Generally speaking taxes in Poland may be divided into:
1. Direct taxes:
2. Indirect taxes:
Several authorities, the hierarchy of which is as follows, administer the Polish taxation system:
If the taxpayer disagrees with the verdict of the Fiscal Administration Chamber, he or she has the right to lodge an appeal with the Administrative Court.
As from 1 January 2004 the structure of Polish Administrative Courts changed and the new Procedural Law on acting before Administrative Courts came into force. The major change includes the introduction of a two stage appeal court process in Polish Administrative Courts: the Administrative Voivodship Courts and the Supreme Administrative Court. The Supreme Administrative Court deals mainly with cassation appeals on verdicts issued by the Administrative Voivodship Courts.
The taxpayer is entitled to apply to the Director of the National Tax Information for an individual tax ruling on a particular tax problem. The Director of the National Tax Information is obliged to give him an answer within 3-month period. To the extent related to applying a ruling which was changed or which was not taken into account in the resolution of a tax case, proceedings in matters of fiscal offences or fiscal petty offences will not be initiated and proceedings initiated in such cases will be discontinued and no default interest will accrue.
Since 1st January 2012 requests for individual (acting only in singular case), as well as for general interpretations can be submitted.
The tax year in Poland is the calendar year that consists of twelve consecutive months ending on December 31. However, a limited liability company or a stock company is free to change its tax year by choosing another twelve-month period and notifying the competent tax office.
The company is obliged to file yearly corporate income tax declaration to the tax authorities until the end the of 3rd month of its fiscal year's following year (usually it is end of March).
The deadline for filing the annual PIT return is April 30th.
The monthly VAT return must be submitted to the tax office by the 25th day of each month for the previous month and the quarterly VAT return must be submitted by the 25th day of month after end of the quarter for the previous quarter.
The "tax on goods and services" (the Polish name for VAT) is charged on sales and supplies of goods and services and on the import and export of goods and services. This tax was introduced in July 1993 and replaced with a turnover tax. Since 1st of May 2004 Polish VAT system has been harmonized with the Sixth EU-Directive no. 77/38 of 17 May 1977 (currently EU-Directive no. 2006/112/WE of 28 November 2006), concerning harmonization of the Member States' regulations in respect of the turnover tax – a common system of the value added tax.
Current rates of VAT in Poland are:
8% rate is applied in particular to some goods connected with health care, groceries, building materials and services connected with housing construction, hotel services and transport of persons.
7% rate is applicable only in agriculture sector
5% rate primarily covers the sale of certain unprocessed or semi-processed produce of agriculture, forestry, hunting and fishery.
4% rate is applicable only for taxi services
0% preferential rate refers mainly to intra-Community supply of goods and export of goods.
By virtue of the Act, the exemption from VAT is applicable primarily to services performed by the State Post, financial agency services, services within scope of education, health care and services in the field of public administration.
According to the amendments to Polish Tax Ordinance, as of 1st January 2017 enterprises are obligated to generate and provide a Standard Audit File for Tax (SAF-T), covering VAT registers. The file has to be submitted monthly, even for companies reporting VAT returns quarterly.
The obligation to transmit data in the SAF-T format applies also to companies which are only registered for VAT purposes. All of its business activities have to be considered, those in Poland as well as those abroad. Moreover, foreign enterprises that carry out its business in Poland through a local branch are required to disclose data in the SAF-T format as well. The taxpayers are obligated to provide SAFT-T to the tax authorities electronically in a standardized format.
Following SAF-T structures have been introduced so far:
Individuals are taxed on their income. Fiscal residents are taxed on their worldwide income. Non residents are taxed only on their income derived from the territory of Poland. The rules of taxation of foreign income vary depending on country of source of the income (details are provided in the double taxation treaties)
The income tax is progressive. In 2017 the following rates are in effect:
|Base of tax calculation PLN||Tax payable|
|over||up to||18% minus the amount decreasing the tax|
|85 528||85 528||15 395,04 + 32% over 85 528 zł minus the amount decreasing the tax|
The amount decreasing the tax depends on the base of tax, the maximum value is 1 188 PLN.
Certain categories of income are taxed with fixed rates, e.g.:
The 19% linear income tax for individuals carrying out their business activity was brought into effect on January 1, 2004. Economic activity is understood as profit-gaining activity, carried on one's own behalf, irrespective of the results thereof, in an organized and uninterrupted manner, the revenues earned from which are not included in other revenue sources.
Choosing a linear income taxation results in automatic resignation from all deductions and allowances. The entrepreneurs are only entitled to reduce the income by the contribution for social security, and to reduce the tax rate by a contribution to the health fund.
Choosing a linear income taxation also results in resignation from the right of a joint taxation with the spouse or preferences provided for single parents.
All limited liability and joint stock companies (including companies with foreign participation), also companies in organization, joint-stock partnerships, as well as unincorporated organizational entities with exception of unincorporated companies being resident in Poland are payers of the corporate income tax.
All other foreign companies, i.e. non-resident companies, pay corporate income tax only on income and capital gains earned in Poland
Corporate income tax is levied on all taxable income, excluding the one derived from forestry and agricultural activities (with some exceptions).
The corporate income tax rate is: 15 % flat for small taxpayers and 19% for the remaining taxpayers.
Certain categories of income are taxed with a fixed rate (withholding tax), e.g.:
If the shareholder of the Polish company is a Polish resident, a resident of the EU, the European Economic Area (EEA) or Switzerland and shareholding of at least 10% (or 25% for Switzerland) is kept for a minimum uninterrupted period of 2 years, dividends paid out by the Polish company qualify for an exemption from the corporate income tax.
Since 1st July 2013 interest and royalties are exempt from the withholding tax provided that certain conditions stipulated in the EU Royalty-Interest Directive are met (e.g. payments are made between 25% parents, subsidiaries or sister companies and the shareholding stems from ownership of shares, the holding is maintained for an uninterrupted period of at least two years).
The general rule is that costs incurred for the purpose of generating income, retaining or protecting the sources of income are considered as tax deductible costs, except where otherwise stated in law. A taxpayer may treat any cost as tax deductible, if it is connected with the business activity it carries on, and if such costs have an impact on the amount of profit derived.
Tax deductible costs are divided into the two categories – direct costs (attributable to particular revenues) and indirect costs (other costs). Direct costs are generally recognized in the tax year in which the related revenue was earned (with some exceptions). Indirect costs are tax deductible on the date they are incurred (with some exceptions).
Non-deductible costs include among others:
Assets which have a useful life of more than one year and an initial value of over PLN 3,500 are deemed capital items and therefore subject to depreciation. The expenditures on the acquisition of items with the initial value of less than PLN 3,500 constitute tax deductible costs in the month when they are given for use.
Depreciation of fixed and intangible assets and of legal rights is deductible for tax purposes. However, tax depreciation is usually different from a book depreciation. Tax depreciation rates are specified in the tax law and cannot be exceeded.
If the debts are not regulated within the period of 30 days (due date of payment up to 60 days) or 90 days (due date of payment exceeding 60 days), the costs have to be corrected (decreased).
Thin capitalization rules the limit of the deductibility of interest on loans and credits from certain related parties. Namely, the interest due on loans or credits granted by a foreign related party (directly or indirectly holding at least 25% of stock) are not to be recognized as a tax deductible cost when the loan to share capital ratio exceeds 1:1.
According to Art. 9a of the CIT Act, a corporate taxpayers must prepare documentation on transactions with associated enterprises (both between resident enterprises and between a resident and non-resident enterprise) and transactions with enterprises resident in the countries applying harmful tax practices.
The documentation must contain the following information:
According to the definition, domestic relationships occur whenever:
The transfer pricing reporting requirement applies to inter-company transactions the total value of which exceeds in a tax year:
With respect to transactions with enterprises resident in countries applying harmful tax practices, the threshold is EUR 20 000. The list of the countries applying harmful tax practices is announced by the Minister of Finance.
The above mentioned regulations apply also to the foreign entities, acting on the territory of Republic of Poland according to Art. 3 Act 2 CIT throughout the fixed establishment.
If the tax authorities or the fiscal control authorities determine income of the taxpayer in the amount higher (loss in the amount lower) than declared by the tax payer in connection with the transactions with related entities, and the taxpayer has not presented those tax authorities with tax documentation required under those provisions - the difference between income declared by the taxpayer and determined by those tax authorities shall be taxed at the rate of 50 %.
As of 1st January 2017, the obligation to prepare the transfer pricing documentation applies only to taxpayers with annual revenue or expenses exceeding EUR 2 000 000. The values of the threshold for significant transactions which have to be documented, range from EUR 50 000 to EUR 500 000, depending on the revenue / expenses.
The documentation must contain:
Tax Capital Groups
Pursuant to the Corporate Income Tax Law, taxpayers may be groups consisting of at least two commercial companies having legal personality. The groups must be linked by capital relationships –"tax capital groups." Such particular status allows the taxpayer to be a beneficiary of a special favorable tax treatment. A tax capital group may only consist of limited liability companies or joint-stock companies registered in Poland. The average initial (share) capital for each of these companies must not be lower than PLN 1.000.000. The "dominant company" (parent company) should have direct shareholdings of at least 95% in the initial capital of the remaining companies, called "dependent companies" (subsidiaries). Dependent companies cannot hold shares in the initial capital of other companies that make up the group. The most important condition is the requirement of a minimum profitability ratio in the tax group (profits/total sales) on the level of 3%. An agreement to form a tax capital group for the period of at least three tax years must be prepared in the form of a notarial deed and registered by the local tax office of the parent company.
The most important advantage of being a tax capital group is a special method available to calculate taxes. The group's taxable income is a surplus of the sum of profits of all companies over the sum of their losses. Members of the group can establish their own pricing policies without the risk of negative transfer-pricing consequences, which is a real risk for companies that are not members of a tax capital group.
The personal income tax and corporate income tax regulations provide that the credit method is used to avoid double taxation, unless double taxation treaties specify differently. Poland has signed Double Taxation Avoidance Treaties with over 80 countries. Most of the treaties signed by Poland are based on the 1977 OECD Model Conventions. The above mentioned Convention applies to persons who are residents of one of the both Contracting States. This Convention applies to taxes on income and on capital imposed on behalf of a Contracting State or of its political subdivisions or local authorities, irrespective of the manner in which they are levied.
Residents have unlimited tax liability in Poland, which means that they are subject to tax on their worldwide income. Non-residents have limited tax liability to Poland, which means that they are liable to pay tax only on income from work performed in Poland, and on other Polish-source income.
Remuneration obtained by non-residents as members of boards of directors, supervisory boards or other decision-making bodies of legal entities is taxed at a fixed withholding tax rate of 20%, provided that they perform their duties under an appointment to the management board and not under a contract of employment concluded with a company registered in Poland.
There are 14 Special Economic Zones in Poland. The advantage of investments in the Special Economic Zones is that the income earned from economic activity within a zone under a granted permit is free of income tax.
Certain legal procedures, in particular contracts of sale, exchange of property rights, loan contracts, contracts of donation, establishment of mortgage, establishment of usufruct for consideration, contracts of irregular deposit, partnership deeds and company deeds or founding acts, amendments to these contracts or increase the share capital of a capital company, and a number of other contractual arrangements – are liable to taxation.
The tax liability arises upon performance of an act in civil law or upon adoption of a resolution increasing the capital of a capital company. The tax liability is borne by parties to acts in civil law and by a company – in case of increasing the share capital.
The Act of 9th September 2000 on Tax on Acts in Civil Law regulates in detail the issues of assessment of tax base, and provides with tax rates. i.e.:
Tax on acts in civil law does not arise, if transactions are taxable with Value Added Tax (VAT).
There are three different types of this tax in Poland, applicable to property, agriculture and forestry. The distinction between these three similar taxes has an important practical aspect, as the rate of taxation for property is far higher than the tax rate for the agriculture and forestry. The Local Taxes and Fees Act determines the general distinction between agricultural and property. The levels of property tax rates are decided by the Commune Council, but they cannot, in the course of the year, exceed the maximal rates per one square meter of taxable land surface determined in the Law Act. The property tax covers lands, buildings and the parts thereof, structures used for conducting business. Agricultural tax is calculated on the basis of the "convertible hectare" units held that take into account different classes of arable land, as well as the different economic and climatic conditions. Only farms covering more than 1 hectare and with over 1 hectare of land in cultivation are subject to this tax.