2021 Tax Guideline for Poland

General rules on purchasing real estate by foreigners

The real estate investor can acquire Polish real estate by way of an asset deal (e.g. direct acquisition of real estate) or a share deal (e.g. acquisition of a corporation owning real estate) only after obtaining a permit from Ministry of Internal Affairs. Both legal and natural persons from European Economic Area and Switzerland are exempt from obtaining such permit (generally).

Asset deal

EEA/Swiss foreign persons (natural or legal) may directly acquire real estate in Poland, except:

• areas close to state borders,
• farmland with the area exceeding 0.3 ha.

Asset deal is subject either to Transaction Tax or VAT (depending on the status of supplier).

Share deal

Foreign investor that acquired a Polish corporation that owns any real estate require a permit. The permit is not required for investors from EEA/ Switzerland.

Share deal is subject to Transaction Tax.

Limitation in acquiring farmlands

On May 1^st, 2016 entered into force the Act on Shaping Agricultural System, which substantially restricts the purchase of farmlands. For example, in case farmland is being sold the following subjects will have the pre-emptive right to buy it: the tenant of the sold property, its neighbour and the State Farmland Agency.

Legal forms of business

The form of business		The minimum capital	Tax treatment	Tax rates
English	Polish
General Partnership	Spółka Jawna (sp.j.)	N/A	Income tax base is calculated at the level of partners; tax is levied at the level of the partners.	Tax transparent vehicle
Professional partnership	Spółka Partnerska (sp.p)	N/A	Income tax base is calculated at the level of partners; tax is levied at the level of the partners.	Tax transparent vehicle
Limited Partnership	Spółka Komandytowa (sp. k.)	N/A	Income tax base is calculated at the level of partners; tax is levied at the level of the partners.	Tax transparent vehicle
			From 2021 – Non-transparent, dividends subject to tax.	19%/9%
Joint-stock Partnership	Spółka Komandytowo-akcyjna (s.k.a.)	PLN 50,000	Non-transparent, dividends subject to tax.	19%/9%
Limited Liability Company	Spółka z ograniczoną odpowiedzialnością (sp. z o.o.)	PLN 5,000	Non-transparent, dividends subject to tax.	19%/9%
Joint Stock Company	Spólka Akcyjna (s.a.)	PLN 100,000	Non-transparent, dividends subject to tax.	19%/9%
Simple Joint Stock Company	Prosta Spółka Akcyjna (p.s.a)	1 PLN	Non-transparent, dividends subject to tax.	19%/9%
Sole entrepreneur	Działalność gospodarcza	N/A	Tax liability of sole entrepreneur.	17% / 32% or flat rate 19%

Contribution for	Employee	Employer
Retirement pension contribution	9.76 %	9.76 %
Pension contribution	1.5 %	6.5 %
Sickness contribution	2.45 %	N/A
Disability pension	N/A	0.4% – 3.6% (applicable until 31 March 2018)0.67 % – 3.33 % (applicable from April 1st, 2018)
Health insurance	9 %	N/A
Employment Fund	N/A	2.45 %
Fund of Guaranteed Employment Benefits	N/A	0.1 %
TOTAL	45%	2.25%

Income and capital gains

Corporate income tax is levied at a rate of 19% (standard rate) or 9% (reduced rate for small taxpayers and new companies in the first year of business activity).

Withholding tax on domestic payments

Withholding tax of 20% is levied on income from interest, copyright or related rights, rights to inventive designs, trademarks and decorative designs, disclosing the secret of a recipe or production process, for the use or right to use an industrial device. The taxation may be diminished by application EU Directives or double taxation treaties.

Withholding tax of 19% covers payment of dividends, also in this case tax burden may be diminished by application of EU Directives or double taxation treaties.

Corporate income tax – general information

Residence

A company is treated as resident if it has its legal seat or place of effective management in Poland.

Taxable income

Resident companies are taxable on their worldwide income, including capital gains. The taxable income is computed on the basis of the accounting profits and is adjusted for several items as described in the tax law. Revenues are divided into two sources – business activity and capital gains.

Tax period

Tax settlement period for a corporate income tax is tax year. Standard tax year is 12 months, it can be similar to calendar year but also may be changed. Tax advances are paid throughout the year on a monthly or quarterly basis and reconciliated annually.

Tax returns and assessment

The taxpayer has to calculate and report revenues, tax deductible costs and tax due in the annual tax return (self-assessment). The deadline for filing the return is by the end of the third month following the end of the tax year. The filing deadline cannot be extended.

Tax advancement

Tax advances should be calculated and paid by the taxpayer on a monthly basis, quarterly in the first year, or if gross sales did not exceed EUR 1,200,000 in the previous year. Basis for calculation are current taxable revenues and tax-deductible costs, the taxpayer can choose to estimate the tax on the basis of tax year preceding the previous year (current year – 2).

Deductions

As a general rule, expenses incurred in connection to obtaining, ensuring and maintaining taxable income are fully deductible, unless they are listed as non-deductible items. Some items are deductible only up to a limit set by the law.

Carry forward of losses

Tax losses may be carried forward up to 5 tax years. During each year the company cannot utilize more than 50% of the loss. Loss from one source (business activity/capital gains) must be utilized within the same source.

Dividend payments

Dividends paid out of profits are taxed at 19% rate. However, exemptions from the EU Parent-Subsidiary Directive apply.

Incentives

Special Economic Zones

Whole territory of Poland is considered as a Special Economic Zone, however, depending on the region intensity of public aid is different. General rule is that depending on the volume of investment, number of employees and additional local requirements, the taxpayer may benefit from tax exemption. Conditions are established for each taxpayer by a special agency responsible for Special Economic Zone which after application procedure issues a decision granting exemption in the particular case.

Research and Development (R&D)

Polish CIT act provides for special taxation regime encouraging investments into new technologies. Main tool is special R&D relief based on which taxpayer can additionally deduct expenses on Research and Development (R&D), including development of prototypes and pilot projects, demonstration, testing and validation of new or improved products, processes or services whose main purpose is to improve the technical Encoding Products.

Another tax benefit dedicated to the investor is so called IP BOX, according to this regulation income derived from intellectual property can be preferentially taxed with 5% tax rate.

There are also other tax benefits introduced for different economic sectors and various legal forms.

International aspects

Resident companies

Foreign income and capital gains

Resident companies are subject to tax on their worldwide income and capital gains. Taxable amount is generally calculated in the same way as in the case of domestic income.

Foreign losses – Losses of foreign permanent establishment (calculated based on Polish tax rules) may be offset against domestic profits unless, on the basis of an applicable double tax treaty, the exemption method applies for double tax relief.

Dividend income paid by non-resident company

Dividends paid out of profits are taxed at tax rate of 19% unless rule implementing EU Parent-Subsidiary Directive applies.

Double taxation relief

No unilateral double taxation relief is provided. Double taxation is relieved only on the basis of tax treaties.

Non-resident companies

Taxable income

Non-resident companies are taxed only on income derived from Polish sources. They are generally taxed according to the rules applicable to residents. Income attributable to a Polish permanent establishment is generally taxed at 19% rate through a tax return (self-assessment).

Withholding tax

Generally, 19% withholding tax or tax security is levied (unless limited under a tax treaty). For interest and royalty payments EU Interest and Royalties Directive was implemented.

Dividend paid by resident companies to non-resident

Dividends paid out of profits are (unless rules implementing EU Parent-Subsidiary Directive apply) subject to a 19% final withholding tax, unless a reduced rate applies under a tax treaty.

Anti-avoidance rules

Thin capitalization

As a rule, deductibility of interest is limited to the amount of 30% of tax EBITDA increase by PLN 3 mil. This limitation applies to all costs of financing also from unrelated entities.

Controlled foreign company

Companies having seat in tax heaven, or in a country with no exchange of information, are treated as controlled foreign company.

The regulation refers also to companies established abroad deriving at least 50% of passive revenues like dividends, interests, copyrights, etc.

Part of CFC income attributable to Polish parent is taxable in Poland. Under certain conditions foreign company may be excluded from CFC rules.

Tax avoidance clause

From 2016 every artificial action consisting in the performance of an act primarily in order to achieve a tax advantage is defined as tax avoidance.

In case of tax avoidance, authorities may reclassify given transaction or action and establish new tax consequences. Penal consequences may be applied to the person involved in the tax avoidance.

Real estate companies

In 2021 the Polish CIT and PIT Act introduced a definition of a real estate company. A real estate company is a company having 50% asset‘s value consisting of real estate located on the territory of the Republic of Poland and the value of such real estate exceeded PLN 10 mio.

Real estate companies are obliged:

• to submit information on their direct and indirect shareholders
• act as an income taxpayer in case the seller of shares in this company is a non-resident and the subject of the sale are shares or stocks giving at least 5% of votes in the company
• appoint a tax representative when the company is not a tax resident in the EU or in another state belonging to the European Economic Area.

Report on the implementation of the tax strategy

Tax capital groups and taxpayers whose revenues exceed EUR 50 mil are obliged to prepare and publish on their website information on the tax strategy implemented for the previous tax year. This obligation must be fulfilled by the end of the twelfth month following the end of the tax year. It should be borne in mind that this obligation already applies to the year 2020, i.e. the first information must be prepared and published by the end of 2021.

Limited partnership

Since January 1^st 2021. limited partnerships have lost their status of tax transparent companies and will obtain the status of CIT taxpayer. In practice, this change is tax-neutral for general partners, while the income due to limited partners will be double taxed. Taxpayers will be able to postpone the CIT taxation of limited partnerships until 30 April 2021.

Transfer pricing

Since 2019 Polish transfer pricing regulations have been significantly amended.

Transfer pricing documentation requirements generally follow the recommendations contained in the OECD Guidelines on Transfer Pricing and the EU Code of Conduct on Transfer Pricing Documentation. In certain cases, country-by-country reporting applies.

You can find more information about Transfer Pricing in our eBook: Transfer Pricing Overview for Poland

Optional settlement methods

Estonian CIT

From January 1^st 2021, some taxpayers will be entitled to settle CIT in a manner following the Estonian solution. It means that the tax will be deferred until the profit from the company is paid (distributed).

In order to take advantage of this solution, the taxpayer will have to meet certain conditions, such as maximum income limit, appropriate shareholding structure, incurring investment expenses or keeping a certain level of employment.

Estonian CIT is characterized by a much simpler tax settlement model, a lower level of taxation and facilitated accumulation of capital.

Small taxpayers

A small taxpayer is a taxpayer whose sales revenue (including the amount of VAT due) did not exceed EUR 2 mio in the previous tax year. Small taxpayers are entitled to preferential treatment of quarterly tax settlement, the right to apply 9% tax rate and one-off depreciation of certain fixed assets.

Tax investment fund

Taxpayers meeting the same conditions as in the Estonian CIT are entitled to create and make deductions to a special investment fund account. The made deduction may be recognized as a tax-deductible cost.

The condition for the deduction to be recognized as a tax-deductible cost is to make an investment expenditure. In practice, this solution enables immediate depreciation of fixed assets.

Personal income tax – rates

The tax rates applicable for income derived in 2021 are:

• annual taxable income up to PLN 85,528 is taxed at 17%
• annual taxable income above PLN 85,528 tax is PLN 14,539 + 32%

Certain types of income are not aggregated but are subject to a flat rate tax of 19%.

Personal income tax – general information

Residence

Individuals who have their permanent residence or habitual abode in Poland are treated as residents. An individual has his habitual abode in Poland if he/ she is present in Poland for at least 183 days (in aggregation) in a calendar year (except individuals who stay there for the purposes of studying, receiving medical treatment, or who cross the borders of Poland on a daily basis or in the agreed upon intervals exclusively for the purposes of performance of his/her dependent activity, the source of which is located in the territory of Poland).

All other individuals are treated as non-residents.

Taxable income

Individuals who are residents for tax purposes in Poland are taxable on their worldwide income.

Taxable income of an individual is usually calculated by aggregating the separate net results of the following income categories:

• employment income
• business activity
• independent professional activities and income from the use of work and art performance
• rental income
• sale of real property
• income from capital;
• other income (e.g. income from occasional activities).

Specific exemptions and deductions apply for the purposes of determining the net result of each income category.

Tax period

Calendar year is settlement period for individual taxation.

Tax assessment

Taxpayers deriving income that is included in the aggregate income have to file an income tax return by April 30^th in the year following the tax year (self-assessment).

Losses

Tax losses generated from business activities and other independent professional activities may only be set off against income derived from those types of activity. Losses that could not have been set off may be carried forward for the maximum period of 5 years. Up 50% of loss may be utilized in a given year.

PIT advance payments

Individuals who conduct business have to make tax advance payments till the 20^th day of the following month.

In the case of employment income, the employer is obliged to remit the tax not later than on the 20^th day of the month following the month the wages were paid out.

Allowances

Personal allowances

The amounts of personal income tax and contributions owed in Poland are presented in the tables below.

Basis for tax calculation	Tax amounts to	Tax allowance
Up to PLN 85,528	17 % – amount decreasing the tax	minus the amount reducing the tax
Above PLN 85,528	PLN 14,539.76 + 32% of surplus over PLN 85,528.00	minus the amount reducing the tax

The tax-reducing amount mentioned in the table amounts to:

• PLN 1,360 – for a taxable base not exceeding PLN 8,000
• PLN 1,360 reduced by an amount calculated using the following formula: PLN 834.88 x (taxable base – PLN 8,000) ÷ PLN 5,000, for a taxable base higher than PLN 8,000 and not exceeding PLN 13,000
• PLN 525.12 – for a taxable base higher than PLN 13,000 and not exceeding PLN 85,528
• PLN 525.12 reduced by an amount calculated using the following formula: PLN 525.12 x (taxable base – PLN 85,528) ÷ PLN 41,472, for a taxable base higher than PLN 85,528 and not exceeding PLN 127,000.

In certain cases, for lower earners, a small personal allowance (tax free amount) can be claimed.

Income derived by the individual until 26 years old from employment contracts are not taxed.

Credits

In Poland childcare relief can be claimed. The standard deduction is PLN 1,112.04 per child (PLN 92.67 monthly). This relief is prorated in cases where the child was with the parent for only part of the year and covers:

• children under the age of 18
• children who have been granted care allowance under Polish regulations, irrespective of their age
• children under the age of 25 having the status of students

This relief may be applied under the condition that the child did not earn any income other than tax-exempt under Polish tax regulations, or a family disability pension, or other income in the amount that does not trigger a tax liability.

International aspects

Resident individuals

Foreign source income

Resident individuals are subject to tax on their worldwide income. Taxable amount is generally calculated in the same way as in the case of domestic income.

Dividend income

Dividends paid out of profits are subject to a 19% withholding tax, unless a reduced rate applies under a tax treaty.

Double taxation relief

Income earned from employment performed abroad is subject in Poland to tax credit (if DTT does not state differently). If DTT envisages exemption in Poland, taxpayer calculates tax only on the part of income derived in Poland. However, the tax is calculated using rate as if an entire income was taxable.

Non-resident individuals

Taxable income

Non-resident individuals are taxed only on their income derived from Polish sources. Employment income derived by non-residents from employment performed in Poland for a period not exceeding 183 days in 12 consecutive months is exempt. The exemption does not apply to activities performed by artistes or sportsmen, or through a permanent establishment. The income of non-residents is generally taxed according to the rules applicable to residents, unless a law or a tax treaty provides otherwise.

Personal allowances

Non-residents are entitled to personal allowance (see above). If certain conditions are met non-residents are entitled to the dependant-spouse allowance.

Withholding tax

Generally, 19% withholding tax or tax security is levied (unless limited under a tax treaty).

Dividend income

Dividends paid out of profits are subject to a 19% withholding tax, unless a reduced rate applies under a tax treaty.

VAT – rates

Standard rate: 23%, reduced rates: 8% and 5%.

Export of goods and services is zero rated.

Intra-Community supplies of goods are zero rated under certain conditions.

VAT – general information

Legislation

The VAT rules are based on the principles of the Council Directive 2006/112/EC on the Common System of Value Added Tax.

Taxable person

Legal entities and individuals that carry on an economic activity.

Taxable event

• supply of goods and services for consideration within the territory of Poland by taxable persons acting as such
• intra-Community acquisition of goods for consideration within the territory of Poland from another EU Member State and
• import of goods to Poland.

Taxable amount

Total consideration charged for the supply, excluding VAT but including any excise duties or other taxes and fees.

Tax period

Month or quarter (small taxpayers only).

Tax assessment

Periodical VAT returns (monthly or quarterly, by the 25^th day of the following month/quarter).

The amount of VAT liability consists of the VAT due on supply of goods and services carried out by the entrepreneur less input VAT of the same period. In addition, taxable person carrying out intra-Community supplies or supplying services according to the basic rule for B2B services has to file an EC Sales List (that shows the VAT identification numbers of his business partners and the total value of all the supplies of goods and services performed by the entrepreneur) on a monthly basis depending.

VAT registration

The threshold for mandatory VAT registration for taxable person with registered office, place of business or fixed establishment in Poland is sales turnover of PLN 200,000 attained in the period of 12 previous consecutive months.

Voluntary VAT registration is possible.  In case of intra-community acquisition of goods from another EU-Member state, the taxable person not registered for VAT has to register for VAT before the first transaction. A taxable person (not registered as a VAT payer) has to register and pay output VAT or to report the supply of service in EC Sales List if the place of delivery for that service is:

• following the Article 44 of the Directive 2006/112/EC
• located in another EU-Member state as is the EU-Member state of supplier of that service.

VAT registration is mandatory for foreign taxable persons without registered office or fixed establishment in Poland before it carries out activity which is subject to VAT in Poland and where the reverse-charge mechanism does not apply.

A foreign taxable person that makes distance-sales (mail order business) in Poland to any person that is not registered for VAT in Poland has to register for VAT in Poland before the net value of the goods reaches PLN 160,000 in a calendar year.

VAT group registration

Not available in Poland.

Taxes on capital

Transaction Tax (PCC)

Certain civil law transactions are subject to this tax, among others:

• Sale of things or rights
• Exchange of things or rights
• Loan
• Mortgage
• An Articles of Association.

The tax refers to non-professional transactions, when a transaction falls under VAT the tax does not apply.

Typically, the tax is levied as percentage of the value of transaction, e.g. sale of real property or loan are taxed at 2%.

Real estate tax

This tax is levied on land, buildings, apartment and constructions related to business activity. In case of business-related estates, the rates are higher. The maximum rate of the business land tax is PLN 0.99 per m2, whereas in a private case it’s PLN 0.52 per m2. In case of buildings, business related space is subject to the rate of PLN 24.48 per m2. Apartment space is taxed at PLN 0.85 per m2.

Municipalities may decrease these rates in accordance with local resolutions.

Other business-related taxes

Motor vehicle tax

Levied on motor vehicles and trailers in categories L, M, N, and O if registered in Poland and used for business purposes.

Excise duties

Excise duties are levied on mineral oil, beer, wine, spirits, electricity, coal, natural gas and tobacco products.

Customs duties

Goods imported from non-EU countries are subject to import customs clearance.

Sugar tax

Sugar tax is levied on the trade of beverages containing sugar, sweeteners, caffeine and taurine.