TAXES IN POLAND
CORPORATE INCOME TAX (CIT)
Companies with legal personality pay corporate income tax. Taxpayers that have their registered office or their management board in Poland are liable to CIT on their world-wide income. If a corporate taxpayer does not have its registered office or management board in Poland, the tax is levied only on the income derived in Poland unless Double Taxation Avoidance treaties state differently.
The aggregate of all revenues, both financial and operational (with exceptions) net of deductible expenses, in a given tax year, constitutes the basis for the calculation of the taxation. The costs of a deductible tax are, generally, costs that are borne in order to generate revenue.
Some expenditure, however, is not as tax deductible (e.g. certain advertising and representation costs). Fixed assets and intangible property in full may be depreciated by taxpayers. Where their value is less than PLN 3,500 they can be deducted at the time when they are brought into use. Certain assets, such as land and works of art, cannot be depreciated.
Income, as calculated in accordance with the tax provisions, is taxed at the rate of 19%.
Income arising from a share in the 'gains' of a legal entity, with their registered office in Poland, including income from dividends, is taxed at a fixed lump-sum rate of 19%. This tax is withheld and remitted by the company paying the dividend. The dividend is paid to a foreign entity, the relevant double taxation treaty may provide a lower rate of withholding tax. Utilisation of the lower treaty rate will is conditional upon presentation of a "certificate of residence" issued by the tax authorities in the beneficiary's country.
Interest on loans constitutes a tax-deductible cost for the debtor when paid. For a creditor, interest is assessable when it is received. Interest paid to a person who has no residence or registered office in Poland is subject to withholding tax of 20%, unless the double taxation treaty fixes a lower tax rate. The person paying the dividend withholds and remits the tax.
Thin capitalisation restricting the ratio of debt to equity to 3:1. Interest paid on loans in excess of this ratio is not tax-deductible. These provisions apply when the loans are granted to a company by a shareholder owning at least 25 per cent of the voting shares; shareholders jointly owning at least 25 per cent of voting shares; another company, if the same shareholder owns at least 25 per cent voting shares in each of the companies.
Poland has introduced provisions dealing with a transfer pricing. If entities with common shareholding conclude transactions in circumstances differing from the market related transactions practice, resulting in a Polish entity disclosing less income than it would otherwise have done, the taxable income of the entity will be adjusted by non-arms length transaction. Moreover, if intangible services are the subject of such a transaction, and the price fixed by the parties differs significantly from the market value of the services, then the expenses incurred in the purchase of the services may disallowed for the purpose.
Taxpayers performing transactions with connected subjects and subjects domiciled, registered, or possessing their Boards of Directors in the territory or in a neighbouring country applying a harmful fiscal competition, are obliged to prepare and store the fiscal documentation covering detailed information concerning the appraisal of such transactions.
The duty of the documentation covers transactions between connected subjects, whose total sum (or its equivalent) resulting from the agreement or the total sum of liabilities required in the financial year and really paid during the said year exceeds the equivalent of:
- EURO 100,000 if the transaction value does not exceed 20% of the initial capital;
- EURO 30,000 in the case of rendering services, sales or making available intangible and legal values;
- EURO 50,000 in other cases.
The duty to prepare the documentation also covers the transaction, for which the payment is realised directly or indirectly for the subject domiciled, registered, or possessing its Board of Directors within the territory or in a country applying a harmful fiscal competition, if the total sum (or its equivalent) resulting from the agreement or the total sum of liabilities required in the financial year and really paid during the said year exceeds the equivalent of EURO 20,000.
VALUE ADD TAX (VAT)
Tax on goods and services (VAT) is a broad based tax levied on the sale of goods and services in Poland. An entity is required to register for VAT once its annual turnover on VATable transactions exceeds 40,000 PLN VAT is imposed on each supply of goods and services at a base or reduced VAT rate unless the transaction is exempt from VAT.
The base VAT rate is 23% and is charged on most goods and services.
The tax due to the Tax Office is calculated as the surplus of output VAT over recoverable input VAT included on purchase invoices.
Transactions between VAT taxpayers must be documented by a VAT invoice. Supplies to a natural person (i.e. not a VAT taxpayer) must be registered by a fiscal cash register, if the turnover with natural persons exceeds a specific threshold.
VAT owing is required to be paid by the 25th day of the month following the month in which the VAT obligation arose.
PERSONAL INCOME TAX (PIT)
An individual generally becomes a tax resident in Poland if he is domiciled in the country. An individual has his usual domicile in Poland when he is present in the country for at least 183 days in a calendar year. Tax residents are taxed on their world-wide income. Individuals temporarily present in Poland for more than 183 days may be taxed as non-residents if employed by a company established with a foreign participation, or by a Polish representative office of a foreign enterprise or bank.
A non-resident is an individual who does not reside in Poland for more than 183 days (except as noted above). Non-residents are taxed only on their Polish source income. Remuneration for employment carried out in Poland is considered Polish - source income, regardless of where the remuneration is paid. Poland has concluded a number of Double Tax Treaties with other countries, which permits avoidance of a double taxation of income.