Poland distinguishes personal income tax (PIT) and corporate income tax (CIT). Residents of Poland and entities that have registered office in Poland are subject to taxation on all their income (unlimited tax liability). Otherwise, only the income earned in Poland is taxed (limited tax liability).
Employees, self-employed entrepreneurs and partners in partnerships (except for limited partnerships and general partnerships – in certain situations) are subject to PIT.
PIT taxpayers (except employees, who are always taxed on tax scale), can choose a form of PIT taxation:
- Tax scale – 12% up to an income of 120,000 PLN minus the amount decreasing tax, which is 3,600 PLN, and 10,800 PLN + 32% of the excess over PLN 120,000%.
- Flat rate tax – 19%.
- Lump-sum on registered income – various rates from 2% to 17% depending on the type of conducted business activity, but taxpayer cannot deduct deductible costs.
As of January 1, 2022, the tax-free amount is 30,000 PLN. Capital gains are taxed at a flat rate of 19%. The tax-free amount does not apply to this income.
Taxpayers whose income exceeds 1,000,000 PLN are required to pay a solidarity tax of 4% on the excess amount.
In Poland, the following entities are subject to CIT:
- legal persons;
- unincorporated organizational units with the exception of unincorporated partnerships, though including companies in organisation and limited joint-stock partnerships having their registered office or management board located within the territory of the Republic of Poland;
- tax groups of companies;
- unincorporated companies having their registered office or management board abroad, if they are regarded as legal persons according to the law of that foreign country, and are subject to taxation in that country, on their entire income, irrespective of the place where the income is generated.
The base tax rate of CIT is 19%. For small taxpayers, the reduced tax rate is 9% (except for the income from the capital gains), if their revenues for the last tax year did not exceed the PLN equivalent of 2,000,000 EUR.
The reduced tax rate can be appliable also to taxpayers starting a new business in their first tax year (if they have status of small taxpayer). Small taxpayer means a taxable person whose sales revenue (together with the amount of tax on goods and services due) did not exceed in the previous financial year the PLN equivalent of EUR 2,000,000.
The 19% rate is also applicable to:
- income from shares in controlled foreign companies (CFC);
- exit tax – in case of transferring assets outside of Poland, or changing the tax residency;
- income from dividends and on other revenue (income) from participation in the profits of legal persons having their registered office or management within the territory of the Republic of Poland.
Taxpayers of CIT, under certain conditions can be subjects to the flat-rate tax (so called “Estoński CIT”) in which tax is only paid upon the distribution of income. Flat-rate tax applies in particular to any income corresponding to the distributed profit, income from hidden profit, income from expenses unrelated to business activity.
Relevant conditions include, inter alia:
- the total operating revenue generated in the previous tax year did not exceed PLN 100,000,000;
- less than 50% of the revenue comes from passive income;
- the taxpayer employs, under an employment contract, at least 3 persons on a full-time basis, who are neither shareholders nor stockholders of that taxable person;
- does not own shares (stock) in the capital of another company, units in an investment fund or in a collective investment institution, rights and obligations in a company not being a legal person and other property rights in the scope of the right to receive benefits as a founder (funder) or beneficiary of a foundation, trust or other entity or a legal relationship based on trust;
- the shareholders are only natural persons.
The flat-rate tax is equal to:
- 10% of the taxable base – in the case of small taxpayer or taxpayer that started a new business;
- 20% of the taxable base – in any other cases.