The Tax System in Poland: Benefits & Overview
The tax system in Poland is one of the most loyal for both large and small businesses in the country. There are two levels in the system that relate not only to residents of Poland, but also to foreigners. The Polish tax system consists of administrative taxes (duties are paid directly to state bodies) and local taxes (the process is similar to the previous type). Therefore, Poland is one of the European countries with a stable economic position, whose attractive system attracts citizens from neighbouring countries to conduct business within the country. It is the Polish taxation system that is advantageous for businessmen willing to enter the international market.
If you are in Poland officially and your stay exceeds 183 days, or you have a source of income in the country, you must pay a tax that is compulsory for both individuals and legal entities.
For mutual settlements of payments between foreigners and state-controlled bodies, it is necessary to have a personal identification number (PESEL). Using this form of identification, governmental services can find all the necessary personal information about the taxpayer .
Market relations with respect to tax duties are calculated according to a progressive scale and the interest rate depends directly on the subject of entrepreneurial activity.
Types of taxes in Poland
There are two types of taxes in Poland:
1) Direct payments to the tax authority. The amount of payments are formed depending on the position of the taxpayer. The main subtypes of this tax are:
- Personal income tax and corporate income tax.
- Inheritance and donations tax.
- Forest tax.
- Motor vehicles tax and property tax.
2) Indirect taxes are paid automatically when you pay for services or goods.
The fees paid by individuals are progressive. Depending on the earned income there are 3 central rates:
- 18% (earnings for the reporting period is less than 85.528 zł).
- 19% (linear tax).
- 32% (earnings for the reporting period is more than 85.528 zł).
Usually for individuals and legal entities, the calendar year is the same as the financial year. However, the taxpayer has the opportunity to change the tax period by duly notifying the tax authority.
Personal income tax puts the individual under an obligation to file a declaration at its place of residence, which is filed using special PIT forms (Personal Income Tax forms). The selection of the form depends on many factors such as the amount of income received and the expenses incurred.
The individual is responsible for the incorrectly calculated amount of tax or selecting of inappropriate form of PIT filling.
Also, in Poland there are a number of tax exemptions so that a taxpayer can pay a lower income tax.
In Poland every taxpayer has the right to transfer 1% of their income tax to a public benefit organisation.
The pecularity of the Polish tax system lies in the fact that legal entities (Corporate Income Tax - CIT) have to make a payment of a duty on profits obtained in the territory of Poland (only from local sources that have the right to conduct legal business). The flat rate is 15%.
Compared to other jurisdictions such as Cyprus (12.5%) and Malta (35%) Poland takes the middle position on the list of European countries. Also in Poland there is one of the lowest quota of non-taxable amount EUR €750.
The main duties in Poland are:
1) The income tax rate is 19%. The basis for this type of duty is the difference between income (revenue received) and expenditures determined by the state.
2) The value-added tax on goods and services is usually 23%. In addition, low rates are set aside in Poland: 5% (applied to bread, meat and dairy products), 8% (applied to food and medical products as well as to the hotel service). Tax reporting should be filed by corporate identity officially registered as VAT payers to local tax office every month (in some cases once a quarter).
3) The excise duty rate is classified as an indirect type. This category includes more than two hundred products such as petroleum products, includeding alcohol and tobacco. The tax is calculated individually for each product depending on its own cost or the calculated tax rate and is paid at the moment that the goods are purchased.
The Pecularity of the Polish Tax System
It should be mentioned that in case of goods exporting to the European Union's territory the tax rate is 0%. If you visit Poland for tourism with accordance with Polish law as a private individual you have the right to receive refund from VAT paid when purchasing goods in Poland. The amount of VAT included in the cost of the service or goods is subject to refund. The maximum total value for VAT refund is over 200 PLN (excluding VAT).
Entities conducting business activities related to the gambling industry must also pay tax. The legal entity pays a certain percentage depending on the type of the gaming sector as well as the state bodies view this as part of the income. Individuals also pay these type of taxes.
The income received from real estate is also taxable and should be paid to the local tax authorities. The basis for calculating the tax depends on the area of the building or land. The local authorities have the right to set tax rates. When selling real estate a 19% duty is paid from the amount of profit if the owner disposes of property less than five years.
Tax on inheritance and gifts applies to acquired ownership titles and other proprietary rights exercised in the territory of Poland and obtained due to inheritance; donation; usucaption; free of charge; cessation of ownership. The amount of duty depends the degree of kinship and the value of the obtained goods.
An unfavourable component of the system of tax collecting in Poland is characterised by tax collecting twice for the same object of taxation (most often for property).Tax avoidance is considered by the state as the provision of distorted or incorrectly filled information in tax return forms.
When opening a branch or a private organisation in Poland, it is necessary to understand that in case of the non-payment of fees or deliberately concealing a real source or amount of income received, the outcome may be administrative and criminal punishment.
The purpose of tax collection is debt repayment to state authorities. Based on the Polish financial code, tax sanctions are used simultaneously, for example on default interest. When registering within special bodies of Poland, legal entities receive an identification number. After receiving such a number, the owner of the company chooses the corresponding system of taxation.
One of the attractive and enticing forms of doing business in Poland is called the Spółka z o.o, the equivalent of a standard limited liability company. An individual can incorporate an OOO company if he has only a valid foreign passport. Even a representative can legalise this enterprise having a properly notarised document.
When starting a business, a company can register authorised capital with a minimum nominal value of EUR €1,000. The capital doesn't need to be placed in the corporate bank account of the OOO company upon registration; it is be sufficient just to simply sign the declaration. To avoid tax burden, the founder of the company shouldn't just be one person, but several. To do this, it is not necessary for the founders of the company to have Polish citizenship, since in Poland the tax rates for the locals and foreigners are fully equal.
In order to conduct business in the banking and insurance spheres, the company's pension capital fund must obtain a license. Therefore, the Polish tax system is designed to optimise taxes, in particular for small businesses. Poland is becoming more attractive not only for its citizens but also for foreigners.
First of all, when opening your own business it is important to study the economic situation in the country and to select kind of activity.
In Poland Gini coefficient is one of the highest. It shows that the difference in wages by regions is quite big. This makes it possible to take actions to optimise the tax burden on the enterprise, which results in profits increasing.
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