Taxes In Poland – Types & Compliances For Companies Discussed

Overview: Taxes In Poland

For several decades, Poland has been in the midst of a taxation transformation. The basic patterns in the change of this branch of the law were dictated by the financial and political transformations around the turn of the decade. The necessity of adopting, or matching with, the constitutional qualifications set by membership in the European Union is a unique feature of Polish tax policy. However, this standardization approach does not include all aspects of Polish tax legislation.

Knowing the financial rules is essential before beginning the business registration in Poland, and the government has a modest corporation tax rate when contrasted to Western European countries. 

In this article, we’ll explore Poland’s tax system, including its rates, compliance standards, and the legal basis for paying taxes in Poland.

Taxes In Poland

An adult who is designated as a Polish tax citizen is subject to Polish taxable income on all of their international earnings, according to Polish legislation. The taxpayer is regarded to have an unrestricted tax burden under these situations. In contrast, if a person is a non-resident of Poland for taxation purposes, they are regarded to have a restricted Polish tax responsibility. As a result, the taxpayer is solely subject to Polish earnings tax on profits earned in Poland.

An individual is probably a native of Poland if most one of the essential criteria is met:

• If the person’s personal or trade cooperation with Poland is stronger (center of vital interests in Poland).
• And if in a given financial year, an average person spends more than 183 days on Polish soil.

For an entity to be recognized as a tax citizen of Poland, only one of the above qualifications must be met.

Types of taxes in Poland

In Poland, two types of administrations are in charge of the tax system:

• One of the main governments under which taxes like excise duty, VAT, personal income tax, corporate income tax, and civil transaction tax includes.
• And the other is the local administration under which taxes like vehicle tax and real estate tax includes.

In total there are twelve types of taxes in Poland, which are as follows:

Direct Tax:

• Inheritance and donations tax
• Agricultural tax
• Forestry tax
• Tax on dogs
• Tax on transactions of civil law
• Real estate tax
• Tax on means of transport
• Corporate income tax
• Personal income tax

Indirect Tax:

• Game tax
• Exercise Duty
• Value Added Tax (goods and services)

Corporate tax in Poland

• When entering the business in Poland, keep in mind that the corporation tax rate in Poland is one of the cheapest in the world, at 19%. In Poland, companies are exempt from the corporate tax rate.
• Legal entities are responsible for paying corporate income tax (CIT). Including hereditary firms and companies without corporate authority, and functional structures without permanent establishment. 
• In terms of management, payers are equity firms. With a corporate headquarters in Poland, limited partnerships and increased joint companies are formed. 
• If the particular company’s current partners are not solely individual citizens and the partnership agreement does not file appropriate data or updates with the authorized head of the tax authority, the general partnership is considered a corporation.
• Organizations without permanent establishment that have their corporate structure or centralized government in another country are recognized as legal entities under that country’s tax laws and are subject to taxation on the sum of their revenue in that country, irrespective of where the income is derived.
• Taxation investment organizations are composed of at least two corporate finance businesses with a permanent establishment that functions under capital organizations and meets the requirements.

Irrespective of where the revenue is made, people who pay taxes with a corporate headquarters or centralized management in Poland are responsible for paying taxes on the sum of their earnings. 

Individuals who do not have a corporate headquarters or a centralized management office in Poland are solely taxed on the revenue they make in Poland. Income tax is levied on overall investment as well as other financing options.

VAT In Poland

In Poland, the typical VAT rate is 23%, however, redacted rates of 8%, 5%, and 0% are also applicable to certain products and services. 

All supplies of goods and services are subject to the regular 23% VAT rate, with the exception of those governed by special VAT rules that offer different rates or treatments.

Certain deliveries are subject to a discounted VAT rate of 8% like medical goods and transportation for passengers.

The Ministry of Economy is in charge of enforcing Polish VAT, which is governed by value-added tax statutes and the Administrative Criminal Code. Non-resident VAT commerce is when a multinational corporation from within or outside the Union registers for VAT in Poland without establishing a Polish corporation or establishing a fixed place of business. 

Aside from remote exports to Poland, there is no VAT limit for non-resident businesses in Poland, and a value-added tax registration must be obtained before includes a combination can begin. There is some leeway for recovering Polish VAT that was paid before the certification. A financial representation is essential for a non-EU dealer’s Tax payments in Poland.

The instances in which a certification is required are governed by rigorous regulations. The following are examples of circumstances that necessitate a Registration certificate in Poland:

• Marketing to individual citizens in Poland over the internet.
• Throughout Poland, commodities are sold.
• Shipping and manufacturing commodities into and out of Poland.
• Exporting Polish commodities to other European nations.

The time it takes to register a Company in Poland is typically 3 weeks, although it can take anywhere from a single day to over months, depending on the condition and thoroughness of the paperwork given. 

Dividend tax in Poland

Polish enterprises are excluded from retaining tax on earnings if the payment recipient is located in another EU nation and collects the relevant taxes on its employees around the world, as per the Polish involvement exemptions. In Poland, investment income is taxed at a rate of 19%. If specific requirements are met, money received by Polish companies from another Polish business or a commercial company in the EU area and Switzerland is tax-free.

Interest and dividends from outside the United States:

Dividends and interest from a non-resident by a Polish corporation tax residence are primarily categorized as normal personal income tax rate at the conventional CIT percentage. 

CIT on such profits received in other jurisdictions may be deducted towards Polish CIT correspondingly. Furthermore, income earned from employed determined in the European Union which includes Poland, EEA member countries, or Switzerland are able to benefit from CIT if the Polish firm acquires at least 10% in the case of a public company based in the EU member states or 25% in the ordinary course of its business based in Switzerland of the payer money shareholding for 2 years and certain other conditions are met.

Anti-avoidance laws are in place to prevent people from avoiding paying taxes:

The involvement exclusion on earnings and other revenue reimbursements does not implement a lawful consideration or sequence of matters of law that are not legitimate, given all applicable circumstances of the case, and were implemented for the original aim or one of the primary aims of collecting a tax incentive. 

A not legitimate legal transfer of funds, according to the new requirements, is one that is conducted in order to profit from a tax deduction but does not exemplify financial reality that is not carried out for legitimate business reasons and its consequence is, in general, and especially, the transfer of shareholdings’ control of the company earning the earnings or the achievement of revenue paid in the form of dividends to shareholders by this corporation.

Interest and dividends earned in the United States:

Foreign pay-outs net profit earned from Polish nationals are not included in overall revenue. However, a 19% tax liability is applied on such earnings, which is deducted and submitted to the tax department by the income recipient. Local earnings, on the other hand, are not liable to the 19% WHT if the Polish benefactor owns at least a 10% ownership in the receiving employer for at least 24 months, thanks to an involvement exemption. 

The earnings received through the voluntary exchange of interests are not taxed as a profit and do not qualify for the contribution deduction that is the procedure of redemption, whether voluntary or automatic, will matter.

Taxation Compliance For Companies In Poland

Tax is quickly now one of the most comprehensive compliance difficulties and expenditure items for organizations doing business around the world. Increasing taxation rates, or increasing inspections and standard operating procedures to trigger fines and financial consequences, is seen as a major element of strengthening financial foundations in difficult nations around the world. When you add in the absence of standardization among authorities, the load rapidly becomes unbearable.

The following tax compliance services that Poland can provide are as follows:

• Administering examinations and responding to government inquiries.
• Throughout tax assessment, support is available.
• Taking care of fundamental financial questions, reports, and penalties.
• Identification with the appropriate tax authorities.
• Tax estimates and negotiations with the authorities are assisted.
• Tax statements are prepared and submitted.
• Meeting the needs of business rates and areas of its operations expenses.

Using regional savings accounts to manage registrations and reimbursements.

Read More: Opening A Bank Account In Poland

Legal Basis For Paying Taxes In Poland

Open, unfunded, obligatory, and non-returnable payments to the government coffers, provinces, districts, or municipalities make up the Polish taxation system. The requirements of the Internal Revenue code also extend to charges and other non-tax obligations for the government budget and city government finances, which are allowed by the tax administration and governed by municipal excise tax decisions.

In the last 25 years, the Polish taxation system has progressed at a breakneck pace. This choice was reached by the Polish government in order to stimulate international investors and raise the labor supply. Amongst actions used to achieve this goal, Poland decreased its taxable income from 40% to 19%, making it one of the cheapest in Central and Eastern Europe.

The legal justification for tax obligation in Poland was founded by the Polish Constitution in Article 217, which states that the attempt to impose taxation and other community expenses, as well as the perseverance of subject to tax activities pertaining to payment of taxes in Poland, tax rates, categories of taxpaying citizens exempted from having to pay taxes in Poland, and the guidelines for obtaining tax exemptions and reduce symptoms, can only be accomplished by legislation and rules founded by the Polish Constitution. 

Conclusion

Taxes in Poland play a crucial role in the country’s development and are crucial for funding public services and infrastructure development. The Polish tax system is characterized by progressive income tax rates, value-added tax (VAT), corporate income tax, and various other taxes and social security contributions. Understanding the tax system in Poland is crucial for individuals and businesses to fulfill their tax obligations accurately. Knowing the tax system’s, rates, compliance necessities, and deductions enables both people and corporations to pay their taxes on time while also improving their financial situation.

If you have any more queries regarding the Poland tax system, you can get in touch with our experts from Odint Consultancy. Our specialist will be happy to assist you with any queries you may have.