Corporate income tax

In Poland, the corporate income tax (CIT) rates are:

• 19% standard rate
• 9% reduced rate

The reduced CIT rate of 9% can be applied for income, other than capital gains, if the taxpayer:

• is a small taxpayer (i.e. taxpayer whose value of sales revenue, including the amount of VAT due, did not exceed the amount corresponding to the PLN equivalent of EUR 2 million, in the previous fiscal year) or
• started its business activity, provided the establishment of the company doing business in Poland was not a result of transformation or merger (in the first tax year)

The tax period in Poland is the calendar year, ending either on 31 December, taxpayer may change the tax year starting and ending dates in articles of association.

The due date for filling the CIT return is by the end of the third month following the end of the year. The filing deadline cannot be extended. Polish tax residents are subject to taxation throughout the world, unless there is an appropriate double taxation treaty between Poland and which stipulates that foreign income is exempt from taxation in Poland. Foreign is exempt from taxation in Poland.

Non-residents are taxed only on income earned in Poland. Poland’s double taxation treaties may result in certain income not being subject to taxation in Poland regardless of its source.

There is a separation of income/loss derived from capital transactions (capital gains) from other sources of income/loss (also known as operating income/loss). Income and expenses related to each “basket” are disclosed separately. It is not possible to offset the income earned from one “basket” with the loss incurred in the other “basket.” Income in both baskets is taxed at a 19% CIT rate. In addition to share/equity transactions, the equity basket includes royalties, license fees and similar rights.

When doing business in Poland, a company is considered as a tax resident if it:

VAT

Polish VAT applies to the following activities:

• Supplies of goods and services within the territory of Poland
• Exports of goods outside the territory of the European Union
• Imports of goods from countries that do not belong to the European Union
• Intra-Community acquisitions of goods (imports from countries belonging to the European
• Union)
• Intra-Community supplies of goods (exports to the countries belonging to the European Union)

In Poland, VAT rates are the following:

• 23% standard rate
• 8% reduced rate
• 5% reduced rate
• 0% rate on exemptions

All resident registered companies doing business in Poland should apply for VAT registration, with the exceptions of companies that had annual turnover of less than PLN 200,000 annually, or they sell only goods and/or services that are exempt from VAT Tax.

A non-resident company doing business in Poland, established in another EU member state or in a third country, has to be registered for VAT in Poland if it has a permanent establishment in Poland from which, it can provide its services or goods, or when it carries out taxable transactions in Poland, for which it is not required to have permanent establishment, but they must pay Polish VAT.

Basic principles of calculation

As a general rule, output VAT is equal to input VAT minus output VAT (in other words, input VAT is deducted from output VAT).

Input VAT can be deducted from output VAT when a company doing business in Poland (with VAT status) receives an invoice for goods or services purchased. Input VAT cannot be deducted unless the purchased supply is related to VAT-taxable activities. In addition, the deductibility of VAT is limited by the VAT Law with respect to the purchase of certain goods and goods and services. In addition, subject to a number of conditions, output VAT may be reduced when receivables arising from sales subject to VAT become uncollectible.

Other taxes

Incentives

Investment incentives

Special Economic Zone is a special incentive that under certain conditions guarantees investors doing business in Poland a number of privileges, including tax exemptions and bonuses for projects contributing to competitiveness and innovation of local economies.

R&D incentives

The R&D incentive entitles enterprises doing business in Poland to reduce the tax base by costs spent on research and development activities. R&D activity is understood as creative work involving scientific research or experimental development work undertaken on systematic basis in order to increase knowledge resources and use of that knowledge to develop new applications. The R&D relief allows for deduction of 200% of R&D costs – firstly the costs are deducted as operating costs (100%), secondly, they are deducted from the tax base (revenue), also 100%. The list of specific costs eligible for the R&D credit is provided in the CIT/PIT regulations.

Young and elderly employees

In case of employees under 26 years old employment income up to 85,528 PLN per year is exempt from tax