A company is treated as a Polish tax resident if it has its registered office or place of management in the territory of Poland under corporate tax law in Poland. In that situation, the company pays corporate income tax (CIT) on their worldwide income and capital gains. If company does not have a registered office or place of management in Poland it is subject to tax only on income generated in the territory of Poland. However, the term “place of management” is in principle determined under the effective management test defined in many treaties (i.e. the place where the management board or equivalent meets and takes decisions).
The standard corporate income tax rate is 19%. A reduced CIT rate of 9% is applicable to small taxpayers earning revenues (inclusive of VAT) equivalent to EUR 1.2m or less.
Polish VAT regulations are harmonized with European Union law and, in principle, are consistent with the regulations of other Member States. Basic transactions subject to VAT are supplies of goods and supplies of services deemed to be made in Poland. In some cases also free of charge supplies of goods or services can be subject to VAT.
The standard VAT rate in Poland is 23%. There are reduced rates of 8% and 5% on certain food, books, newspapers and the supply of a limited number of other services. A number of services are exempt from Polish VAT, such as financial and postal services.
Since 1 November 2019 Poland introduced the requirement to use the split-payment mechanism for selected transactions. In split-payment mechanism, payment for an invoice is split between two bank accounts: net value is transferred to the regular bank account and the VAT value is transferred to the specific VAT bank account.
VAT bank account is opened by the bank automatically and free of charge for all taxpayers, provided that taxpayer has a regular bank account in a Polish bank. VAT bank accounts are kept only in PLN. In the case the invoice is issued in other currency than PLN the invoice has to indicate the amount of VAT in PLN. There is no possibility of paying invoices under split payment mechanism in other currencies – hence the PLN must be used.
All VAT taxpayers in Poland, regardless the size, are obliged to submit data from VAT records in the form of Standard Audit File JPK_VAT to the Ministry of Finance in respective settlement periods. From 1 October a new JPK_VAT structure (initially named JPK VDEK) is expected to be introduced.
Taxation on personal income tax applies to natural persons who have their place of residence in Poland – on all income, regardless of where the sources of income are located (unlimited tax liability in Poland). However, natural persons who do not have a place of residence in Poland are subject to tax only on income generated on the territory of Poland (limited tax liability in Poland). As a rule, a person domiciled in the territory of the Republic of Poland is a person who:
stays on the territory of the Republic of Poland for more than 183 days in a tax year, or
has a center of personal or economic interests (the so-called center of vital interests) on the territory of the Republic of Poland.
The above principles apply subject to the provisions of the respective double taxation conventions. Therefore, even if in the light of Polish internal regulations a person meets the criteria of residence in Poland, it is always necessary to apply the appropriate criteria contained in the international agreement to determine in which country his actual place of residence is for tax purposes.
In general, the PIT tax rate is 18% and after exceeding the income of 85,528 PLN the rate of 32%. However, certain income (revenue) categories are taxed in accordance with separate rules.
One of the most important differences between e.g. employment and running a business is the possibility to choose the form of PIT taxation. Natural persons conducting business activity, at their request, may tax their income with 19% flat-rate tax. Depending on the scale of business conducted, upon meeting specific criteria, the taxpayer may request the application of other simplified taxation forms, i.e. tax card.
Since 1 January 2019 new tax scheme disclosure rules came into effect, which are based on the EU Council Directive 2011/16 in relation to cross-border tax arrangements, known as DAC6. In general, the new regulations oblige an electronic reporting of the tax schemes to the Head of National Revenue Administration (NRA). The reporting does not limit only to tax optimisation but also other legal and factual arrangements specified in Polish law. Lack of reporting is threatened with heavy fines from PLN 750 to PLN 21.6 milion.
Since 1 January 2019 the exit tax has been introduced to the Polish tax law. According to the new regulations, transfer of assets by a taxpayer from Poland to another country results in taxation of unrealised gains generated in the period when the assets were located in the territory of Poland. Moreover, the individuals who changed their tax residency are also potentially subject to the exit tax. The basic exit tax rate is 19%, however a tax rate of 3% is specified regarding the personal income tax.
The following assets may be subject to the exit tax law:
rights and obligations in a partnership;
shares in a company;
stock and other securities;
derivatives and certificates.
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For further information regarding corporate tax law in Poland please contact your current contact person or our partner. Please contact for further information and business law advice.
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*This article is for general information purposes only and does not constitute a legal advice.