Taxes in Poland: What to Pay & 10 Ways to Save Money

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What taxes does a business need to pay in Poland?

Let's clarify: in Poland, as in many other countries, the list of taxes and their rates differs for individuals and businesses, as well as depending on the tax system. In addition, contributions to social security are often included in the tax expenditure category. We also talk about them.

Corporate Income Tax

Also known as CIT - Podatek dochodowy od osób prawnych. This tax is levied on legal entities. Payment can be made monthly or quarterly – the rate does not change but depends on the company's annual turnover.

The rate is 9% for legal entities with an annual turnover of up to €1.2 million and 19% for companies with a turnover above that.

Value Added Tax

VAT – Podatek od towarów i usług. Separate registration as a VAT taxpayer is required for payment in the tax system. This is necessary to determine the tax rate and the possibility of applying limits.

The main rate is 23% of the value of the goods or services. However, other rates may apply as well:

• 0% - for supplies within the EU and export of necessary goods;
• 4% - for passenger transportation and taxi services;
• 5% - for basic food products, agricultural and livestock products (bread, milk, baby products, and books);
• 8% - for construction of housing included in social programs, services related to culture, sports, and recreation.

Important! When using a zero rate, the seller is exempt from tax payment and has the right to deduct VAT from the cost of purchased goods and services.

Personal Income Tax

PIT is a tax that applies to the income of a specific individual. PIT must be paid on income from labor and entrepreneurial activities, freelance work, pensions, benefits, creative, scientific, educational activities.

Who should pay: tax residents of Poland (from 183 days of stay in the country within a year), as well as non-residents - from income earned in the territory of the Republic of Poland.

PIT rates:

• Non-taxable amount. If the annual income does not exceed 30,000 zlotys, PIT is not required.
• 12% - for incomes of 30,000-120,000 zlotys minus 3600 zlotys.
• 32% - for incomes above 120,000 zlotys.

How does it work?

While the non-taxable amount is straightforward, the rest gets more interesting. The 12% rate applies to annual income up to 120,000, but from this amount, you can subtract 3600 zlotys (which is the same tax that isn't paid up to the non-taxable amount). For those earning more than 120,000 per year, a fixed tax of 10,800 zlotys applies, and the same 32% applies only to the income amount above 120,000.

Let's look at examples.

Example №1

A person earns 50,000 zlotys per year. Accordingly, the 12% rate applies to their income - this is 6,000 zlotys of PIT per year. Subtracting 3600 zlotys from this amount leaves 2,400 zlotys per year of PIT.

Example №2

Suppose a person earns 130,000 zlotys per year. In this case, the fixed rate of 10,800 zlotys applies to the amount up to 120,000 - this is the same 12% that applies to the amount up to the specified threshold. And 32% is calculated from the difference: 130,000 minus 120,000 equals 10,000 zlotys. The PIT for the year is 10,800 plus 3,200 zlotys - totaling 14,000 zlotys.

Tax on Banking Income

Tax on banking income (podatek od zysków kapitałowych) is an initiative of Poland's former Minister, Marek Belka. The rate of 19% is levied by the bank on interest from deposits, dividends, loans, and profits from investment.

Social Security Contributions (Składki ZUS)

Social security contributions are the foundation of social protection for the population. Contributions are collected from employers and employees for healthcare and social benefits for the country's population.

ZUS includes medical and social insurance. The rates are as follows:

Social Security Contributions:

• Pension contribution (ubezpieczenie emerytalne) – 9.76%;
• Disability contribution (ubezpieczenie rentowe) – 1.5%;
• Sick leave payment contribution (ubezpieczenie chorobowe) – 2.45%;

Medical Insurance (ubezpieczenie zdrowotne) – 9%. However, the contribution amount depends on the basic rate, which is calculated based on three income tiers:

• For income up to 60,000 zlotys per year, the basic rate is calculated as 60% of the average wage;
• For income between 60,000 and 300,000 zlotys, the basic rate is 100% of the average wage;
• For income exceeding 300,000 zlotys, the basic rate is 180% of the average wage.

Thus, the higher the income, the higher the contribution for medical insurance.

We have outlined the most common taxes in Poland, but there are others that are levied depending on the company's field of activity and are not mandatory for everyone. For example, taxes on land, vehicles, sugar, and gambling businesses.

You can calculate taxes based on individual conditions and exemptions here.

How to Pay Less Taxes in Poland?

Now let's delve into how you can optimize taxes for business in Poland and pay less. Reloaction.io has found a whole ten ways!

Tax Breaks

Utilize the maximum opportunities for business offered by the Polish tax system. One of them is investment zones. Doing business in investment zones allows for tax exemptions for a certain period, as well as state support and other benefits.

Cooperation with the EU

One of the significant advantages of doing business in Poland is the possibility of registering for VAT-EU. To take advantage of this, the company must plan to work with other European Union countries and exceed transactions totaling 50,000 zlotys.

Registering for VAT-EU protects against double payment of VAT. Thus, the company does not pay value-added tax to foreign contractors and exempts them from paying Polish VAT.

Furthermore, registering a business in Poland opens up the opportunity to receive subsidies, grants, and EU investments for business development.

Flat-Rate Tax (Ryczałt ewidencjonowany)

This is a one-time fixed tax that can be levied instead of personal income tax (PIT) under certain conditions. For this, the company's income for the previous year must not exceed 2 million euros (in zlotys). The convenience is that with a one-time payment, the business can manage resources for the rest of the time and maximize profits, and simplified accounting can be conducted without expense accounting.

However, it is worth understanding that different rates are set for each type of activity. The rate depends on the average profitability of a specific industry and varies from 2% to 17%.

Taxation System

Businesses can change their taxation system once a year to optimize the process and tax expenses. To switch systems, it is necessary to submit the corresponding application to the Polish Central Register of Entrepreneurs (CEIDG).

Investments in pension funds and insurance

Investments in pension funds and life insurance not only can secure financial futures but also may provide tax benefits in accordance with regional legislation.

Youth exemption (ulgą dla młodych)

Individuals under the age of 26 are exempt from paying PIT if their gross income does not exceed 85,000 zlotys per year, provided they are employed under an employment contract (umowa o pracę) or an umowa zlecenie.

Additionally, students and pupils not working under an employment contract may be exempt from paying ZUS.

"Returnee's Relief" (ulga na powrót)

A valid Pole's Card exempts individuals from personal income tax (PIT) on the majority of their income up to 85,528 zlotys gross per year. After moving back to Poland, this relief can be utilized for four consecutive years, but it is crucial for the individual to have resided outside Poland for at least 3 years prior to this.

IP Rights

Earning from the use and sale of copyrights is also possible. Especially now, when various types of unique content are in demand and rights are protected. For income from copyright transactions, 50% of the fee is not subject to taxation if the amount does not exceed 120,000 zlotys per year. Another condition to be met is that labor relations must be formalized under umowa o pracę, umowa zlecenie, or umowa o dzieło.

IP Box

Tax relief under the IP Box is available to those who produce qualified intellectual property in the field of scientific research and development, as well as engage in the commercialization and development of intellectual property rights. In simpler terms, the relief applies to the sphere of scientific research and those who purchase and develop it. When using the relief, it is possible to pay 5% instead of 19% income tax. More detailed information can be found here

Estonian CIT

This is the name for the tax system in Poland, which involves paying corporate income tax in the form of one-time amounts upon withdrawal of funds from circulation, such as dividend payments. Therefore, until funds are withdrawn, the company is not obliged to pay taxes, and reporting is not required in this case.

Under Estonian CIT, the tax rate is 10% for new and small companies and 20% for others. And individuals receiving dividends can reduce their tax on their income by the amount the company has already paid (for new and small companies - by 90%, for others - by 70%). This is done to avoid double taxation.

Conclusion

Taxation in Poland provides many opportunities for business development. And Reloaction.io is always ready to understand and share useful information. We know everything about moving to Poland, opening, and running a business here. Contact us for questions about legalization, taxes, and benefits. Let's grow and build the future together!