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Poland

General Information

Country Name: Republic of Poland (Rzeczpospolita Polska)
Currency: Polish Złoty (PLN, zł)
Primary Tax Authority: National Revenue Administration (Krajowa Administracja Skarbowa, KAS)

Key Legislation:

  • Constitution of Poland (Konstytucja Rzeczypospolitej Polskiej): Establishes fundamental principles regarding taxation and fiscal policy.
  • Corporate Income Tax Act (Ustawa o podatku dochodowym od osób prawnych): Governs the taxation of corporate entities.
  • Personal Income Tax Act (Ustawa o podatku dochodowym od osób fizycznych): Regulates individual income taxation.
  • Value-Added Tax Act (Ustawa o podatku od towarów i usług): Establishes VAT regulations for goods and services.
  • Tax Ordinance Act (Ordynacja podatkowa): Defines tax procedures, collection, and administration.
  • Anti-Tax Avoidance Rules (GAAR): Provides guidelines for addressing tax avoidance.

Tax Authority and Collection Competence

Fiscal Authority Allocation:

Poland has a semi-decentralized tax system. The central government oversees most major taxes, while some local taxes are administered by municipalities and regional authorities.

Taxes Collected by Central Authorities:

  • Corporate income tax (CIT, podatek dochodowy od osób prawnych)
  • Personal income tax (PIT, podatek dochodowy od osób fizycznych)
  • Value-added tax (VAT, podatek od towarów i usług)
  • Excise duty (akcyza)
  • Customs duties (cło)

Taxes Collected by Local Authorities:

  • Real estate tax (podatek od nieruchomości)
  • Agricultural tax (podatek rolny)
  • Forestry tax (podatek leśny)

Revenue Sharing Mechanisms:
Municipalities receive a share of personal income tax revenues and certain local taxes to fund public services, infrastructure, and education.

Corporate Income Tax (CIT)

  • Standard CIT Rate: 19%
  • Reduced CIT Rate: 9% for small taxpayers with revenues under EUR 2 million and start-ups.
  • Taxable Income Definition: Resident companies are taxed on worldwide income, while non-resident companies are taxed only on Poland-sourced income.
  • Deductible Expenses: General business expenses, depreciation, wages, and certain R&D expenditures.
  • Loss Carryforwards/Carrybacks: Losses can be carried forward for up to 5 years, with an annual deduction cap of 50%. No carrybacks are allowed.
  • Tax Incentives: Special regimes for investment in research and development, special economic zones, and renewable energy projects.

Value-Added Tax (VAT)

  • Standard VAT Rate: 23%
  • Reduced Rates: 8% (e.g., for food, medicines, and some construction services), 5% (e.g., for books and specific foodstuffs).
  • Scope of VAT: VAT applies to the supply of goods, provision of services, and importation of goods.
  • Exemptions: Financial services, educational services, healthcare, and certain cultural activities.
  • International VAT Treatment: Exports are zero-rated, while imports are subject to VAT upon entry. Cross-border services follow EU VAT rules.

Personal Income Tax (PIT)

  • PIT Rates:
    • 12% for income up to PLN 120,000
    • 32% for income above PLN 120,000
  • Tax-Free Allowance: PLN 30,000 annually (approx. EUR 6,400)
  • Deductions and Exemptions: Deductions for children, mortgage interest, charitable donations, and contributions to social and health insurance.
  • Foreign Income Treatment: Polish residents are taxed on their worldwide income, while non-residents are taxed only on Poland-sourced income.
  • Special Rules for Expatriates: Foreign workers may benefit from tax exemptions or reduced rates under bilateral agreements or EU regulations.

Additional Mandatory Contributions

Overview:

Poland requires both employers and employees to contribute to a comprehensive social security system, covering pensions, healthcare, and unemployment benefits.

Social Security Contribution Rates:

  • Total Contribution Rate: Approximately 35% of gross salary (split between employer and employee).
  • Pension Insurance: 19.52% (split equally between employer and employee).
  • Healthcare Insurance: 9% (paid by the employee).
  • Unemployment Insurance: 2.45% (paid by the employer).

Mandatory Participation:

Polish citizens and foreigners working in Poland must participate in the social insurance system unless exempted by international agreements.

Contribution Thresholds:

Contributions are capped based on an annual salary ceiling, which is adjusted periodically.

Tax Deductibility:

Social security contributions are deductible for personal income tax purposes.

Employer and Employee Contributions:

  • Employer Share: Typically around 20-22% of the total contributions.
  • Employee Share: Approximately 13% of gross salary.

Withholding Taxes

  • Dividends: 19% withholding tax on dividends paid to non-residents, subject to reduction under tax treaties.
  • Interest: 20% withholding tax on interest paid to non-residents, subject to treaty reductions.
  • Royalties: 20% withholding tax on royalties, with reductions possible under double taxation treaties (DTTs).

Transfer Pricing Rules

  • Documentation Requirements: Companies must maintain contemporaneous documentation for transactions with related parties, including pricing policies and justifications.
  • Arm’s Length Principle: Transactions with related parties must be conducted at market rates.
  • Penalties for Non-Compliance: Non-compliance can result in financial penalties and tax adjustments.

Special Tax Regimes

  • Special Economic Zones (SEZs): Companies operating in designated SEZs benefit from exemptions on CIT, VAT, and other local taxes.
  • R&D Tax Relief: Companies can deduct 200% of qualified R&D expenditures from their tax base.
  • Taxation of Trusts/Foundations: Foundations and trusts are taxed similarly to corporate entities unless exempt under specific conditions.

Other Taxes

  • Real Estate Tax: Applied annually based on the property’s area, with rates set by local authorities.
  • Capital Gains Tax: Generally taxed at 19%, applying to gains from the sale of real estate, shares, and other assets.
  • Inheritance and Gift Tax: Progressive rates from 3% to 20%, depending on the relationship between the donor and recipient.
  • Trade Tax: Municipalities may impose a minor trade tax on local businesses.
  • Stamp Duty: Stamp duty applies to certain legal acts, such as civil law transactions and registration of property.

Double Taxation Agreements (DTAs)

  • Key Partner Countries: Poland has over 80 DTAs with countries such as Germany, the United States, and the United Kingdom.
  • Reduced Withholding Tax Rates: Under DTTs, withholding tax rates on dividends, interest, and royalties can be reduced to 5-15%.
  • Tax Treaty Benefits Application Process: To access DTT benefits, non-residents must provide a tax residency certificate and submit relevant forms.

Local Taxes

  • Real Estate Tax: Levied on buildings and land based on area, with rates determined by local municipalities.
  • Agricultural Tax: Applied to agricultural land, with rates based on the area and type of cultivation.
  • Forestry Tax: Assessed on forest land according to specific criteria.

Compliance and Reporting

  • Corporate Tax Filing Deadlines: Corporate income tax returns must be filed annually by the end of March of the following year. Quarterly advances are required.
  • VAT Filing Requirements: Monthly or quarterly VAT returns are required, with electronic filing mandatory.
  • Penalties for Late Filing/Non-Compliance: Late filings or non-compliance can result in fines, interest charges, and criminal prosecution in severe cases.

Recent Developments

  • Recent Tax Law Changes: Poland introduced a “Polish Deal” in 2022, aimed at reforming personal income tax and expanding tax relief for families and businesses.
  • Upcoming Reforms: Further tax reforms are anticipated, focusing on digital economy taxation and transfer pricing rules.
  • Global Tax Initiatives: Poland is participating in the OECD’s efforts to implement a global minimum tax and improve transparency through the Common Reporting Standard (CRS).

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