The legal basis for paying taxes in Poland
The legal basis for the tax liability in Poland is effective from 17 October 1997 and it is established by the Polish Constitution in the Article 217 which provides that imposition of taxes and other public charges and determination of taxable entities subject to tax payment in Poland, tax rates, categories of taxpayers exempted from paying taxes in Poland and the rules for granting tax reliefs and remissions can occur only by the laws and regulations established by the state.
The Polish tax system consists of twelve tax titles, which are defined as public, unpaid, compulsory and non-returnable funds to the state treasury, state, county or municipality. The provisions of the Tax Code also apply to fees and other non-tax duties for the state budget and the budgets of local governments, which are authorized by the tax authorities and regulated by rulings on local taxes and fees. The Polish tax system
registered an accelerated development in the past 25 years. This decision taken by the Polish government was taken with the purpose to encourage foreign investments and increase the employment rate. Among the measures taken to reach this objective, Poland has reduced the income tax from 40% to 19% reaching an indicator among the 5 lowest in Central and Eastern Europe.
Corporate tax in Poland
Companies that must pay these taxes in Poland are the following:
• corporations in formation;
• tax capital groups;
• limited liability companies, joint-stock companies and other legal entities;
• organizational units without legal personality except for companies without legal personality;
• companies without legal personality with offices or management boards in another state.
Our Polish lawyers can give you more details about the corporate tax and about the process of paying taxes in Poland.
VAT in Poland
The standard Polish VAT rate
is 23% since 2011. As in many other countries, Poland also applies VAT exemptions for various services like postal and financial ones, and also reduced rates of 8% and 5% for certain food, books, newspapers and others. However, contributors have the possibility to apply for VAT refund by submitting an application to the Tax Authorities.
Dividend tax in Poland
The Polish dividend tax is 19%. This rate applies to the gross dividend amount. Dividends received by Polish companies from another Polish company or a company operating in the EU/EAA area and/or Switzerland are exempt from taxation if they fulfil certain conditions.
According to the Polish participation exemption, Polish companies are exempt from the withholding tax on dividends if the receiver of the dividends resides in another EU country and pays the relevant taxes on its worldwide income. Also, the company receiving dividends must hold at least 10 percent of the shares of the dividend payer company for at least two years, uninterrupted.
Other provisions for dividends taxation in Poland
Poland has signed double taxation treaties with more than 80 countries in order to guarantee that companies are protected from double taxation. These treaties also influence the taxation of dividends. One of the benefits included in double taxation treaties is a reduced withholding rate for dividends, interests, royalties and capital gains.
Poland also has a Parent-Subsidiary Directive for companies. According to the provisions of this directive, dividends paid between related EU companies are benefit from a participation exemption. Our incorporation agents are at your disposal for more details about this directive or about the types of taxes in Poland.
Incentives for foreign investors in Poland
Entrepreneurs that decide to invest in Poland
can choose the Special Economic Zones (SEZ)
. These are specific areas where the Polish government has implemented programs meant to attract foreign investors and increase the region economic development. Basically SEZ represent the result of successful connections between the needs of these regions and the wishes and needs of foreign investors. Therefore, a new company with foreign capital can benefit from income tax and local taxes exemptions, employee training, and financial grants for new investments and for the creation of new jobs. The respective company must receive a permission to begin trading in an SEZ from the management board of each zone and can also receive assistance related to the investment process.
Compulsory contributions to social insurance
Social insurance in Poland include pension, disability, sickness and maternity funds. Health insurance is mandatory in case of illness, accident, injury, poisoning, life threatening conditions. In order to benefit from this insurance, both employer and employee must pay contributions arising from the insurance contract, regulated by the National Health Fund (NFZ). The amount of social security that must be paid is 19,52% for pension, 13% for annuities, 2,45% for sickness, 0.90% to 3.60% for accidents. These amounts are calculated in accordance with the employee's wage and income.
Real estate tax
When paying taxes in Poland, the real estate tax must be taken in account. The real estate tax in Poland is a local tax, levied by local governments and it is applied for owners of land, buildings or parts of buildings, buildings or parts associated with running a business.
Real estate tax payers are individuals or legal persons, organizational units, including companies without legal personality, which are owners of real estate or buildings, holders of the intrinsic property or buildings, users of perpetual land and other particular categories provided by the law.
Other Taxes in Poland
The withholding tax on interests and royalties was established at 20% unless the company can take advantage from the benefits double tax treaties signed by Poland
. For branches it is not required to pay a remittance tax. For sea and air transportation services companies must pay a fax in quantum of 10%.