"ABC" OF THE ENTREPRENEUR – TAXATION OF BUSINESS ACTIVITY IN POLAND

Below, we briefly discuss the most important issue concerning taxation of business activity in Poland.

There is no doubt that taxes:

– are a vital component of the financing of the State and local governments;

– the tax system in Poland is complex and includes various types of taxation, which can have a diverse impact on a business.

Today we discuss the main forms of taxation of business in Poland.

Corporate income tax (CIT)

CIT is a tax on the income of businesses and capital companies, such as joint stock companies [spółki akcyjne] and limited liability companies [spółki z ograniczoną odpowiedzialnością]. Companies pay CIT on their net income, less various expenses and deductions.

The current rate of CIT is, as standard, either 19% or 9% of the tax base, in the case of the latter, if certain criteria are met. The lower rate applies to the taxation of income other than capital gains for businesses that start up (in their first tax year), as well as for 'small taxpayers'. One should remember that, unfortunately, it is not possible to apply the CIT rate of 9% in the case of companies that have been established as a result of restructuring, the conversion of a natural person or a company that is not a legal person into another type of business, and when a business with a value of more than EUR 10,000 has been contributed to the company.

Personal income tax (PIT)

PIT applies to sole traders. PIT rates vary and depend on the level of income. The current provisions of the Personal Income Tax Act (Journal of Laws 2023, item 641), known as the PIT Act, provide for two tax rates:

• 12% for income not exceeding PLN 120,000,
• 32% for the excess over PLN 120,000.

This means that the second tax threshold does not apply to the taxpayer's total income, but only to amounts that exceed the PLN 120,000. Article 27 of the PIT Act explicitly indicates that the income tax is levied on the basis of its calculation according to the following scale:

• up to PLN 120,000 – 12% minus the amount reducing the tax,
• above PLN 120 000 – PLN 10 800 plus 32% of the excess above PLN 120 000.

Value Added Tax (VAT)

VAT is a value added tax that is levied on the sale of goods and services. The current VAT rate in Poland is 23%, but there are also reduced rates such as 8% and 5% for certain products and services. Entrepreneurs are required to be entered in the register of VAT taxpayers and then 'collect' the tax from customers and settle with the tax office.

Tax on civil law transactions (PCC)

The tax on civil law transactions (PCC) is a stamp duty that has replaced the fee applicable to contracts and other declarations of intent of a civil law nature. They include certain types of civil law transactions whose subject matter has not been subject to VAT.

Excise duty

Excise duty is levied on certain goods such as alcohol, tobacco, fuel and cars. Excise duty rates vary depending on the type of goods.

Real Estate tax

Real estate owners in Poland pay real estate tax. The rates of the tax are set by local governments.

Other fees and contributions

In addition to taxes, there are other fees and contributions, such as social and health insurance contributions, contributions to the Labour Fund and others, that every entrepreneur has to reckon with.

It is worth noting that there are various tax reliefs and exemptions that may be available to businesses in Poland, depending on the type of business and other factors. Entrepreneurs should learn about tax regulations and consult tax experts or tax advisors to be able to optimise their tax obligations and mitigate the risks associated with operating a business

In summary, taxation of business activity in Poland involves several different types of taxes that affect entrepreneurs. Understanding the taxes and tax regulations is key to doing business in Poland properly.