.

Mandatory contributions on the employer and employee’s side, in force in 2015, are set forth below:

Contribution % of total monthly salary Total Employee Employer
Retirement insurance 19.52%*** 9.76% 9.76%
Disability pension insurance 8.00%*** 1.50% 6.50%
Health insurance 9% 9%*
Illness insurance 2.45% 2.45%
Accident insurance 0.40-3.60% 0.40-3.60%**
Bridging Pension Fund**** 1.5% 1.5%
Labour Fund 2.45% 2.45%
Employee Benefit Fund 0.10% 0.10%

* Partly deducted from the monthly tax withholding
** 1.80 % payable in the first year of the employer’s activity (starting from 1. April 2015)
*** In 2015, the cap on the basis for the calculation of retirement and disability contributions is PLN 118,770.
**** The premium payable for employees born after 31 December 1948 and performing work in harmful conditions.

Social security contributions should be paid by the 15th day of each month.

Compensation for the duration of inability to work

The employer and the Social Security Office must pay compensation for the duration of an employee’s inability to work on the terms set out below:

Duration of inability to work Paid by the employer Paid by the Social Security Office (ZUS)
1-14 days of illness for employees over 50 years of age 80 % of average remuneration **
1-33 days of illness for other employees 80 % of average remuneration **
more than 14 or more than 33 days of illness 80 % of average remuneration *

* Sickness benefit paid by the ZUS, reduced to 70 per cent of average remuneration in the case of hospitalization.
** Average remuneration for the previous twelve months

In the event of inability to work as a result of a work-related accident, illness during pregnancy or maternity leave or in connection with donating tissue or organs, employees are entitled to receive 100 per cent of their remuneration.

Tax on inheritance and charitable donations

Scope of taxation

Tax on inheritance and charitable donations applies to the acquisition of ownership of assets located in the Republic of Poland or property rights exercised in the Republic of Poland by way of inheritance, bequest, further bequest, specific bequest, testamentary instruction, charitable donation, donor’s instruction, usucaption, or unpaid removal of shared ownership.

Tax is also applied to acquisitions of ownership of items located abroad or property rights exercised abroad if at the time of opening the inheritance or concluding a donation agreement, the acquiring party was a Polish citizen or had a permanent place of residence in the Republic of Poland.

Taxpayer categories

Payers of tax on inheritance and charitable donations are grouped into three categories depending on the relationship with the donor/testator:

  • Tax group 1 includes: The spouse, descendants, ascendants, son-in-law, daughter-in-law, siblings, stepfather, stepmother, parents in-law
  • Tax group 2 includes: parents’ siblings, siblings’ descendants, siblings’ spouses
  • Tax group 3: other acquiring parties.

Special rules apply to acquisition of assets or property rights through close relatives of the donor/testator, who include the spouse, descendants, ascendants, stepson, siblings, step-parents. In such cases, the acquisition of assets or property rights will be exempt from tax if:

  • the acquisition of assets or property rights is reported to the relevant tax office within six months from the establishment of the tax obligation (with the exception of agreements concluded in the form of a notarial deed)
  • In the case of cash donations – the taxpayer documents the receipt with a proof of transfer to a bank account or their account maintained by a credit union or postal order.

Tax rates

Currently, tax-exempt amounts are as follows:

  • for acquirers from tax group 1 – PLN 9,637.
  • for tax group 2 – PLN 7,276.
  • for tax group 3- PLN 4,902.

The tax scale is set out as follows:

Taxable base in PLN Tax scale
more than up to
3) from acquirers from tax group 3
10,278 3%
10,278 20,556 PLN 308.30 + 5 per cent of the surplus over PLN 10,278
20,556 PLN 822.20 + 7 per cent of the surplus over PLN 20,556
from acquirers from tax group 2
10,278 7%
10,278 20,556 PLN 719.50 + 9 per cent of the surplus over PLN 10,278
20,556 PLN 1,644 + 12 per cent of the surplus over PLN 20,556
3) from acquirers from tax group 3
10,278 12 %
10,278 20,556 PLN 1,233.40 + 16 per cent of the surplus over PLN 10,278
20,556 PLN 2,877.90 + 20 per cent of the surplus over PLN 20,556

 

 

Tax returns

Taxpayers must file tax returns, save for instances where tax is withheld by a withholding agent (for agreements concluded in the form of a notarial deed). The deadline for filing tax returns is one month from the date of establishment of the tax obligation. Documents affecting the determination of the tax base to be attached to the tax returns.

 

 

Tax on goods and services (VAT)

Overview

The Polish Value-Added Tax Act of 11 March 2004 [the VAT Act] is based on EU legislation, and in particular, on the provisions of Directive 2006/112/EC on the common system of value added tax [the VAT Directive].

In 2015, the main VAT rates applicable in Poland are as follows:

Category VAT rate:
standard VAT rate 23%
reduced VAT rate – applied to supplies of certain food items, medical products, hospitality services and community housing 8%
super-reduced VAT rate – applied to supplies of certain food items, such as bread, dairy products, meats, and selected publications 5%

VAT in international trade – supply of goods

Taxpayers selling goods to buyers in EU states may apply the zero-per cent VAT rate as part of the intra-Community acquisitions of goods.

The zero-per cent VAT rate also applies to exports of goods defined as the export of goods from Poland outside of the European Union in performance of taxable activities. In order for the zero-per cent rate to be applied, the taxpayer must have appropriate customs forms stating that the goods have exited the territory of the European Union.

In the event of purchasing goods transferred from an EU Member State to Poland, the Polish taxpayer must ensure self-assessment of VAT. This means that the taxpayer should disclose both the output VAT resulting from the taxable activity and the input VAT (due to the fact that this activity constitutes a “purchase” for the purpose of its business). Consequently, as a rule, intra-Community acquisitions of goods is a VAT-neutral activity for the Polish taxpayer (the amount of output VAT equals the amount of input VAT).

Imports of goods subject to VAT in Poland are deemed to mean imports of goods from outside the European Union into Poland. In such cases, the import output VAT is typically paid to the customs office that clears the imported goods. Furthermore, a taxpayer that has paid VAT to the customs office may deduct this tax on the basis of the customs document received. In select cases, it is possible to avoid paying VAT to the customs office and settle the import of goods in a VAT return (postponed accounting system) on the terms applicable to intra-Community acquisitions of goods. However, the implementation of this solution applies solely to entities using the simplified customs procedure. The VAT exemption applies, among other things, to imports of goods subject to inward processing, goods subject to temporary clearance with full customs duty exemption, advertising materials, and product samples.

VAT in international trade – provision of services

In the case of cross-border services, a VAT obligation in Poland may arise if the place of taxation of a transaction, agreed in accordance with the VAT Act, is Poland.

In this respect, the Polish VAT Act complies with the VAT Directive – for services provided between taxpayers (on a B2B basis) with their registered office/place of residence/permanent place of business in different countries, the primary place of taxation is the country of the registered office/place of residence/permanent place of business of the entity purchasing the service. The opposite applies to services provided by a taxpayer to a non-taxpayer entity (B2C basis).

As a result, under the fundamental principle, VAT will be payable in Poland on service transactions between taxpayers from different countries only if the service recipient has its registered office/place of residence/permanent place of business in Poland. However, in the case of services provided by a Polish taxpayer to a non-taxpayer entity, VAT will be payable in Poland if the service provider has its registered office/place of residence/permanent place of business in Poland.

There are several exceptions to the above rules – for instance, the place of taxation of real property-related services is, in each case, the place (country) in which the real property is located, while the place of taxation of hospitality services is the place (country) of their actual provision.

VAT exemptions

The VAT Act contains a list of activities that may be exempt from VAT. Typical VAT-exempt activities may include (no optional taxation of these services):

  • financial services (lending, maintaining bank accounts, currency exchange), other than leasing, factoring and consulting;
  • insurance and reinsurance services;
  • certain medical services;
  • some educational services;
  • welfare services;
  • social security services;
  • some culture and sports-related services.

The Polish VAT Act also introduces a VAT exemption for supplies of certain real properties. In some situations, however, taxpayers may choose to pay VAT on these services.

VAT deduction and refund

Taxpayers may reduce the amount of output VAT by the amount of input VAT when purchasing goods and services, provided that the purchases are related to a sale that is eligible for a VAT deduction (so, as a rule, a sale subject to VAT).

The input VAT reduction concerns real estate, used partly for purposes other than conducted business activity (according to actual use). The right to deduct input VAT is also limited in case of purchases of passenger cars as well as goods (including fuel) and services connected with use of passenger cars (i.e. only 50% of input VAT may be deducted). However, the taxpayer is entitled to deduct the full amount of input VAT if the cars are assigned for sale, hire, lease or if taxpayer carries on the cars’ routes records.

Also the VAT on accommodation and gastronomic services is not subject for deduction.

In the case of input VAT concerning both purchases related to activity eligible for a deduction (taxed) and not eligible for deduction (VAT-exempt), the taxpayer is entitled to a partial deduction of VAT.

The surplus of input tax over output tax is, as a rule, refunded within 60 days from the date of filing an appropriate VAT return. The same 60 days term applies in case taxpayer reported only transactions subject to VAT outside of Poland (however, in such case taxpayer need to submit respective application for the VAT refund).The VAT refund period may be shortened to 25 days if additional criteria are met.

If no taxable sales or sales outside of Poland are concluded, the taxpayer may apply for a tax refund within 180 days of filing the VAT tax return.

The tax refund is, as a rule paid into the bank account indicated by the taxpayer. It can however, constitute security against borrowings.

Reverse charge in local transactions

From 1st July 2015 the reverse charge procedure has been introduced for electronic equipment such as portable computers, mobile phones and game consoles. Before that day the main subject of reverse charge in domestic transactions was the supply of scraps.

The purchaser shall be obliged to settle VAT for the supply of electronic equipment only if the value of goods exceeds the amount of 20.000 PLN net within the economically uniform transaction.

From settlement for July 2015 taxpayers are also obliged to submit recapitulative statement for local transactions. In these recapitulative statements taxpayers report supplies of goods and services subject to VAT according to local reverse charge.

Registration

Entities that wish to conduct activities subject to VAT in Poland must file a registration form before the date of the first taxable activity. Taxpayers who intend to conduct intra-Community transactions must be EU VAT registered.

The annual sales that do not exceed PLN 150,000 are exempt from VAT. However, the taxpayers may choose to pay tax on that sale upon prior notification to the director of the tax office.

In order to register for VAT purposes in Poland, entities without a registered office, permanent place of residence or place of business in the European Union must appoint a tax representative. Tax representatives are responsible for the tax liabilities of the taxpayers they represent.

The VAT Act does not permit the establishment of tax groups for VAT purposes.

Returns

Taxpayers file monthly VAT returns by the 25th of the month following the month in which the tax obligation arose, or quarterly, by the 25th of the month following the quarter in which the tax obligation arose. As a rule, VAT is paid to the tax office at the time of filing an appropriate VAT return. However, in the case of taxpayers paying VAT on a quarterly basis, monthly VAT withholdings must be made if the tax due results from the return filed for the previous quarter. Taxpayers with annual sales of less than EUR 1,200,000 are not required to make monthly withholdings (VAT paid quarterly).

Taxpayers conducting intra-Community transactions and providing services (for which the place of provision is determined in accordance with general principles) to EU taxpayers are required to file monthly Recapitulative Statements. Quarterly Recapitulative Statements may be filed by taxpayers who do not exceed certain value thresholds in commodity transactions and taxpayers providing services solely to EU taxpayers. Furthermore, taxpayers are required to file statistical information (INTRASTAT) on intra-Community commodity transactions.

Related parties

In the case of transactions between related parties, tax authorities may assess VAT tax base as a market value of transaction if it turns out that the relationship affected the calculation of the remuneration for the supply of goods or provision of services and one party to the transaction is a taxpayer not eligible to deduct VAT.

The right to assess the tax base applies if there are family, capital or financial links between counterparties or persons in managerial or supervisory roles in the counterparties’ business. Capital links apply if one counterparty has voting rights that represent at least five per cent of all voting rights, or disposes of such rights directly or indirectly.

Property tax (real estate tax)

  1. Real Estate Tax – basic information

Real estate tax [further: RET] is classified to the wealth-tax group (tax is levied on a mere possession of particular assets, here: real estate and construction structures). RET is a local tax, which means that executive bodies of municipalities are tax authorities.

  1. Subject of taxation of RET

Subject of taxation of RET are:

  • lands,
  • buildings or their parts,
  • Construction structures or their parts associated with conducting a business activity.
  1. Taxpayers of RET in Poland

The taxpayers of RET are: natural persons, legal persons, and organizational units including partnerships, which are:

  • owners,
  • freeholders,
  • perpetual usufructuaries or
  • Dependent holders of real estate being an ownership of the State Treasury or municipalities.
  1. Base of taxation in RET

Depending on a subject of taxation, the tax base of RET is:

  • area (lands),
  • usable area (buildings),
  • Initial value or market value (construction structures).
  1. RET rates

The rates of RET are determined by the council of each municipality and applies only within their jurisdiction. The maximum allowable rates are specified in the RET Act. Resolutions regarding RET rates in each municipality and related tax-forms should be available on a web page of each municipality.

Subject of taxation Maximum tax rate
Lands associated with conducting business activity 0.90 PLN/m2
Other lands, including those occupied by public benefit organizations conducting benefit activity 0,47 PLN/m2
Residential buildings 0.75 PLN/m2
Buildings designated for the conduct of business 23.13 PLN/m2
Other buildings, including those occupied by public benefit organizations conducting benefit activity 7.77 PLN/m2
Structures 2% of initial value or market value
(shown in the books of accounts as the basis for depreciation)
  1. Tax obligation in RET

As a rule, tax obligation arises on the beginning of a first day of the month following the month in which circumstances justifying the creation of this obligation occurred. If that circumstance is formation of a building or a construction structure, the tax obligation arises on 1st January of the year following the year in which construction was completed or in which the use of the building or structure or parts thereof was commenced before the final completion of the construction works.

  1. RET exemptions and exclusions

Tax exemptions and exclusions from RET applies, among others, to:

  • farmlands and forests not occupied for business activity (which are, however subject to agricultural tax or forest tax),
  • land occupied for lanes on public roads,
  • real estates occupied to conduct unpaid statutory public benefit activity by public benefit organizations,
  • other exemptions introduced by resolutions of municipalities,
  • historical monuments,
  • Railway and port infrastructure and real estate located in airports.
  1. RET assessment

Responsibilities towards tax authorities differ between natural, legal persons and organizational units.

Taxpayers who are natural person are obliged to:

  1. submit an information, within a specified period, on real estates and building structures,
  2. pay instalments proportionate to the duration of the tax obligation within following deadlines: 15th March, 15th May, 15th September and 15th November of the tax year.

Taxpayers being a legal entity or organizational unit, including partnership are obligated to:

  1. submit a declarations on RET for each the tax year,
  2. correct tax declaration in case of changes in the tax obligation (if circumstances justifying obligation to perform adjustment occur),
  3. pay amount of RET, in instalments proportionate to the duration of the tax obligation within the 15th day of each month (and for January – before 31st January).

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