Ministry of Family and Social Policy

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Types of taxes

In Poland, there are fifteen types of taxes which are divided into direct taxes (paid by a tax payer to the tax authority) and indirect taxes (paid when purchasing goods).

Direct taxes include:

1) personal income tax (PIT),

2) corporate income tax (CIT),

3) inheritance and donation tax,

4) tax on civil law transactions,

5) agricultural tax,

6) forest tax,

7) property tax,

8) tax on means of transport,

9) tonnage tax (levied on shipowners operating offshore commercial vessels in international shipping),

10) tax on the extraction of certain minerals,

11) tax on certain financial institutions,

12) tax on income subject to taxation in accordance with the principles set out in the Act on activation of the shipbuilding industry and complementary industries (tax on the value of production output sold),

13) retail sales tax.

Indirect taxes include:

1) value added tax (VAT – 23%, 8%, 5% and 0%),

2) excise duty,

3) gambling tax.

In the context of employment and conduct of economic activities in Poland, the most important taxes are the Personal Income Tax and the Corporate Income Tax.


Personal income tax

The most important tax for natural persons employed in Poland is the Personal Income Tax.

Income earned by natural persons is subject to the Personal Income Tax. If a tax payer earns income from more than one source in a given year, the sum of the income types from all sources in Poland and abroad is subject to taxation. Income gained by non-residents in Poland or by Polish residents abroad is subject to the provisions of the relevant agreements concluded by Poland on the avoidance of double taxation. Poland has signed such agreements with such countries as Austria, Germany, France and the United Kingdom. A full list of countries and agreements with them is available on the Ministry of Finance website.

Every person who resides in Poland must pay the tax on income earned. A person who resides in Poland means any person whose "centre of personal or economic interests" is located in Poland (e.g. he/she lives or works in Poland) or who stays in Poland for longer than 183 days a year. Such a person is a tax resident and is subject to taxation in Poland on the total amount of the income earned in a given year, both in Poland and abroad. A person who does not have a place of residence in Poland will pay his/her taxes in Poland only on his/her income received in Poland. Income is taxed in accordance with the principles set out in the agreements on the avoidance of double taxation concluded by Poland.

Income is taxable (revenues minus tax deductible expenses).

Tax deductible expenses are determined depending on the type of the revenues earned, e.g. for persons who earned revenues in 2020:

  • from employment – the basic expenses amount to PLN 3,000 (ca. EUR 660) a year and PLN 250 (ca. EUR 55) a month,
  • from contracts of mandate (umowa zlecenia) - the tax-deductible expenses are 20% of the revenues earned,
  • from copyrights – the tax-deductible expenses are 50% of the revenues earned, but the total annual expenses must not exceed PLN 85,528 (ca. EUR 18,835),
  • from economic activity – the tax-deductible expenses cover any costs which have been incurred in order to earn revenues or to maintain or secure the source of revenues, excluding the expenses listed in the Act as non-tax deductible.

The method for calculating the income tax depends on the source of revenues from which the income is earned. There are the following methods:

  • progressive tax scale with a degressive amount decreasing the tax due – natural persons whose income is taxed under general principles use a two-rate tax scale, with the tax rates of 17% and 32% in 2021, one tax threshold of PLN 85,528 (ca. EUR 18,835) and the amount decreasing the tax due which amounts to:
  • PLN 1,360 (EUR 299.50) – for the tax assessment basis below PLN 8,000 (EUR 1,840),
  • PLN 1,360 (EUR 299.50) minus the amount calculated as follows: PLN 834.88 (EUR 183.86) × (tax assessment basis – PLN 8,000 (EUR 1,7610) ÷ PLN 5,000 (EUR 1,101) - for the tax assessment between PLN 8,000 (EUR 1,761) and PLN 13,000 (EUR 2,862),
  • PLN 525.12 (EUR 115.64) – for the tax assessment basis between PLN 13,000 (EUR 2,990) and PLN 85,528 (ca. EUR 18,835),
  • PLN 525.12 (EUR 115.64) minus the amount calculated as follows: PLN 525.12 (EU 115.64) × (tax assessment basis – 85,528 (ca. EUR 18,835.44) ÷ PLN 41,472 (EUR 9,133) - for the tax assessment basis between PLN 85,528 (ca. EUR 18,835) and PLN 127,000 ( EUR 27,968).
  • PLN 0 where the tax payer’s annual income (tax assessment basis) is equal to or higher than PLN 127,000 (ca. EUR 27,968).

For calculating advance personal income tax payments (within a year), the amount reducing the tax due applies only to income which does not exceed the first threshold of the tax scale (PLN 85,528 – ca. EUR 18,835) and amounts to PLN 556.02 (ca. EUR 122) a year.

The progressive tax scale applies to inter alia income earned from hired labour (employment relationship, contracts of mandate and specific-task contracts), old-age and disability pensions, economic activity, lease and rental.

The final settlement of this income and the advance tax payments made on it is made after the end of the year in the tax return (PIT-36 and PIT-37) submitted by the taxpayer or in the annual tax assessment (PIT-40A) submitted for the taxpayer by the pension authority, if the pension is the only source of income for the taxpayer.

Tax payers who have their income taxed according to the progressive tax scale, upon meeting the requirements specified by law, following the request made in the PIT-36 or PIT-37 tax return may benefit from the joint taxation of income earned spouses or from preferential taxation of income earned by single parents.

Spouses who have chosen this taxation method calculate their tax due as the double amount of the tax calculated for a half on their joint income.

On the other hand, single parents calculate the tax under preferential rules in the double amount of the tax calculated on a half of their income;

  • PIT-37 and PIT-36 tax returns are submitted to the tax office between 15 February and the end of April of the year following the tax year, unless the taxpayer leaves Poland earlier. In such case, the tax return must be submitted before departure. 19% income tax on non-agricultural economic activity or special sections of agricultural production – income from non-agricultural economic activity or special sections of agricultural production (based on the accounting books) may be taxed with the tax rate of 19%. The profit (loss) is settled under a separate PIT-36L tax return to be filed by the taxpayer between 15 February and the end of April in the year following the tax year;

 

  • flat-rate methods of taxation for non-agricultural economic activity – taxpayers may also, upon meeting the requirements specified by law, choose one of the flat-rate methods of taxation of their income (revenues) from non-agricultural economic activity, i.e.

 

  • flat-rate tax on registered income: assessed with a specific tax rate on revenues earned; a separate tax return in this method of taxation should be submitted between 15 February and the end February of the year following the tax year;
  • tax card: the monthly amount is established by the head of the competent tax office; no tax returns are submitted in this case, but it is necessary to report the health insurance contributions paid and deducted in the annual tax return to be submitted by 31 January of the following tax year;
  • flat-rate method of taxation of revenues from lease and rental contracts - may be chosen by tax payers subject to meeting specific requirements specified by law. The tax rate is 8.5% on the revenues earned up to PLN 100,000 (EUR 22,022). The tax rate of 12.5% is charged on the surplus. A separate tax return is to be submitted between 15 February and the end of February of the following tax year;

 

  • 19% income tax on certain capital gains – the uniform tax rate of 19% applies to certain capital gains (e.g. from the sale of securities or derivative financial instruments for a remuneration), the profit (loss) from which is settled under a separate PIT-38 tax return which the taxpayer files between 15 February and the end of April of the year following the tax year;

 

  • 19% income tax on the sale of properties for a remuneration – the obligation to pay income tax of 19% on the income from the sale of properties for a remuneration comes into existence if the property is sold before the end of the period of 5 years starting from the end of the calendar year in which the property has been purchased or built, and if it is not part of economic activity; the income is settled under a separate PIT-39 tax return which the taxpayer files between 15 February and the end of April of the year following the tax year.

 

Income from the sale of real property for a fee is exempt from taxation if the respective revenues are used by the tax payer for his/her own housing purposes listed in the Polish tax regulations within 3 years after the end of the fiscal year in which the property was sold;

  • flat-rate income tax collected by the withholding agent – the tax applies to revenues (income) from e.g. winnings from lotteries, interests and discounts on securities, interests on cash (not related to the economic activity conducted) deposited in the bank account of the tax payer, participation in capital funds and dividends. Non-residents’ income earned in Poland from such sources as interest, copyrights and related rights, know-how, advisory services, accounting services, legal services and advertising services is also subject to lump-sum tax withheld by the tax remitter. As a rule, these revenues (income) are not settled in a tax return, as the respective tax is collected and paid by the withholding agent.

Taxpayers who carry out research and development activities as part of their economic activities may benefit from a preferential tax rate of 5% on their eligible income from eligible intellectual property rights.

For more information on the filing of tax returns by natural persons who are personal income taxpayers, see Section 5.4.


Corporate income tax

Corporate income tax is paid by:

  • legal persons,
  • organisational units without legal personality, excluding inherited companies and companies without legal personality; the taxpayers are capital companies in organisation,
  • limited partnerships and limited joint-stock partnerships with their registered office in Poland,
  • general partnerships with their registered office in Poland, if the partners of the general partnership are not exclusively natural persons and the general partnership does not file certain information or its update with the competent head of the tax office,
  • tax capital groups (i.e groups which consist of at least two commercial law companies with legal personality which operate under capital associations and meet the conditions specified by law),
  • companies without legal personality with their registered office or central management in another state, if they are treated as legal persons in accordance with the tax provisions of the that state and are subject to taxation on the total of their income in that state regardless of the place where the income is earned.

Tax payers with their registered office or central management in Poland are subject to taxation on the total of their income, regardless of the place where the income is earned. Tax payers which do not have their registered office or central management in Poland are subject to taxation only on their income earned in Poland.

Income tax is charged on income representing the sum of income from capital gains and income from other sources.

In principle, a surplus of total revenues earned from that source over the tax-deductible expenses achieved in a given tax year is deemed as income from a source of revenues. In the case of tax capital groups, a surplus of the total income of all companies from a given source of revenues over their total losses incurred on that source of revenues is the income from that source of revenues.

If the tax-deductible expenses exceed the sum of revenues (in the case of tax capital groups - if the sum of losses from a given source of revenues exceeds the sum of income from that source), the difference represents a loss from a source of revenues.

A taxpayer may use the loss to:

  • reduce the profit in the next consecutive five tax years, but the reduction any of the years must not exceed 50% of the amount of the loss, or

 

  • make a one-time reduction of the income from that source in the next consecutive five years by an amount of up to PLN 5,000,000 (EUR 1,101,127). If the loss incurred is higher, the amount that has not been deducted is subject to settlement in the remaining years of the 5-year period, but the reduction any of the years must not exceed 50% of the amount of the loss.

In the case of tax capital groups, losses incurred by a group are not covered from revenues of the respective group companies if the group agreement has expired or after the group has lost its status as a tax capital group. The group’s revenues are not used for covering losses incurred by groups companies before the establishment of the group.

As regards revenues from the share in profits of legal persons (e.g. dividends) and revenues of foreign entities from the license fees (e.g. interests), the tax is charged on revenues.

In the case of capital relations and other specific associations, it is possible to tax income by estimation.

A specific form of taxation, potentially available to a large group of taxpayers from 1 January 2021, is the lump sum on income of limited companies. This is a new method of taxation linking taxable income to categories of balance sheet law and involving a change in the time when the tax obligation arises. In contrast to the classic CIT rules, a lump sum on income of limited companies links the emergence of the tax obligation with the distribution of the profit generated, and not with the generation of income. As a rule, the subject of taxation under the lump-sum system is the effective distribution of profit from a limited company, including to its shareholder.

Polish tax law provides for a catalogue of specific tax exemptions, including for such taxpayers as unions, associations, foundations which pursue socially beneficial objectives listed in applicable regulations. For these taxpayers, the exemption applies to income which is used for performing the socially beneficial objectives specified in the national law. These objectives must correspond to the statutory objectives of these entities.

Taxable revenues include money received, pecuniary values, foreign exchange differences and the value of the items, rights or other services which have been received without a fee or for a partial fee. Regarded as revenues related to economic activity and special sections of agricultural production and revenues from capital gains (excluding revenues from participation in profits of legal persons regarded as revenues in fact earned from such participation) earned in a given tax year are also revenues due, even if not actually received yet, excluding the value of the returned items and discounts and allowances granted.

Tax deductible costs are costs which are incurred to generate revenues or to maintain or secure a source of revenues, excluding the costs (expenses) which are not deemed to be incurred to generate revenues, as listed in applicable provisions of law.

Costs directly related to revenues are credited towards the tax-deductible costs in the tax year in which the related revenues were achieved.

Costs other than costs directly related to the respective revenues are deducted on the date they are incurred. Should the costs refer to a period which exceeds the tax year and it is not possible to determine which part refers to the particular tax year, they are treated as tax deductible costs proportionately to the length of the period they refer to.

The tax base, established as the difference between taxable revenues and tax-deductible costs, is a profit reduced by donations granted to public tasks specified in applicable provisions of law.

Donations for entities which carry out such activities in an EU Member State or an EEA Member State other than Poland may also be deducted under the joint limit of 10% of the income.

Donations for charity and care activities under the Church Acts – up to 100% of the income – are also deductible.

The value of the expenses incurred for research and development activities, i.e. the part of the costs for research and development which have also been treated as tax deductible costs, may also be deducted from the tax base.

The tax is equal to 19% of the tax base. Beginning on 1 January 2019, there is a 9% corporate income tax rate addressed to small taxpayers and start-ups; it applies to income other than from capital gains, provided that the taxpayer’s revenues (regardless of the source) do not exceed EUR 2 million (expressed in PLN) in a given tax year.

In addition, beginning in 2019, eligible income from eligible intellectual property rights, e.g. patents, rights from registration of industrial designs and copyrights to computer software, may be taxed with a 5% corporate tax as part of what is known as IP BOX.

In addition, owners (co-owners) of fixed assets which are buildings located in Poland commissioned in whole or in part under rent, lease or other similar agreements pay the income tax on revenues from buildings amounting to 0.035% of the tax base for each month. The tax base is the sum of revenues from individual buildings minus PLN 10 million (EUR 2.2 million).

Tax payers and withholding agents do not submit tax returns during the tax year, but are obliged to pay monthly advance payments. Small taxpayers and start-up taxpayers have the right to pay income tax advance payments on a quarterly basis.

During the tax year, taxpayers can also settle their advance payments under the simplified scheme.

Taxpayers are obliged to submit their tax returns by the end of the third calendar month of the next year and, also by this date, pay the tax due or the difference between the income tax due as shown in the return and the sum of the advance payments due from the beginning of the year.