There are two most popular methods of employment in Poland: on employment agreement basis and on civil law agreements basis. The provisions of Polish Labour Code and other acts concerning labour law apply only to persons employed with employment agreements. Persons performing work under civil law agreements are legally not considered employees.

By establishing an employment relationship, an employee undertakes to perform work of a specified type for the benefit of an employer and under his supervision, in a place and at the time specified by the employer. At the same time, the employer undertakes to employ the employee in return for remuneration. It should be emphasized that employment under the aforementioned conditions is considered employment on the basis of an employment relationship, regardless of the name of the contract concluded between the parties. Employment contract cannot be replaced with a civil law contract where the performance of work conditions specified above remain intact.

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Employment characteristics

Employment contract types

There are three types of employment agreements in Poland:

Employment agreement for trial period

Employment agreement for definite period

Employment agreement for indefinite period

The agreement for trial period can be concluded for a maximum of 3 months. This type of agreement can precede employment agreement for definite or indefinite period.

The agreement for definite period can be concluded for a maximum of 33 months. Moreover, it is possible to conclude only 3 of such agreements in a row. The agreement which exceeds the total of 33 months or is a 4th agreement in a row will be considered as the agreement concluded for indefinite period.

All foreigners, EU, and non-EU residents can be employed on the basis of the same types of agreements as Polish citizens.

Non-EU residents

The foreigner has to obtain a work permit and possess legal basis to reside in Poland
in order to perform work in Poland. Such permit is issued on a request of employer by competent local authority (in Polish: wojewoda).

The procedure lasts approximately 2-3 months. Further, the work permit constitutes a basis to obtain working visa in the country of foreigner’s residence, that constitutes the legal basis to reside in Poland.

Citizens of Republic of Armenia, Republic of Belarus, Republic of Georgia, Republic of Moldova and Ukraine can perform work in Poland based on employer’s statement of intention to employ a foreigner.

The following conditions should be met:

  • the foreigner cannot work longer than 24 months on such statement
  • performed work cannot constitute seasonal work for which work permit is needed i.e. be performed for a period of not more than 9 months in a calendar year in the sectors of agriculture, horticulture, tourism as part of seasonal activities listed in the Regulation of the Minister of Family, Labour and Social Policy of December 8, 2017, on activity subclasses according to the Polish Classification of Activities (PKD), in which seasonal work permits for
    a foreigner are issued. The employer’s statement needs to be registered by Poviat Labour Office. The procedure takes approx. 9 days.
  • the Ukrainian citizens has been temporarily enabled to apply for legalization of their work through a simplified procedure adopted in connection with armed conflict between Russia and Ukraine. This procedure allows for the legalization of work on Polish territory on the based-on notification to the Poviat Labor Office. The employer is required to notify the Labor Office within 14 days since the commencement of work of Ukrainian citizen.

EU residents

The work permit is not required in case of citizens of EU and EEA and Switzerland. Residents of these countries are allowed to perform work under the same conditions as citizens of Poland. However, if the foreigner (EU resident) plans to stay in Poland longer than 3 months, he/she should register his/her stay in provincial office.

Employment contract minimums

An employment agreement should specify the parties of the agreement, registered seat of employer, the type of agreement, the date of its conclusion, as well as the work and remuneration conditions, including in particular:

The type of work

The place where the work is performed

The remuneration corresponding to the type of work, with a specification of the remuneration components

The working time

The starting date of employment

in case of an employment agreement for trial period shorter or equal to 2 months, the duration of the subsequent agreement for definite period intended to be concluded after the current agreement. 

Furthermore, the employer must inform the employee in writing, not later than within 7 days from the date of concluding the employment contract, about:

  • the standard daily and weekly working time binding the employee
  • the daily and weekly length of work binding the employee
  • the applicable breaks at work
  • the daily and weekly rest time entitlement of the employee
  • the rules related to overtime work and its compensation
  • in case of shift, work the rules on changing from shift to shift
  • in case of more than one workplace, the rules of moving between the workplaces
  • the other components of remuneration outside of employment agreement and other benefits in cash or in kind
  • the frequency of the remuneration payments
  • the length of payable leaves, especially annual leave to which the employee is entitled
  • the applicable rules on termination of the employment agreement, including formal requirements, the length of termination notice, and the deadline for appealing to the labour court
  • the rights to trainings
  • the length of the notice period binding upon the termination of the employee’s employment contract
  • the collective labour agreement the employee is governed by.

If the employer is not obliged to establish work regulations – they should additionally inform the employee about the night-time hours, the place, date and frequency of remuneration payments, and the adopted procedure of confirming the arrival and presence of employees at work, as well as the procedure of excusing their absence from work.

Additionally, the employer must inform the employee in writing, not later than within 30 days from the date of concluding the employment contract, about:

  • the name of the social security institutions to which the social security contributions relating to the employment are paid, as well as information about the protection associated with social security provided by the employer.

The remuneration in Poland cannot be lower than minimum wage, which is determined by the Council of Ministers each year. As of the 1st January 2024 the minimum wage amounts to PLN 4.242 gross.  Starting 1st July 2024 it will be increased to PLN 4.300 gross.

Termination of the employment

Alternatives

There are 3 methods of terminating employment agreement in Poland:

Termination by mutual consent

Termination with notice

Termination without notice

Notice period

The employment agreements can be terminated by notice given by each party. The termination notice period depends on the period of employment. Notice periods for definite and indefinite period agreements are the following:

  • 2 weeks if the employee was employed for less than 6 months
  • 1 month if the employee was employed for at least 6 months
  • 3 months if the employee was employed for at least 3 years

In case of agreement for definite and indefinite period, the employer’s notice of termination should state the reason justifying the termination.

The law in Poland does not provide the list of possible reasons, but according to Polish judicature, the reason should be real, concrete and understandable for employee.

In case of agreements for trial period, the periods of termination notice are the following:

  • 3 business days if the trial period does not exceed 2 weeks
  • 1 week if the trial period is longer than 2 weeks
  • 2 weeks if the trial period is 3 months

Termination without notice

An employer may terminate an employment agreement without notice:

  • in the event of a severe violation by the employee of the employee’s basic duties
  • if the employee commits an offence, which prevents further employment in the occupied job position – if the offence is obvious or has been convicted by a final court judgement
  • if the employee, through his/her fault, loses a license required to perform work in the occupied job position
  • if an employee is unable to work as a result of an illness:
    • for more than 3 months – if the employee has been employed with a given employer for less than 6 months
    • for longer than the total period of receiving remuneration and welfare and sickness benefits on that account, as well as receiving rehabilitation allowance for the first 3 months – if the employee has been employed with a given employer for at least 6 months, or if the incapacity to work was caused by an accident at work or an occupational disease
  • if an employee has any justifiable absence from work for other than aforementioned reasons, lasting for more than 1 month.

An employee may terminate an employment agreement without notice:

  • if he/she received a medical certificate declaring a harmful effect of the work performed on the health of the employee, and the employer, within the period determined in the medical certificate, fails to transfer the employee to another position appropriate for his/her health condition and corresponding to his/her professional qualifications
  • in the event of severe violation of employer’s basic duties, in such case the employee is entitled to compensation in the amount of remuneration for the notice period.

Contributions and income tax

The employer is obliged to pay monthly contributions to social and health insurance and advances on the income tax. The tax advance should be paid until 20th day of the next calendar month. The contribution to social insurance should be paid until 15th day or 20th day of the next calendar month (depending on the legal status of the remitter).

The amounts of personal income tax owed in Poland are presented in the table below.

Basis for tax calculation Tax amounts to
Up to PLN 120,000.00 12% – amount decreasing the tax PLN 3,600
Above PLN 120,000.00 PLN 10,800.00 + 32% of surplus over PLN 120,000.00

The amounts of contributions in Poland are presented in the table below.

Contribution Employee Employer
Retirement pension contribution 9.76 % 9.76 %
Disability pension contribution 1.5 % 6.5 %
Sickness contribution 2.45 % N/A
Accident contribution N/A from 0.67 % to 3.3 %
Health insurance 9 % N/A
Labour Fund N/A 2.45 %
Guaranteed Employee Benefits Fund N/A 0.1 %
TOTAL 22.71 % 19.48 % – 22.11 %

Working time and vacation

General requirements

Working time should not exceed 8 hours per day and an average of 40 hours per an average five-day working week. For the work performed in excess of the working-time standards employee is entitled to an allowance. If it’s justified by the type of work or the organization thereof, the employer can introduce the other working-time systems which allow to extend daily amount of working time. Specific requirements related to this matter are indicated in the Polish Labour Code.

Paid leave

An employee is entitled to an annual, paid vacation leave amounting to 20 days – if an employee has been employed for less than 10 years, or to 26 days if an employee has been employed for at least 10 years. In case of an employee who possess intermediate or severe level of disability, such employee is entitled to additional 10 days of annual paid vacation leave.

Periods of previous employment, regardless of intervals in employment and how the employment relationship ended, are counted into the employment period determining the right to leave and the length of leave.

Graduating from the following schools means the following periods are counted into the employment of period on which the length of leave is based:

  • basic or other equivalent vocational school – the duration of the education provided for by the syllabus, but not more than 3 years
  • secondary vocational school – the duration of the education provided for by the syllabus, but not more than 5 years
  • secondary vocational school for graduates of basic (equivalent) vocational schools – 5 years
  • middle comprehensive school – 4 years
  • post-comprehensive school – 6 years
  • school of higher education – 8 years.

The periods of education cannot be aggregated.

If an employee attended school while being employed, the employment period determining the length of leave includes either the duration of employment while attending school, or the duration of attending school, whichever is the more favourable to the employee.

In the event of changing the employer during the year, the employee is entitled to paid leave as follows:

  • with current employer – in an amount proportional to the period worked at this employer in the calendar year in which employment relationship ends, unless the employee has already used up or exceeded the leave he is entitled to
  • with new employer – in the amount:
    • proportional to the time remaining until the end of the calendar year – if the employee is employed for a period not shorter than up to the end of the calendar year, or
    • proportional to the employment period in the calendar year – if the employee is employed for a period shorter than up to the end of the calendar year.

An employee who has exceeded the leave he/she is entitled to during employment (with the prior employer), is entitled to leave with the new employer in an appropriately reduced amount. The total length of leave within a calendar year cannot be shorter than the amount resulting from the employment period, as indicated above.

Time off from work due to force majeure

This time off may be granted for 2 days or 16 hours per year, in urgent family matters caused by disease or accident (employee retains 50% of his/her remuneration).

Carer’s leave

This leave is unpaid and can be granted to employees for 5 days per year. It can be granted to provide care to a family member who requires support for serious medical reasons.

Sickness leave

For the period of an employee’s incapacity to work, the employee retains the right to the sickness remuneration. The sickness remuneration is due in amount of 100 % or 80 % of regular remuneration depending on the cause of the incapacity. The employer is obliged to pay the sickness remuneration for the first 33 days of incapacity in any given calendar year. If the incapacity lasts longer the employee is entitled to receive sickness benefit paid by social security institution for a period of up to 182 days, including the previous 33 days of sickness remuneration in this limit of days.

Unpaid leave

At the written request of an employee, the employer in Poland can grant unpaid leave to the employee. The period of unpaid leave is not counted into the employment period on which the employee’s rights are based.

When granting unpaid leave longer than 3 months, the parties may provide a possibility to recall the employee from leave for important reasons.

An employer can also grant an employee, with the written consent of the employee, unpaid leave to perform work at another employer for a period set out in an agreement concluded on this matter between the employers. The period of such leave is counted into the period of work on which the employee’ rights at the existing employer are based.

Temporary work

General aspects

According to Polish law, temporary work shall be understood as:

  • seasonal, periodic, or casual work; or
  • work that the employees of the user-employer would not be able to perform on time; or
  • work that falls within the scope of duties of an employee of the user-employer who is absent.

The legal scheme of temporary employment is the following:

a temporary work agency concludes a contract with a user-employer setting forth the rules of leasing of the temporary employee

the temporary work agency employs a temporary employee

the temporary work agency assigns the temporary employee to perform temporary work for the user-employer

It shall be stressed out that the temporary employee remains the employee of the temporary work agency at all times. But it is the user-employer who instructs the temporary employee and subsequently supervises his work.

It shall be noted that unless regulated in Act on Employment of Temporary Workers otherwise, the provisions of the Labour Code and other labour laws concerning the employer and the employee apply accordingly to temporary work agency, temporary employee, and user-employer. The only exception is the regulation related to group redundancies.

Minimum requirements and limitations

The temporary work agency should agree with the user-employer in writing, at least on the following:

  • the type of work to be entrusted to the temporary employee
  • the qualifications required from the temporary employee to perform assigned work
  • the expected duration of the temporary employment
  • the working hours of the temporary employee
  • the place of performing the temporary work
  • the scope of information regarding the performance of the temporary work that affects the level of remuneration for the temporary employee’s work, as well as the method and deadlines for providing this information to the temporary work agency in order to correctly calculate the employee’s remuneration
  • the extent to which the user-undertaking assumes the obligations of the employer with respect to health and safety at work
  • the extent to which the user-undertaking assumes the obligations of the employer with respect to payments to cover business travel expenses

The user-employer shall also inform the temporary work agency about the remuneration and its structure (bonuses, fees, additional payments) and also health and safety conditions.

The temporary work agency may not assign the temporary employee with temporary work for a single user-employer for a total period of work exceeding 18 months within a period of 36 successive months. The user-undertaking can use the temporary employee for not more than 18 months within a period of 36 successive months. 

There is an exception only in a situation when the temporary employee performs temporary work for the benefit of a given user-employer in a continuous manner, and the work includes performing the tasks of an absent worker of the user-employer. In such a case the temporary work can be performed for maximum of 36 months. The break between the employment for the same user-employer shall last at least 36 months.

Temporary work agencies – obligations

The activity of temporary work agency is regulated by Polish state. In order to conduct such activity each entity should register in the National Register of Employment Agencies kept by the marshal of the voivodship. In order to be registered as a temporary work agency the following conditions shall be fulfilled:

  • the entity cannot have tax, social security, health insurance and the Labour Fund, Guaranteed Employee Benefits Fund and the Bridge Pension Fund arrears
  • the entity cannot be criminally recorded
  • the entity cannot be subjected to bankruptcy or liquidation proceedings
  • the entity should have real not virtual office.

The employment agency has an obligation to provide the marshal of the voivodship with a report on the activities of employment agencies – within January 31st of each year for the preceding year – containing in particular the number of persons assigned to perform temporary work.

In the documents, announcements and offers the temporary work agency is obliged to disclose the registration number and label the job adverts for temporary employment as “temporary jobs”.

Employee capital plans

General information

Employee Capital Plans (PPK) is a voluntary pension saving system for all persons paying the social security contributions, regardless of the form of employment. This is a universal social program which aim is to increase the financial security of Poles.

Regulations concerning PPK are included in the Act on Employee Capital Plans from October 4, 2018. The participation in PPK is voluntary for the employees. They may resign from it based on a written declaration.  

On the other hand the employer is obliged to join the PPK in case it employs at least 1 person. There is only one exception for employers being microentrepreneurs, whose all eligible persons resigned from participation in PPK. Such employer is not obliged to join the program. However, such employer shall constantly observe whether it fulfils the requirements of allowed exception. The obligatory basic contribution is financed by both the employee and the employing entity’s funds.

The scheme below depicts the contribution rates:

Obliged entity The amount of payment
State Welcome Payment 250 PLN
State Annual Payment 240 PLN
Employer | Basic contribution 1.5% of basis of pension and disability insurance contribution
Employer | Additional contribution 2.5% of basis of pension and disability insurance contribution
Employee | Basic contribution 2% of basis of pension and disability insurance contribution
Employee | Additional contribution 2% of basis of pension and disability insurance contribution

Funds accumulated in PPK will be paid to the participant after reaching the age of 60 (the legislator introduced the same age for women and men in accordance with the principles of equal treatment in relation to voluntary pension schemes for employee). This payment will be divided into one-off payment (equal to 25% of accumulated capital) and the other parts (equal to 75% of accumulated capital) paid for the period of 10 years and divided in 120 monthly instalments.

Remote work

Remote work has been implemented to the Labour Code in April 2023. It means the work performance entirely or partially in the place designated by the employee (including under the employee’s address of residence) and each time agreed with employer.

Agreeing on remote work between employee and employer.

Remote work can be agreed:

  • during the conclusion of employment agreement, or
  • during the employment period (by changing the terms of the employment).

Legal basis of remote work

The fundamental legal basis for remote work.

The law introduced the obligation to specify the rules for remote work in:

  • an agreement between the employer and the company’s trade union
  • a regulation established by the employer – if no agreement is reached with the trade union and if there is no trade union at the employer’s (then the regulation would be established after consultation with employee representatives)
  • individual agreement with the employee regarding remote work, specifying its conditions.


Legal basis of remote work in connection with special circumstances.

Employer may instruct (not agree with) an employee to work remotely under special circumstances, i.e., during:

  • the state of emergency, epidemic state, or state of epidemic threat, and within 3 months after its cancellation
  • a period in which, due to force majeure (eg., fire or flooding of the workplace establishment) providing safe and hygienic working conditions at the employee’s current place of work will temporarily not be possible.

Employer’s main obligations connected with remote work

The employer is obliged to:

  • provide remote employees with work materials and tools, including technical devices, necessary for remote work
  • the law also provides for the possibility for the employee to use private work tools (e.g.,
    a computer) if both parties agree, provided that the employee’s private technical devices and other work tools used by the employee ensure work safety. In such a case, the employee is entitled to a monetary equivalent agreed upon with the employer
  • provide for the installation, service, maintenance of work tools, including technical devices, necessary for remote work, or cover the necessary costs related to the installation, service, operation, and maintenance of work tools, including technical devices, necessary for remote work, as well as the costs of electricity and necessary telecommunication services (costs of electricity and telecommunication services can be covered by the agreed lump-sum amount)
  • cover other costs directly related to the performance of remote work if such an obligation is specified in an agreement (concluded with trade unions) or a regulation (or in the absence of an agreement or regulation – in an instruction or agreement concluded with the employee)
  • provide remote employees with the necessary training and technical support
  • allow remote employees to be present at the employer’s premises, contact other employees, and use the employer’s premises and facilities, social facilities, and social activities (under the rules adopted for all employees).

Occasional Remote Work

Occasional remote work may be granted at the employee’s request (non-binding, the employer may refuse to consider it), for up to 24 days in a calendar year, due to its specific nature, some provisions regarding remote work do not apply (e.g., the obligation to provide work materials and tools). Applicability of Occasional Remote Work is based on the provisions of the labour law.

The upcoming legislative changes in 2024 regarding labour law

In the first part of 2024, it is highly likely that the Whistleblower Protection Act is going to be adopted in Poland. The Whistleblower Protection Act forms an implementation of EU Directive 2019/1937 of the European Parliament and Council of 23 October 2019 on the protection of persons who report breaches of Union law.

The adoption of a law regulating issues related to reporting violations, including the protection of whistleblowers who have become aware of a violation of the law in the context of their work, will require employers to take a series of actions, including implementing a violation reporting procedure. Failure or improper fulfilment of this obligation will be sanctioned with a fine. Employers will be required not only to develop and implement an internal procedure for reporting legal violations but also to take a series of follow-up actions, including conducting appropriate proceedings regarding received reports.

Overview of applicable legislation

  • Labour Code dated 26.06.1974
  • Act on promotion of employment and labour market institutions dated 20.04.2004
  • Act on minimum remuneration for work dated 10.10.2002
  • Act on personal income tax dated 26.07.1991
  • Act on social insurance system dated 13.10.1998
  • Act on employment of temporary workers dated 09.07.2003
  • Act on employee capital plans dated 04.10.2018
  • EU Directive 2019/1937 of the European Parliament and Council of 23 October 2019 on the protection of persons who report breaches of Union law.

The main types of companies in Poland are Partnerships (Registered Partnership, Professional Partnership, Limited Partnership, Limited Joint-Stock Partnership) and Capital companies (Limited Liability Company, Joint-Stock Company). There are also 2 other alternatives (Branch and Sole Proprietorship), but special conditions apply.

Download our 2024 guide on company formation in Poland, or read more below

Freedom of business activity

Freedom of business activity

Polish law stipulates the principle of freedom of business activity. This means that undertaking, pursuing, and terminating economic activity is free for everyone on an equal basis.

In some cases, running business requires consent of an appropriate authority, e.g., a license or a permit

This applies to the performance of economic activity in areas of particular importance for the security of the state or citizens, or other important public interest. Granting of a license or a permit may be subject to the fulfilment of specific conditions, for example, no criminal records of board members.

Foreigners

Citizens of the European Union and European Economic Area Member States who want to conduct business activity in Poland may:

Set up own sole proprietorship or any commercial company in Poland

Provide cross-border services – without registering business in Poland

Set up a branch or representative office of foreign entrepreneur in Poland

The EU member states are Austria, Belgium, Bulgaria, Croatia, Cyprus, Czechia, Denmark, Estonia, Finland, France, Greece, Spain, Netherlands, Ireland, Lithuania, Luxembourg, Latvia, Malta, Germany, Poland, Portugal, Romania, Slovenia, Slovakia, Sweden, Hungary, Italy.

The member states of the European Economic Area, apart from the EU member states, are Norway, Iceland, and Liechtenstein.

Citizens of the USA and the Swiss Confederation can establish a sole proprietorship, any commercial company, branch, or representative office in Poland.

Citizens of countries that do not belong to the European Union may:

  • Set up a sole proprietorship or any commercial company in Poland, if they have a residence permit that entitles them to do so
  • Set up a limited partnership, limited joint-stock partnership, limited liability, simple joint-stock company, and joint-stock company in Poland
  • Join a limited partnership, limited joint-stock partnership, limited liability, simple joint-stock company, and joint-stock company, and acquire and take up shares or stocks in these companies
  • Set up a branch of a foreign entrepreneur in Poland, if ratified international agreements signed with Poland do not exclude such a possibility

Registered Partnership

Minimum capital, minimum contribution

There are no requirements regarding the amount of company’s capital.

Business name

The business name of the Registered Partnership should include the surname or the business name of at least one partner.

Minimum documentation

In order to establish a Registered Partnership, the founders of the company have to adopt articles of partnership. The articles of partnership shall be made in writing, or else they will be invalid.

Next, the motion to the National Court Register should be prepared. The Registered Partnership is considered established from the date of its registration at the commercial register.

Details about shareholders

Each partner of a Registered Partnership is liable for the obligations of the company without limitation with all his assets jointly and severally with the remaining partners and the partnership. However, a creditor of the partnership may conduct execution from the partner’s assets only if execution from the assets of the partnership proves ineffective.

Each partner has the right to represent the company. The right of representation includes all acts in court and out of court and cannot be limited with effect towards third parties. The partner may be deprived of the right to represent the partnership only for significant reasons under a final and court decision.

Management of the affairs of the partnership may not be entrusted to third parties to the exclusion of the partners. Management of the affairs of the partnership may be entrusted to one or several partners under the articles of partnership or under a subsequent resolution of the partners. In such a case, the remaining partners are excluded from managing the affairs of the partnership.

Professional Partnership

Minimum capital, minimum contribution

There are no requirements regarding the amount of company’s capital.

Business name

The business name of the Professional Partnership should include the surname of at least one partner.

Minimum documentation

In order to establish a Professional Partnership, the founders of the company must adopt articles of partnership. The articles of partnership shall be made in writing, or else they will be invalid.

Next, the motion to National Court Register should be prepared. The Professional Partnership is considered established from the date of its registration at the commercial register.

Details about shareholders

Only natural persons qualified to pursue liberal professions, i.e., legal advisers, notaries, doctors etc. can be partners of Professional Partnership.

A partner is not liable for the obligations of the partnership which arise in connection with the pursuit by the remaining partners of the profession in the partnership, or for the obligations of the partnership which arise as a result of acts or omissions of persons employed by the partnership under an employment contract or another legal relationship who have been guided by another partner in the provision of services connected with the objects of the partnership.

The articles of partnership may provide that one or more partners agree to be liable as a partner of a Registered Partnership.

Each partner shall have the right to represent the partnership individually, unless the articles of partnership provide otherwise. A partner can be deprived of the right to represent the partnership only for significant reasons under a resolution adopted by a majority of three-fourths of the votes in the presence of at least two-thirds of the total number of partners. The articles of partnership may provide for stricter requirements for such a resolution. Such depriving of a partner of the right to represent the partnership is effective from the date of registration of this fact in the commercial register.

The articles of partnership of a Professional Partnership may provide that the management of the affairs and the representation of the partnership be entrusted to the management board.

Limited Partnership

Minimum capital, minimum contribution

There are no requirements regarding the amount of company’s capital.

Business name

The business name of the Limited Partnership should contain surname or business name of at least one of the general partners. The surname of the limited partner may not be placed in the business name of the partnership or else that limited partner shall be liable to third parties like a general partner.

Minimum documentation

In order to establish a Limited Partnership, the founders of the company must adopt articles of partnership. The articles of partnership of a Limited Partnership shall be made in the form of a notarial deed.

Next, the motion to National Court Register should be prepared. The Limited Partnership is considered established from the date of its registration at the commercial register.

Details about shareholders

There are 2 types of partners in a Limited Partnership: general partners and limited partners.

  • A general partner is liable to the creditors for the obligations of the partnership without limitation
  • A limited partner is liable only up to the amount specified in the articles of partnership. Such amount is set up individually for each limited partner. The limited partner is released from liability up to the value of contribution made to the partnership

Unless the articles of partnership provide otherwise, the limited partner’s contribution maybe made in a value lower than this specified amount. However, a decision of the partners to release the limited partner from the obligation to make a contribution shall be invalid.

The Limited Partnership is represented by the general partners, who are not deprived of the right to represent the partnership under the articles of partnership or a final and non-appealable court judgement. A limited partner may represent the partnership only as a proxy.

The affairs of the company are managed by the general partners. A limited partner does not have the right or obligation to manage the affairs of the partnership, unless the articles of partnership provide otherwise.

Limited Joint-Stock Partnership

Minimum capital, minimum contribution

The minimum capital in a Limited Joint-Stock Partnership amounts to PLN 50,000. The nominal value of the share cannot be lower than PLN 0.01.

Business name

The business name of the Limited Joint-Stock Partnership should include the surnames of one or several general partners. The surname of a shareholder cannot be placed in the business name of the partnership or else that shareholder shall be liable to third parties like a general partner.

Minimum documentation

For establishing a Limited Partnership, the founders of the company must adopt a statute of the company. The statute of a Limited Joint-Stock Partnership should be made in the form of a notarial deed.

Next, the motion to National Court Register should be prepared. Like other partnerships, Limited Joint-Stock Partnership is considered established from the date of its registration at the commercial register.

Details about shareholders

In a Limited Joint-Stock Partnership there are 2 types of partners: general partners and shareholders.

  • General partners are liable for the obligations of the partnership without limitation, while the shareholders are not liable for company’s obligations.
  • The partnership is represented by the general partners, who are not deprived of the right to represent the partnership under the statute or a final and non-appealable court judgement. Any subsequent deprivation of a general partner of the right to represent the partnership should constitute an amendment to the statute and requires the consent of all the remaining general partners. A shareholder may represent the partnership only as a proxy.

Affairs of the company are managed by general partners. The statute may provide that management of the affairs of the partnership shall be entrusted to one or several general partners. An amendment to the statute depriving a general partner of the right to conduct affairs of the partnership or granting such right to a general partner who was previously deprived of such right shall require the consent of all remaining general partners.

Supervisory board

A supervisory board may be established in any Limited Joint-Stock Partnership. If there are more than twenty-five shareholders, the creation of a supervisory board is obligatory. The members of the supervisory board shall be appointed or revoked by the general meeting.

Under last year’s amendment to the Code of Commercial Companies, the powers and duties of supervisory boards have been increased, enabling them to request management bodies to prepare or provide any information, documents, reports, or explanations regarding the company.

Limited Liability Company

Minimum capital, minimum contribution

The share capital of a Limited Liability Company shall be at least PLN 5,000. The share capital of the company can be divided into shares of equal or non-equal nominal value. However, the nominal value of a share may not be lower than PLN 50. The shares may not be subscribed for the amount below their nominal value. The amount of contribution shall not be lower than the share capital.

Business name

There are no requirements regarding the business name of the Limited Liability Company.

Minimum documentation

In order to establish a Limited Liability Company, the founders of the company must adopt articles of association. The articles of association should be made in a form of notarial deed.

In contrast to the partnerships, capital companies can start their activity right after execution of the articles of association. Until the date of registration at the commercial register, capital companies are obliged to add to their business name the term “in organization” (in Polish “w organizacji”). After the registration, the companies obtain legal personality.

Also, the motion to the National Court Register must be prepared. Following documents should be attached to the motion:

  • Articles of association
  • Board statement that the contribution has been made by all shareholders in full
  • The list of shareholders
  • Resolution of shareholders on board appointment
  • The board members’ statements concerning their addresses for delivery and consent for appointment on the position of a board member
  • The document concerning full names and addresses for delivery or company’s name, or name and registered office of the members of the bodies or persons authorized to appoint the management board; if the shareholder is a legal person, it is required to provide full names and addresses for delivery of members of the body authorized to represent that legal person.

Details about shareholders

The shareholders of the Limited Liability Company can be natural persons, as well as companies. A Limited Liability Company cannot be formed solely by another single-shareholder Limited Liability Company. The shareholders are not liable for the obligations of the company.

Management board

The management board manages the affairs of the company and represents the company. The management board is composed of one or more members. Members of the management board are appointed and dismissed by a resolution of the shareholders, unless the articles of association provide otherwise. If the management board comprises several members, the rules for representation should be stipulated in the articles of association. If the articles of association do not include any provisions in this respect, representations in the name of the company may be made by two members of the management board acting jointly or by one member of the management board acting together with a commercial proxy.

Supervisory board

The articles of association may create a supervisory board or an audit committee or both. In companies where share capital exceeds PLN 500,000 and where there are more than twenty-five shareholders, the establishment of supervisory board or audit committee is mandatory. The supervisory board (or audit committee) consists of at least three members appointed and dismissed by a resolution of the shareholders. The articles of association may provide a different method of appointment and dismissal of members of the supervisory board. The supervisory board exercises permanent supervision over all areas of the activities of the company. However, the supervisory board does not have the right to give the management board any binding instructions with respect to the management of the affairs of the company. But, last year’s amendment to the Code of Commercial Companies strengthens the position of supervisory boards by granting them the power to request management bodies to prepare or provide any information, documents, reports, or explanations concerning the company. Whereas the acquisition of new information by the supervisory board from the management boards of companies, will result in the imposition of new obligations on it with regard to the analysis of this information.

Joint-Stock Company

Minimum capital, minimum contribution

The minimum amount of share capital in Joint-Stock Company is PLN 100,000. The share capital shall be divided into shares of equal nominal value. Nominal value of the share may not be lower than PLN 0.01.

The shares subscribed for in-kind contributions shall be paid in full not later than within a year from the date of registration of the company.

The shares subscribed for cash contributions shall be paid prior to registration of the company to the extent of at least one fourth of their nominal value.

If the shares are subscribed solely for in-kind contributions or for in-kind contributions and cash contributions, the share capital shall be paid in prior to registration to the extent of at least one fourth of its amount.

Business name

There are no requirements regarding the business name of the Joint-Stock Company.

Minimum documentation

In order to establish a Joint-Stock Company, the founders of the company must adopt statute of the company. The statute of the Joint-Stock Company should be made in a form of notarial deed.

Establishment of a Joint-Stock Company also requires the consent to the formation of the Joint-Stock Company and the wording of the statutes, as well as to the subscription for the shares. The consents should be adopted in a form of one or more notarial deeds.

Also, the motion to National Court Register must be prepared. Following documents should be attached to the motion:

  • Statute
  • Notarial deeds on the formation of the company and subscription for the shares
  • Statement of all members of the management board that the payments towards the shares and the in-kind contributions required under the statute have been legally made
  • Confirmation, certified by a bank or an investment company, of payment for the shares made to the account of the company in organization or, in the event of coverage of share capital by in-kind contributions after the registration, the statement of all board members that payments of the contributions within statutory period is ensured by the statute
  • Document confirming that the governing bodies were formed with details about members of the bodies
  • The board members’ statements concerning their addresses for delivery and consent for appointment on the position of a board member
  • The document concerning full names and addresses for delivery or company’s name, or name and registered office of the members of the bodies or persons authorized to appoint the management board; if the shareholder is a legal person, it is required to provide full names and addresses for delivery of members of the body authorized to represent that legal person.

Details about shareholders

The shareholders of the Joint-Stock Company can be natural persons, as well as companies. A Joint-Stock Company may not be formed exclusively by a single-shareholder Limited Liability Company. The shareholders are not liable for the obligations of the company. The shareholders are not liable for the obligations of the company.

There are two kinds of shares: registered shares and bearer shares. The registered shares indicate the shareholder. The registered shares certificate can be issued before making a full payment. The statute can state that the sale of registered shares requires a consent of the company or limits such sale in a different way. The bearer share does not indicate entitled party, which is the holder of the share certificate. Such share cannot be issued before the full payment. Sale of the bearer shares cannot be limited. The change of the ownership of the bearer share requires handing over the share certificate.

Upon the request of shareholder, registered shares can be changed to bearer shares (or vice versa), unless the law or the statute provide otherwise.

Management board

The management board manages the affairs of the company and represents the company. The management board is composed of one or more members. Members of the management board are appointed and dismissed by the supervisory board unless the statute provides otherwise. The board member can be dismissed or suspended also by the general meeting of the shareholders. The board members can be appointed for maximum 5 years term of office.

If the management board comprises several members, the rules for representation should be stipulated in the statute. If the statute does not include any provisions in this respect, representations in the name of the company may be made by two members of the management board acting jointly or by one member of the management board acting together with a commercial proxy.

Supervisory board

Establishment of a supervisory board in the Joint-Stock Company is mandatory. The supervisory board exercises permanent supervision over all areas of the activities of the company.

The supervisory board consists of at least three members (five in case of public companies) appointed and dismissed by the general meeting of shareholders. The statute may provide a different method of appointment and dismissal of members of the supervisory board. Members of the supervisory board can be appointed for maximum 5 years term of office.

The amendment to the Code of Commercial Companies strengthens the position of supervisory boards by granting them the power to request management bodies to prepare or provide any information, documents, reports, or explanations regarding the company. However, the supervisory board’s acquisition of new information from the management boards of companies imposes new obligations on it in terms of analysing this information.

Simple Joint-Stock Company

Minimum capital, minimum contribution

The minimum amount of share capital in Simple Joint-Stock Company is PLN 1. The shares have no nominal value, do not constitute part of the share capital and are indivisible.

The amount of the share capital is not specified in the articles of association. The provisions on amendments to the articles of association do not apply to changes in the amount of share capital.

The contributions shall be paid in full within three years from the company’s entry in the register.

Business name

There are no requirements regarding the business name of the Simple Joint-Stock Company.

Minimum documentation

In order to establish a Simple Joint-Stock Company, the founders of the company have to adopt articles of the association. The articles of association should be made in a form of notarial deed.

Establishment of a Simple Joint-Stock Company also requires the establishment of company bodies required by the law or the articles of association and making contributions by shareholders to cover the share capital.

Also, the motion to National Court Register must be prepared. Following documents should be attached to the motion:

  • Articles of association
  • A declaration of all members of the management board on the amount of the share capital
  • Declaration by all members of the management board that the contributions to cover the shares were made in the part provided for in the articles of association
  • If the appointment of members of the company’s governing bodies does not constitute a notarial deed containing the articles of association – proof of their appointment, specifying their personal composition
  • A list of shareholders signed by all members of the management board, giving the surname and first name or company (name) as well as the number and series of shares taken up by each of them
  • The board members’ statements concerning their addresses for delivery and consent for appointment on the position of a board member
  • The document concerning full names and addresses for delivery or company’s name, or name and registered office of the members of the bodies or persons authorized to appoint the management board; if the shareholder is a legal person, it is required to provide full names and addresses for delivery of members of the body authorized to represent that legal person.

Details about shareholders

The shareholders of the Simple Joint-Stock Company can be natural persons, as well as companies. A Simple Joint-Stock Company may not be formed exclusively by a single-shareholder Limited Liability Company. The shareholders are not liable for the obligations of the company. Shareholders are only obligated to perform the services specified in the articles of association.

Shares are not in the form of a document, and they are registered in the register of shareholders.

Management board

It is mandatory to establish a management board or board of directors.

The management board manages the affairs of the company and represents the company. The management board is composed of one or more members. Members of the management board are appointed and dismissed by the shareholders, unless the article of associations provide otherwise.

If a supervisory board has been established in the company, the members of the management board shall be appointed, dismissed, and suspended for important reasons by the supervisory board, unless the articles of association provide otherwise.

If the management board comprises several members, the rules for representation should be stipulated in the articles of association. If the articled of association do not include any provisions in this respect, representations in the name of the company may be made by two members of the management board acting jointly or by one member of the management board acting together with a commercial proxy.

Board of Directors

The board of directors manages the company’s affairs, represents the company, and supervises the conduct of the company’s affairs. It is composed of one or more directors.

Directors are appointed, dismissed and suspended by shareholders for important reasons by a resolution, unless the articles of association provide otherwise.

The articles of association, the rules of the board of directors or a resolution of the board of directors may delegate some or all the activities of the company’s business to one director or some directors (executive directors). Directors who are not executive directors (non-executive directors) exercise permanent supervision over the conduct of the company’s affairs.

If the board of directors comprises several directors, and the articles of association do not contain any provisions on this matter, two directors or one director together with a commercial proxy are required to make statements on behalf of the company.

Supervisory board

Establishment of a supervisory board in the Simple Joint-Stock Company is not mandatory. However, the articles of association may provide that, in addition to establishing a management board, the company must also establish a supervisory board. The supervisory board exercises permanent supervision over all areas of the activities of the company.

The supervisory board consists of at least three members appointed and dismissed by a resolution of shareholders. The articles of association may provide a different method of appointment and dismissal of members of the supervisory board.

The mandate of a body member shall expire on the date of the general meeting approving the financial statements for the first full financial year following the date of appointment, unless the articles of association provide otherwise for an indefinite period.

If the articles of association provide the appointment of a member of the body for a term of office, it shall be counted in financial years, unless the articles of association provide otherwise. In such a case, the mandate of the body member shall expire on the date of the general meeting approving the financial statements for the last year of the body member’s term of office, unless the articles of association provide otherwise.

The amendment to the Code of Commercial Companies grants the supervisory board the power to request management bodies to prepare or provide any information, documents, reports, or explanations regarding the company. However, the supervisory board’s acquisition of new information from the management boards of companies imposes new obligations on it in terms of analyzing this information.

Company registration via internet

Two ways of online registration

Currently, an application for company registration can be submitted in the National Court Register online only. It is not possible to submit a paper application. However, there are two methods of applying for registration with the National Court Register:

  • Via the S24 system – in the case of companies whose articles of association has been concluded in this system
  • Via the Court Registers Portal – in the case of companies whose articles of association has been concluded in a traditional form.

Types of companies that can be set up online (S24)

Registration of a company via Internet, in the S24 system, is a good form for the companies established by one person or those that have only standard provisions in their articles of association.

In the S24 system, it is possible to conclude an agreement and register:

  • Registered partnership
  • Limited partnership
  • Limited liability company
  • Simple joint-stock company

Registration process

The main condition for establishing a company in the S24 system is that all persons signing the articles of association and participating in its registration should have a qualified electronic signature, a trusted signature (ePUAP) or an electronic personal signature.

It is possible to use S24 portal after creating an account. To log in, it is necessary to provide login and password. Each person who will sign the registration application (each of the management board members

listed in the articles of association that is not suspended, or theirs representative), and shareholders or their representatives should have an account.

The system will notify which documents are needed and will guide through all stages of their preparation. S24 provides most of the model documents, but not all of them, for example, a declaration of the status of a foreigner should be prepared independently.

After correctly completing the previous steps, the S24 system will automatically transfer applicant to the electronic payment system.

After payment, the application will be sent to the registry court competent for the company’s seat. The court should verify an application within one day from the date of receipt. However, the verification time may be extended if the court asks for additional documents, e.g., if the shareholder is a foreign company (then a translated excerpt from the foreign company’s register along with an apostille may be required).

Advantages and disadvantages of registering a company via S24

Advantages:

  • All formalities related to the establishment and registration of companies may be done online
  • There is no obligation to visit a notary public, as opposed to setting up a company in a traditional way
  • The court fee is lower. Instead of PLN 600, it is PLN 350.

Disadvantages:

  • Fewer possibilities of adjusting the articles of association than in the case of using the services of a notary public
  • No possibility to modify the financial year
  • Share capital may be covered only with cash contributions.

Additional notifications

In addition to the registration of the company in the National Court Register, the following data should also be reported:

  • Supplementary information for the tax office, for example bank account numbers, information on the special status of companies, expected number of employees or place of business and detailed contact details, within:
    • 21 days from the date of entry of the company into the National Court Register
    • 7 days from the date of commencement of business activity – if it is planned to pay social security contributions.
  • Ultimate beneficial owner to the Central Register of Real Beneficiaries (CRBR),
    • the application should be made within 7 days from the date of entry into the National Court Register
    • the application must be signed with e-PUAP or qualified electronic signature by
      the board members/proxies according to company representation rules
    • the application must be submitted electronically – can be done by PoA.

Branch

Purpose

Foreign entrepreneurs can conduct business activity on the territory of Poland trough a branch. A branch can only conduct such activity which coincides with the scope of business activity of foreign entrepreneur. According to Polish law, the branch is considered a part of mother company, not an independent entity. However, the branch may hire employees on its own behalf.

Business name

The branch operates under the same business name as the mother company.

To the business name should be added the form of business of the mother company translated into Polish (e.g., LTD = spółka z ograniczoną odpowiedzialnością) and the term “oddział w Polsce” (in English: branch in Poland).

Minimum documentation

The branch can start conducting business activity after the registration in the National Court Register. The following documents should be attached to the registry motion:

  • Articles of association, statute, or other document on basis which the foreign entrepreneur conducts the activity
  • Excerpt for the register of foreign entrepreneur
  • Document stating name and address of the person entitled to represent foreign entrepreneur in branch.

Additional notifications

In addition to the registration of the company in the National Court Register, additional data must be submitted to the tax office, such as bank account numbers, information on the special status of companies, the expected number of employees or place of business, and detailed contact details. Applications must be made within the:

  • 21 days from the date of entry of the foreign entrepreneur’s branch into the National Court Register
  • 7 days from the date of commencement of business activity – if you intend to pay social security contributions.

Sole proprietorship

Purpose

The sole proprietorship is an alternative for establishment of a company. In this case natural person conducts business activity on his/her own behalf. Such entrepreneur is solely liable for obligations connected to business activity without limitation.

Registration

Natural persons who conduct business activity are registered in the Central Registration and Information on Business (CEiDG). The entrepreneur can register in CEiDG, tax office and social insurance institution (ZUS) with a single application. Such application can be submitted electronically by CEiDG website, sent by post to a selected municipal office or filed in person in selected municipal office.

Documentation

Together with the application, the entrepreneur shall provide a statement that he owns legal title to the real estates, with addresses already entered into the register (i.e., correspondence address and all addresses of conducting business, including main address of business and addresses of branches – if there are such). The legal title can be for example a property sales agreement or a lease agreement.

Such legal title is not attached to the registry motion, but the ministry responsible for economic affairs may request the entrepreneur to provide it within 7 days from receiving the request. If the entrepreneur will not provide it or changes the addresses in the register, the ministry can decide on erasing the entrepreneur from the register.

Incorporation time and fees

Incorporation time

All types of companies must be register at the commercial register held by district courts. The duration of the registration procedure depends on the relevant court. The procedure in Warsaw currently lasts approximately 2-3 weeks.

Fees

The court fee for registration of the company in the National Court Register amounts to PLN 600 or PLN 350 in case of registration via S24 platform.

Registration of a group of companies

Creation of a group of companies

In connection with the amendment of the provisions of the Polish Code of Commercial Companies, the rights of groups of companies were introduced to the Polish legal order.

A group of companies within the meaning of the new regulations should be understood as a parent company and a company or subsidiaries that are capital companies and follow a common strategy to pursue the common interest of the group of companies.

Decision to create a group of companies

In order to establish a group of companies, the partners or shareholders of a subsidiary should adopt an appropriate resolution specifying the parent company in its content. A resolution is passed by a majority of three-fourths of votes. However, it is possible to determine in the articles of association or the company’s articles of association a number of votes higher than the statutory number of votes necessary to adopt such a resolution.

Disclosure of accession of a subsidiary to a group of companies

Participation in a group of companies is disclosed in the National Court Register, and the application of the provisions of the law on groups of companies is possible only after disclosing this information in the register.

  • If the registered office of the parent company is in Poland – the management board of the parent company and the subsidiary notify the registry court of the fact of joining the group of companies of the subsidiary
  • If the parent company has its seat abroad – the obligation to disclose in the register the fact of joining a group of companies rests only with the management board of the subsidiary.

Supervisory Board

The amendment to the Code of Commercial Companies, in force since last year, gave new powers and duties to supervisory boards of companies belonging to the group. When supervising a subsidiary, the parent company’s supervisory board may request the management board of a subsidiary participating in a group of companies to provide books and documents and to provide information for supervision. However, in the absence of a supervisory board in the parent company, its competencies will fall to the management board (or the board of directors in the case of a simple joint-stock company).

Company transformation

Unified Rules for EU Companies

In 2023, a new amendment to the Commercial Companies Code came into effect in Poland. The primary objective of this amendment is to incorporate into Polish law the Directive (EU) 2019/2121 of
the European Parliament and of the Council dated November 27, 2019. This directive amends Directive (EU) 2017/1132 concerning cross-border conversions, mergers, and divisions of companies.

The law, enacted on August 16, 2023, amends the Commercial Companies Code and certain other statutes, marking another crucial step in implementing the so-called “company law package” to deepen integration within the European Union’s single market.

In light of the implementation of regulations regarding new types of cross-border operations for companies, significant changes have been introduced concerning domestic types of company transformations. These changes expand the range of possible forms of reorganization. The aim of these modifications is to prevent the reverse discrimination of Polish entities participating in company transformation processes at the national level compared to entities participating in such processes at the cross-border level.

e-Deliveries for entrepreneurs

What are e-Deliveries?

e-Deliveries (“e-Doręczenia”) is a service that allows for sending and receiving correspondence electronically, with an effect equivalent to a registered letter with acknowledgment of receipt.

Who is required to have an e-Deliveries mailbox?

Entrepreneurs registered in CEIDG (Central Register and Information on Economic Activity) and in National Court Register are required to have an e-Deliveries (“e-Doręczenia”) mailbox.

When does an entrepreneur need to have an e-Deliveries mailbox?

Entrepreneurs are required to have an e-Deliveries(“e-Doręczenia”) mailbox based on the following timelines, depending on the registration date of the company in CEIDG or National Court Register:

  • companies registering their business in CEIDG from January 1, 2025, and in National Court Register from October 1, 2024, will set up e-Doręczenia mailboxes during the registration process
  • companies that registered or will register their business in CEIDG by December 31, 2024, must have an e-Doręczenia address by September 30, 2026
  • companies that registered or will register their business in National Court Register by September 30, 2024, must have an e-Doręczenia address from January 1, 2025.

Taxes on corporate income

Income and capital gains

  • 19% is the standard corporate income tax rate
  • 9% is the reduced rate for small taxpayers and new companies in the first year of business activity

Withholding tax on cross border 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.

For the following payments “pay and refund” mechanism is applicable:

  • To the related entities
  • Of interest, royalties, and dividends
  • In case yearly payment towards a certain contractor exceeds PL 2M.

Under this mechanism WHT rate needs to be withheld at a standard rate (19% and 20% respectively) and may be refunded on the later stage upon taxpayer’s/tax remitter’s application if according to Double Tax Treaty or EU Directives lowered rate or WHT exemption would be applicable.

In order not to apply pay and refund mechanism a tax remitter should obtain an opinion on WHT preferences or submit a statement.

Minimal income tax

Minimal income tax was supposed to be implemented from 2022, however it has been postponed until 2024. For the first time taxpayers will be obliged to calculate and pay minimal income tax for 2024 by the end of March 2025.

The regulation applies to corporations incurring a loss or whose share of income in revenue is less than 2%. Taxpayer will have the right to choose the way of calculating the tax base:

  • 3% of the revenues
  • 1,5% of the revenues and excess of debt financing costs exceeding 30% of tax EBITDA and costs of intangible services from related entities exceeding 5% of tax EBITDA over PLN 3 M

Tax rate is 10%.

Exempt will be i.a:

  • taxpayers in the year in which they set up their business and in the two following tax years
  • financial enterprises
  • small enterprises
  • companies if in one of the 3 years prior the current year 2% rentability ratio was exceeded
  • taxpayers, if their revenues are lower by at least 30% compared to the year preceding
  • taxpayers that are owned exclusively by natural persons and do not hold certain shareholding rights in other entities
  • taxpayers that are part of a group of at least two companies if the rentability of the group is greater than 2%
  • taxpayers in bankruptcy, liquidation or restructuring proceedings.

Flat tax rate on the revenue of capital companies
(the so-called Estonian CIT)

In this form of taxation, the company’s profit is not taxed as long as it remains in the company and is allocated for investment.

Estonian CIT tax is available to a certain  catalogue of entities. Estonian CIT tax rules may be applied by joint-stock companies, limited liability companies, limited partnerships, limited joint-stock partnerships, and simple joint-stock companies. There are some additional requirements in terms of investors’ structure (natural persons only) and minimal employment (3 employees).

If the entrepreneur decides to apply the Estonian CIT regulations, they will be applied for the next 4 tax years. If the entrepreneur does not resign from the flat-rate income tax during this period, the tax period based on these rules will be automatically extended by another 4 tax years.

Regime for holding companies

Holding company is a Polish entity with unlimited tax obligation, not benefiting from CIT exemption, running real business activity, having at least 10% of shares in companies with seat in countries other than tax heavens, not part of a CIT group.

Special method of taxation for holding companies assumes the CIT exemption of 95% of the amount of dividends received by the holding company from subsidiaries and under certain conditions full CIT exemption for profits from the sale of shares or stocks in subsidiaries.

Tax on transferred income

If advisory, royalties, debt financing, remuneration for transfer of functions, risks etc. costs exceed 3% of taxpayer’s costs, tax on transferred income may be due. Subsequent requirements concern:

  • Relations between entities (related entities)
  • Effective tax rate for related entity
  • Structure of costs/revenues/dividend in the related entity.

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 based on 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.

Tax advances

Tax advances should be calculated and paid by the taxpayer generally on a monthly basis. Quarterly payments are possible, in the first year or if gross sales did not exceed EUR 2,000,000 in the previous year. Basis for calculation are current taxable revenues and tax-deductible costs. In certain cases, a taxpayer may pay simplified advances monthly, being as a rule 1/12 of a tax paid in the tax year preceding the previous year (current year – 2).

Deductions

As a 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 incurred in a given year. Alternatively, a taxpayer may utilize PLN 5M of loss from a given year at once, whereas remaining part of loss will be settled compliant with general provisions. Loss from one source (business activity/capital gains) must be utilized within the same source.

Expected changes in income taxes

Based on Directive no 2022/2523 Poland will be obliged to implement global minimal tax (further: “Globe”).

Globe

The details of implementation of Globe into Polish tax system are not known yet (neither in terms of timing nor in terms of scope of taxation). The general concept of Globe is that the effective taxation of multinational companies (entities whose yearly consolidated revenue exceeds EUR 750 M) at the level of at least 15%.

Investment incentives

Special Economic Zones

Certain territory of Poland is considered as a Special Economic Zone, however, the intensity of public aid is different and depends on the region. 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 Research and Development (R&D) relief based on which taxpayer can additionally deduct expenses on R&Dincluding 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.

Polish Investment Sphere is a kind of tax relief for new investment based on the decision on support in Polish Investment Sphere (dedicated for industrial sector and sector of innovative services).

Another tax benefit dedicated to the investor is so called IP Box. Based on the IP Box provisions, income derived from intellectual property can be preferentially taxed with 5% tax rate.

Remaining preferences in the CIT Act are i.a.:

Tax relief for robotization

Tax relief for consolidation

Tax relief for trial production of a new product and its market placement

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

Our latest tax guideline for Poland is a comprehensive yet concise overview of Polish statutory framework and local entrepreneurial environment, prepared by our tax, accounting and legal experts.

We hope the new tax guideline will provide all necessary information for those who consider doing business in Poland, as well as for already existing businesses.

Download our 2024 tax guideline for Poland, or read more below

Legal forms of business

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 1st, 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. A foreigner from outside the European Economic Area (this area consists of the European Union countries, Iceland, Liechtenstein and Norway) or Switzerland who intends to purchase real estate in Poland should obtain a prior permit from the Minister of Internal Affairs and Administration.

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. 12 / 32% or flat rate 19%

2-17% lump-sum tax on registered income

Social and health security

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 0.67 % – 3.33 %
Health insurance 9 % N/A
Employment Fund N/A 2.45 %
Fund of Guaranteed Employment Benefits N/A 0.1 %
TOTAL 22.71% 19.48% – 22.14%

Taxes on corporate income

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 cross border payments

The term “withholding tax” is used to describe income tax (both corporate and personal) withheld by remitters whose permanent establishment (place of residence, seat, or the so-called foreign establishment) is in the country in which the income arises.

20% is the withholding tax rate, 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.

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

From 2022, a ‘pay and refund’ mechanism (including withholding tax at standard rates of 19%/20%) has been introduced in relation to certain categories of payments to related parties exceeding PLN 2 million.

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 2,000,000 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

Generally, 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. It is also possible to reduce the loss by an amount not exceeding PLN 5,000,000 at a time, the amount not deducted being settled in the remaining years of the five-year period, provided that the amount of the reduction in any of those years may not exceed 50% of the amount of the loss.

Dividend payments

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

Minimum tax

Starting from 2024, the minimum tax comes into effect.

The minimum tax will be paid by companies, tax capital groups and permanent establishments of foreign entrepreneurs, which in the tax year:

  • Incur a loss from a source of income other than from capital gains, or
  • Have a share of income from a source income other than from capital gains not less than 2%.

The tax rate is 10%.and the tax base is the sum of:

  • 5% of the value of the company’s income other than from capital gains (currently 4%)
  • costs of debt financing exceeding the value of 30% of the so-called EBITDA
  • costs of intangible services and royalties

With the alternative method, the rate is 3%. With this method, the tax base is the sum of income from the source of income other than capital gains earned by the taxpayer in the tax year.

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.

The relief is available to all entrepreneurs engaged in R&D activities and allows for a deduction from the taxable base:

  • 200% of personnel costs (for employees involved in research and development projects)
  • 100% of other qualified costs.

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

Taxpayers are required to exclude from their deductible expenses the cost of debt financing to the extent that the excess cost of debt financing exceeds either PLN 3 million or 30% of annual so-called EBITDA indicator. For its determination, an algorithm has been established:

[(P – Po) – (K – Am – Kfd)] × 30%, where:

P – summed up value of revenues from all sources subject to CIT;

Po – revenues of interest nature;

K – sum of tax-deductible costs without taking into account deductions to which one is entitled;

Am – depreciation write-offs included in the tax year to the tax deductible costs;

Kfd – debt financing costs included in the tax year to the tax deductible costs not included in the initial value of fixed assets and intangible assets, before taking into account deductions to which one is entitled.

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 33% of passive revenues like dividends, interests, copyrights, etc. In 2022, there was an expansion of the passive revenue catalogue to include intangible services provided, such as consulting, accounting, market research, legal, advertising, management and control, data processing, employee recruitment and acquisition services, and benefits of a similar nature.

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

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 mil.

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.

Real estate companies can only recognize depreciation up to the limit set for accounting purposes.  Depreciation and amortization payments made on buildings and dwellings are excluded from tax expenses.

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.

Limited partnership

Since January 1st 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.

Transfer pricing

At the turn of 2022, Polish transfer pricing regulations were significantly revised. Positive aspects of these changes include some simplifications for businesses, as well as the elimination of the statement on the preparation of transfer pricing documentation as a separate document. There has also been a change in the regulations on transactions with tax havens, in particular, the repeal of the regulations on indirect haven transactions and an increase in the documentation thresholds for direct haven transactions. Transfer pricing documentation requirements generally follow the recommendations of the OECD Transfer Pricing Guidelines and the EU Code of Conduct on Transfer Pricing Documentation. In some cases, country-by-country reporting is used.

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

Optional settlement methods

Estonian CIT

From 2021, a new system of taxation of capital companies was introduced into the Polish legal system, the so-called ‘Estonian CIT’. Estonian CIT changing the moment of tax payment. Currently, entities pay CIT on the income earned in a given tax year. In the Estonian CIT model, the tax will be paid only when the income is distributed, e.g., in the form of a dividend.

The law is addressed to capital companies that meet the following criteria:

  • The scheme can be used by joint-stock companies, limited liability companies, limited partnerships, and limited joint-stock partnerships.
  • The shareholders are exclusively natural persons.
  • The company has no shares in other entities.
  • The company employs, apart from the shareholders, at least three employees on the basis of an employment contract (or incurs monthly salary expenditures in the amount of at least three times the average monthly salary).
  • Passive income does not exceed 50% operating income of all company revenues obtained from its activities in the previous tax year, calculated including the amount of VAT due.

The lump sum on income is paid of the payment of profit and in a different amount than the standard CIT. For small taxpayers and for taxpayers starting business activity on these principles, it is 10% of the tax base. In the case of other taxpayers, it is 20% of the tax base.

Small taxpayers

A small taxpayer is a taxpayer whose sales revenue (including the amount of VAT due) did not exceed EUR 2 mil 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.

Holding Company

The purpose of introducing the institution of a holding company in the CIT Law is to encourage investors. The main condition for the use of this legal form will be that the holding company holds at least 10% of the shares in the subsidiary for a minimum of 2 year. The holding company should perform actual activities constituting business activity, including:

  • to have staff, premises, and equipment to conduct this activity,
  • function based on economic premises,
  • show proportionality between the conducted activity and the resources possessed,
  • enter into contracts and agreements that are economically feasible, economically justified and not manifestly contrary to the general economic interest of the entity.

The institution provides for tax preferences, such as a tax-free sale of shares and an exemption for 100% of dividends received.

Taxes on individual income

Personal income tax – rates

The tax rates applicable for income derived in 2024 are:

  • annual taxable income up to PLN 120,000 is taxed at 12%
  • annual taxable income above PLN 120,000 tax is PLN 10,800 + 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 30th 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. It is also possible to reduce the loss by an amount not exceeding PLN 5,000,000 at a time, the amount not deducted being settled in the remaining years of the five-year period, provided that the amount of the reduction in any of those years may not exceed 50% of the amount of the loss.

PIT advance payments

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

In the case of employment income, the employer is obliged to remit the tax not later than on the 20th 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 120,000 12% – amount decreasing the tax Minus the amount reducing the tax
Above PLN 120,000 PLN 10,800 + 32% of surplus over PLN 120,000 Minus the amount reducing the tax

The amount reducing the tax is PLN 3 600. The tax-free amount (the annual earnings limit on which no PIT is payable, provided the amount is not exceeded) is PLN 30 000.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.

Value-added tax

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 25th 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 42,000 (EUR 10,000) in a calendar year.

VAT group registration

As of 2023, the regulations governing the formation and operation of VAT groups in Poland came into force. This new tax law institution provides for a legal form of interaction between a group of taxpayers with close financial, economic and organizational ties, which, if they choose to do so, will be merged into one new taxpayer for VAT purposes.

In other words, in the case of several taxpayers with capital, business and personal ties, it will be possible for them to merge for VAT purposes in such a way that, from a VAT perspective, they will lose their previous separateness as VAT taxpayers independent of each other and become one new VAT taxpayer.

At the same time, all supplies of goods and services between members of the VAT group will be neutral for VAT purposes, and not as before these transactions were subject to normal documentation and settlement for VAT purposes, additionally taking into account the provisions on transactions with related parties.

On the other hand, supplies of goods and services by an entity in the VAT group to an entity outside the VAT group will be made by the VAT group. On the other hand, supplies of goods and services to an entity in the VAT group by an entity outside the VAT group will be made to the VAT group.

One-stop shop (OSS and IOSS)From 1 July 2021, an extended form of the MOSS procedure (an electronic system allowing businesses supplying to consumers (B2C) to declare and pay VAT), i.e. One Stop Shop (OSS) and Import One Stop Shop (IOSS) apply.

Under the EU’s OSS procedure, VAT due can be accounted for on:

  • services supplied to consumers in Member States where the supplier is not established (B2C);
  • Intra-Community distance selling of goods;
  • domestic supplies facilitated by operators of electronic interfaces, recognised as suppliers.

Under the non-EU OSS procedure, it will be possible to account for VAT due on services supplied to consumers in Member States (B2C).

Under the IOSS procedure, it will be possible to account for the VAT due on distance sales of imported goods (in a consignment of a value not exceeding EUR 150) to the Member State of consumption (various Member States, including PL), via the Member State of identification (PL).

The One-Stop Shop makes it easier for businesses selling goods and services to final consumers across the EU to fulfil their VAT obligations by allowing them to:

  • register electronically for VAT in a single Member State for all eligible sales of goods and services to final to customers located in all other 26 Member States;
  • to submit their returns to a one-stop shop for VAT and make a single payment of output VAT on all those sales of goods and services;
  • to cooperate with the tax administration of the Member State in which they are registered for the one-stop shop and to deal with them in a single language, despite the fact that they sell throughout the EU.

The National System of e-Invoices

KSeF, or the National e-Invoice System, can be called the central invoice database. It is an ICT system administered by the National Tax Administration for issuing and receiving structured e-invoices. Taxpayers can voluntarily use KSeF from January 1, 2022. The e-invoicing obligation was in principle supposed to come into effect on July 1, 2024, and for small and medium-sized VAT-exempt companies on January 1, 2025. However, it will be implemented at a later date. At the time of publication, the date is not yet known.

Other taxes

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 1,16 per m2, whereas in a private case it’s PLN 0.61 per m2. In case of buildings, business related space is subject to the rate of PLN 28,78 per m2. Apartment space is taxed at PLN 1,00 per m2.

Municipalities may decrease these rates in accordance with local resolutions.

Exit tax

The introduction of the exit tax into the Polish tax system, starting in 2019, is due to the obligation to implement Directive (EU) 2016/1164, adopted in 2016. An important premise of the exit tax is the taxation of unrealized gains in connection with the transfer of one’s assets to another country. Tax will also be due in the event of a change in the taxpayer’s residency status, which deprives Poland of taxation on income that arises in connection with the disposal of an individual’s assets.

The general idea behind the introduction of exit tax was to cover only assets with a value exceeding PLN 4 million. This applies in the case of transferring assets abroad.

The rate of exit tax is equal to 19% and 3%.

The change in the PIT is the extension of the exit tax deadline to:

  • the seventh day of the month following the month in which the taxpayer lost all or part of the assets subject to this tax, if the loss of all or part of the assets occurred before December 1, 2023, and.
  • December 31, 2023 in other cases.

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.

Employing expatriates in Poland or posting employees abroad brings a new set of obligations to any employer. Our Polish tax and labour law experts gathered all the crucial information related to cross-border employment for fiscal compliance, to provide you with a basic knowledge on the topic. Get an easy overview on expat tax in Poland, such as conditions for tax residency, personal income tax, social security and health insurance contributions or penalties for non-compliance.

Download our expat tax guide for Poland, or check out our brief infographic summary below

Overview of key facts related to expats in Poland

Our local tax, payroll and labour law experts are here to help you – as an expat or an employer – to obtain essential expert advice, so that you can effectively address all the matters related to cross-border mobility in Poland and other locations globally.

Tax residency

In Poland, tax residents are natural persons, who:

Have a centre of personal or economic interests (centre of vital interests) on the territory of Poland

They stay on Polish territory for more than 183 days in a tax year

Tax rate

Tax rate on income up to PLN 120,000
12%

%
Tax rate on income exceeding PLN 120,000
32%

%

Tax period

Calendar year

Social security contributions

Rate for the employer
20.48%

%
Rate for the employee
13.71%

%

Health insurance contributions

Rate
9%

%

From 2022, it is not possible to deduct health insurance contribution from tax to be pay.

Employee capital plans

Employee Capital Plan (PPK) is a pension saving system for the employees paying the social security contributions, regardless of the form of employment. This is a universal social program which aim is to increase the financial security of Poles. For the employer, the introduction of this program is mandatory (with exemptions), but the employee’s participation is voluntary. Employees can resign from participation in PPK by signing explicit declaration. If all employees resign and the employer falls within the definition of micro entrepreneur then it is not necessary to introduce PPK.

250 PLN welcome contribution from the state

240 PLN annual contribution from the state

Basic contribution of the employer
1.5%

%
Additional contribution of the employer
2.5%

%
Basic contribution of the employee
2%

%
Additional contribution of the employee
2%

%

Tax return filing

The due date for filing the tax return falls on the end of April, with no possibility to extend the deadline.

Penalties related to tax

Delayed filing of the tax return: from PLN 424.20 up to PLN 84,840 (to 30th of June) and from PLN 430 up to PLN 86,000 (after 1th of July)

Delayed payment of the due tax: from PLN 424.20 up to PLN 84,840 (to 30th of June) and from PLN 430 up to PLN 86,000 (after 1th of July)

Delayed or missing registrations at tax authorities: 5 years in prison or a fine up to about PLN 40,000,000, depending on the approach of the court

Delayed or missing report on monthly salary or withholding tax from salary: from PLN 424.20 up to PLN 84,840 (to 30th of  June) and from PLN 430 up to PLN 86,000 (after 1th of July)

Penalties related to social security

Not requesting an A1 form from the respective authorities: the same as the penalty for a delay with social security obligation and payment

Delayed report on social security: up to PLN 5,000

Delayed payment of the social security contributions: penalty interest is applicable

Delayed or missing registrations for the purposes of social security: from PLN 424.20 up to PLN 84,840 (to 30th of June) and from PLN 430 up to PLN 86,000 (after 1th of July)

Penalties related to health insurance

Delayed report on health insurance: from PLN 424.20 up to PLN 84,840 (to 30th of June) and from PLN 430 up to PLN 86,000 (after 1th of July)

Delayed payment of the health insurance contributions: from PLN 424.20 up to PLN 84,840 (to 30th of June) and from PLN 430 up to PLN 86,000 (after 1th of July)

Delayed or missing registrations for the purposes of health insurance: from PLN 424.20 up to PLN 84,840 (to 30th of June) and from PLN 430 up to PLN 86,000 (after 1th of July)

In general, Polish citizens, as well as Polish companies can purchase and sell real estates. Similar rules apply to citizens and companies from EU and EEA member states.

During the procedure of accession to European Union, Poland negotiated 12-year grace period of protection with regard to agricultural parcels. During this period EU residents were obliged to obtain a permit to purchase agricultural parcels. This protection period has ended in May 2016.

Nevertheless, there are still some restrictions concerning acquisition of the agricultural parcels. They apply to all potential purchasers, regardless the nationality.

Sale of agricultural parcels which are the state property has been suspended until April 30th, 2026. There are also restrictions concerning sale of agricultural parcels owned by private persons. Detailed rules of acquisition of agricultural parcels are presented below.

Download our overview on real estate transactions in Poland, or read more below

General information about real estate transfer process

The ownership of the real estate may be transferred by conclusion of several types of agreement, e.g.:

purchase

exchange

donation agreement

The agreement obliging to transfer the ownership of real estate must be executed in the form of notarial deed. The ownership of a real estate cannot be transferred conditionally or with a reservation of a time limit.

The common practice is to conclude preliminary agreement prior to conclusion of the main agreement. Legal consequences of such agreement will differ depending on its content and the form in which it was concluded. If preliminary agreement was concluded in form required for the main agreement (in this case notarial deed) entitled party may pursue conclusion of the agreement in court even if the other party refuses to fulfil its obligation. However, if preliminary agreement does not fulfil formal requirements, entitled party may only demand payment of compensation for the damage caused by the lack of conclusion of the agreement.

The ownership of the real estate may be also acquired by so-called usucapion (acquisitive prescription). In the event of adverse possession of a real estate (i.e. occupation without legal title), possessor of real estate acquires ownership of this real estate after specified period. The period depends on good faith of the possessor and amounts to 20 years – in case of good faith – or 30 years – in case of bad faith – of uninterrupted possession of the real estate.

Usual scenario of the real estate transactions and fees

Due diligence

The majority of real estate in Poland are disclosed in land and mortgage registers. The registers are held by district courts and are public. They may be viewed free of charge on the website of Ministry of Justice.

Prior to conclusion of the agreement the purchaser should verify the legal condition of real estate he/she intends to buy in land and mortgage register. To check the real estate’s register the purchaser will need its registry number. The purchaser should in particular check the information about the owners of the real estate and any possible rights of third persons in relation to the real estate, e.g.: mortgage.

Polish law guarantees the authenticity of the information disclosed in the land and mortgage register. It means that in case of acquisition of the ownership or other right ad rem to a real estate from the person disclosed in land and mortgage register as the owner, the acquisition is valid even if this person was not in fact the owner of the real estate. However, such protection does not apply to the purchaser who knew about the inconsistency of the register or could have easily learnt about such inconsistency.

If the real estate is not registered in land and mortgage register, the purchaser should check land and building records. These records do not contain information as detailed as the land and mortgage register. Nevertheless, they include all basic information, such as real estate’s owners, their addresses of residence or seats, cadastral value of the property etc.

Conclusion of the agreement

The agreement which transfers the ownership of a real estate has to be executed in the form of notarial deed or else it will be invalid.

Notary fee for preparation of a notarial deed depends on the value of sold real estate. However, the fee cannot exceed PLN 10,000.

The notary will also calculate due civil law transaction tax. The tax is paid to the notary at the conclusion of the agreement. The notary is obliged to transfer it to the relevant tax office.

Obligations after the purchase

After the conclusion of the agreement the purchaser of the real estate should file a motion for update information disclosed in land and mortgage register. The motion should be filed in the relevant district court. The court fee amounts to PLN 200. There is also a possibility to ask the notary to do it for us.

In the event of lack of land and mortgage register, the purchaser may establish such register for the purchased real estate. This also requires a motion to the district court with jurisdiction over the location of the property. The court fee in such case amounts to PLN 60.

The purchaser of real estate should also inform relevant municipal office about the change of the owner of the real estate in order to provide information about new payer of the property tax.

Limitations over the acquisition of the real estate

Acquisition of real estates by foreigners

Acquisition of real estate in Poland by foreigners is regulated by the Act on Acquisition of Real Estate by Foreigners dated March 24th, 1920 (Official Journal from 2017, position 2278).

According to this Act the foreigner is:

  • natural person not having Polish citizenship;
  • legal person having its seat abroad;
  • company without legal personality having its seat abroad, established by persons referred in point 1 and 2 in compliance with statutory law of foreign state;
  • legal person (or company without legal personality) having its seat in Poland, which is directly or indirectly controlled by persons indicated above.

Under the Act acquisition of perpetual usufruct requires fulfilment of the same conditions as acquisition of ownership.

The acquisition of real estate by a foreigner requires a permit. The permit is issued by the Minister of Internal Affairs. The Minister of National Defence or the minister competent for rural development (in case of agricultural parcels) have a right to oppose such acquisition.

The permit is issued upon the foreigner’s request if:

the acquisition of real estate does not threaten the defense or security of the state or the public order, as well as if the interest of social policy and public health do not oppose to such acquisition;

foreigner proves that there are circumstances which confirm his/her ties with the Republic of Poland (e.g. Polish nationality, marriage with Polish citizen, doing business in Poland in accordance with Polish law etc.).

Permit is also required in case of acquisition of shares in a company with its seat in Poland by foreigners, as well as any other legal action concerning shares of the company, if:

  • in the result of such action the company which is an owner or a perpetual usufructuary of real estate in Poland will become a controlled company or
  • if the company which shares are acquired is a controlled company and the shares are acquired by a foreigner who is not a shareholder of this company.

Acquisition of a real estate which violates the provisions of the Act on Acquisition of Real Estate by Foreigners is null and void.

Most of the limitations do not apply to residents of member states of European Union, European Economic Area and Swiss Confederation.

Acquisition of agricultural parcels

In general acquisition of agricultural parcel is reserved for so-called “individual farmers”.

Individual farmer is a term introduced by the Act on Shaping the Agricultural System dated April 11th, 2003 (Official Journal from 2022, position 2569) and means a natural person, who:

  • is the owner, perpetual usufructuary, autonomous possessor or tenant of agricultural land of total utilised agricultural area not exceeding 300 hectares,
  • possess agricultural qualifications (i.e. is educated in agriculture or has appropriate work experience in agriculture),
  • is residing in the municipality, on the territory of which the agricultural parcels are located for at least 5 years;
  • personally runs the farm for all the time stated above.

The acquisition of the agricultural parcels by persons who are not individual farmers is possible in particular in the following cases:

  • the purchaser is close relative of the vendor (which means descendants, ascendants, siblings, sibling’s children, siblings of parents, spouse, parents-in-law, adopters and adopted individuals, stepchildren, stepparents, and stepchildren)
  • the purchaser is a commercial company:
    • of which the sole shareholder or shareholder is the State Treasury, being the operator of the transmission system or holding a concession for the transmission of liquid fuels, within the meaning of the Act of April 10, 1997 – Energy Law
    • which is the operator of the gas distribution system within the meaning of the Act of April 10, 1997 – Energy Law, in the case of acquiring agricultural real estate for purposes related to the construction, modernization, or expansion of the gas distribution system
  • a capital company or capital group, as referred to in Article 1(1) of the Act of March 18, 2010, on special powers of the minister responsible for state assets and their exercise in certain capital companies or capital groups operating in the sectors of electric energy, crude oil, and gaseous fuels (Journal of Laws of 2020, item 2173), is entitled to acquire agricultural real estate for purposes related to the construction, modernization, or expansion of the infrastructure in the sectors of electric energy, crude oil, and gaseous fuels
  • the purchaser is an entity of local self-government or the State Treasury
  • the purchaser is a church or religious association
  • the purchaser is a national park – in case if the acquisition of agricultural parcel is associated with nature conservation
  • the purchaser is agricultural production cooperative
  • the entity that has sold agricultural real estate for purposes related to the construction of a marine wind farm within the meaning of Article 3(3) of the Act of December 17, 2020, on promoting the generation of electric energy in marine wind along with a set of devices for power extraction within the meaning of Article 3(13) of this Act, or has been expropriated for purposes specified in this Act – if acquiring agricultural real estate with an area not exceeding 150% of the area of the sold agricultural real estate within 3 years from the date of the sales agreement or within 3 years from the date when the decision on expropriation of the agricultural real estate became final
  • the purchaser is a person who has sold agricultural real estate for purposes related to the implementation of an investment in the construction of a nuclear power facility or an associated investment within the meaning of the provisions of the Act of June 29, 2011, on the preparation and implementation of investments in the field of nuclear power facilities and associated investments, or has been expropriated for purposes specified in this Act – if acquiring agricultural real estate with an area not exceeding 150% of the area of the sold agricultural real estate within 3 years from the date of the sales agreement or within 3 years from the date when the decision on expropriation of the agricultural real estate became final
  • the purchaser is Investor as referred to in Article 3a(2) of the Act of June 29, 2011, on the preparation and implementation of investments in the field of nuclear power facilities and associated investments
  • agricultural real estate has an area smaller than 1 hectare
  • inheritance of a real estate
  • acquisition of a real estate on basis of article 151 and article 231 of Civil Code
  • acquisition of a real estate in the course of restructuring proceeding
  • during enforcement and bankruptcy proceedings
  • as a result of abolishing co-ownership, division of marital property after the termination of marriage, and estate distribution;
    • as a result of the division or merger of commercial companies
    • as a result of the transformation of an entrepreneur or civil partnership into a commercial company based on the provisions of the Act of September 15, 2000 – Commercial Companies Code.

The acquisition of agricultural real estate by entities other than those mentioned above may also occur with the consent of the Director-General of the National Center, expressed through an administrative decision issued upon request, but only in specific cases defined by regulations.

Obligations of a purchaser of agricultural parcels

The purchaser of the agricultural parcel is obliged to run the farm, which was a part of acquired agricultural parcel for at least 10 years from the date of acquisition. If the purchaser is a natural person – he/she is obliged to fulfil this requirement personally.

During this 10-year period the acquired agricultural parcel cannot be sold or given into the possession of other person.

Priority right

The tenant of agricultural parcel, who fulfils requirements specified in the Act on Shaping the Agricultural System, has a priority in purchasing it. If there is no tenant entitled to priority right or if he/she does not exercise this right, the priority in purchasing the agricultural parcel is passed to the State Treasury.

The above rules do not apply if:

  • the purchaser is a person close to the vendor, an entity of local self-government or the State Treasury;
  • relevant authorities granted a purchaser a permission to acquire the agricultural parcel;
  • the sale is concluded between legal entities of the same church or religious association.

Exclusion of the application of the provisions of the Act on Shaping the Agricultural System

The requirements regarding the transaction of agricultural real estate introduced by the Act on Shaping the Agricultural System do not apply when the arable land area in the sold real estate is a maximum of 0.2999 hectares.

Real estate transfer taxation

As mentioned above, real estate can be sold either through a direct sale of the property (an asset deal or enterprise deal) or indirectly through sale of shares in the company owning the property (a share deal). These three types of transactions have different tax implications under the Polish tax regulations.

Asset deal

The revenues derived from the sale of real estate are subject to the standard taxation rules of Polish corporate income tax. Taxable revenues are reduced by the net book value of the property. Thus, effectively, only the “capital gain” is taxed at the rate of 19%. If the sales price differs substantially and without a justified reason from the market value of the real estate, the revenue may be assessed by the tax authorities according to the market value. This price adjustment may be applied to transactions between related and unrelated entities.

Costs incurred by the buyer for the acquisition of real estate: purchase price, transaction costs including advisory, civil law transaction tax – if applicable, financial costs accrued till the purchase, etc., are to be allocated to the initial value of the real estate and are recognized as tax deductible costs through depreciation write-offs or upon sale. As the value of the land is not subject to depreciation.

VAT on the sale of real estate

The supply of buildings, infrastructure, or parts of buildings or infrastructure is generally VAT exempt, except for:

  • the supply of a building, infrastructure or part of a building or infrastructure in the course of its first occupation or prior to it; and
  • the supply of a building, infrastructure or part of a building or infrastructure made within two years of the first occupation;

in which cases the supply of buildings, infrastructure or parts of buildings or infrastructure are generally subject to VAT.

“First occupation” is understood as handing over a building, infrastructure or part of a building or infrastructure within the context of the performance of VAT-able activities (subject to VAT or VAT exempt) to the first acquirer or user, after the:

  • initial completion; or
  • improvement (if the expenses incurred for the improvement constituted at least 30% of the initial value).

of that building, infrastructure or part of a building or infrastructure.

Taxpayers may choose not to apply the exemption and charge VAT if:

  • buyer and seller are VAT registered; and
  • before the day of supply they submit the appropriate joint statement to the tax office of the purchaser or include relevant statement in sales agreement.

The supply of buildings, infrastructure or parts of buildings or infrastructure which should be subject to VAT (i.e. supply in the course of first occupation or within two years of the first occupation) must be VAT exempt (no option to tax allowed) if:

  • the seller was not entitled to deduct input VAT; and
  • the seller did not incur improvement expenses on which he had right to deduct VAT, or such expenses did not exceed 30% of the initial value of the building, infrastructure or part of a building or infrastructure.

The VAT treatment of transfer of land or perpetual usufruct (RPU) over in general the VAT treatment of the buildings developed on the land.

However, if an RPU is acquired for the first time from the State or local authority, the transfer is always subject to 23% VAT, even though the buildings developed on the land may be exempt from VAT.

The supply of ownership title / RPU to undeveloped land qualified as land for development purposes is subject to 23% VAT (supply of agricultural land exempt from VAT).

Supply of residential buildings and separate apartments is subject to a reduced 8% VAT, except for part of residential buildings whose usable floor space exceeds 300 m2 and apartments whose usable floor space exceeds 150 m2. In such a case the part exceeding the thresholds is subject to a 23% VAT rate.

TCLT

If the supply of real estate is VAT exempt, it is subject to civil law transaction tax payable by the buyer. The applicable rate is 2% of the market value of the real estate. This tax is levied on the total value of the building, infrastructure, or parts thereof, and the land / RPU.

Recoverability of input VAT by the buyer

Input VAT is recoverable if the company performs or intends to perform activities in the future which are subject to VAT (e.g. lease of the commercial real estate). Input VAT will not be recoverable if the company performs or intends to perform activities in the future which are VAT exempt. If this is the case, the input VAT will increase the initial tax basis of the real estate.

If business activities are partly exempt, any input VAT which cannot be matched directly either to VAT-able sales or VAT exempt sales may be recovered according to the proportion of the net value of the taxed supplies to the total value of all supplies (a so called pro rata recovery). During a calendar year, the proportion is calculated based on the volume of supplies made in the previous year. At the year end, the amount of deductions is adjusted to the actual percentage calculated for the whole year. In the case of real estate subject to depreciation for tax purposes, the percentage of input VAT which may be deducted is subject to adjustments over the period of 10 years. Taxpayers also need to take into account so called preliminary pro-rata that limits input VAT recovery on purchases, if linked both with the business of the taxpayer and other activities not related with business operations.

Declaring input VAT for recovery

The right to recover input VAT arises in the period when the tax point with respect to the acquired goods or services arose (i.e. in the month in which the services were rendered, or the goods were acquired by the purchaser). It cannot be, however, recovered earlier than in the period in which the taxpayer receives the respective invoice (prepayment invoices do not fall under this rule: they must be paid in order for input VAT to be reclaimable).

Direct refund of input VAT

A direct refund of any surplus input VAT should be made within 60 days of the submission of the application for the refund provided that in the period for which the refund is claimed the taxpayer performed VAT-able supply.

This deadline can be shortened to 25 days at a taxpayer’s request when a number of conditions are met, such as providing bank payment proofs for invoices, invoices paid in cash amount to less than PLN 15,000 in total.

In the case where VAT-able supplies are not made in the period for which the refund is claimed. The period for the refund is extended to 180 days, unless a form of security is provided (in which case the refund must be made within 60 days).

Enterprise deal

The revenues derived from the sale of an enterprise are subject to the standard taxation rules of Polish corporate income tax. Thus, effectively, only the “capital gain” is taxed at the rate of 19%.

Verification of status of enterprise deal or organized part hereof

Enterprise is an organized complex of material and non-material components designed for carrying on an economic activity.

Organized part of an enterprise are material and non-material components organizationally and financially separated in an existing enterprise, including liabilities, being designed for the fulfilment of specific economic tasks, which at the same time could constitute an independent enterprise carrying out these tasks on its own..

According to clarifications of the Ministry of Finance on VAT consequences upon sale of commercial real estates, if beside typical items sold together with a real estate, rights and obligations from debt financing agreements, property management agreement, asset management agreement and agreements on financial nature are transferred as well as the intention of the purchaser is to continue the business activity of the seller and such continuation is possible via purchased items such sale will constitute an enterprise deal transaction.

VAT on the sale of enterprise or organized part of hereof

Sale of the enterprise or organized part of an enterprise is out of VAT scope.

TCLT

Purchase of enterprise or organized part of the enterprise is subject to civil law transaction tax payable by the buyer. The applicable rate is 2% of the market value of the real estate, movables, etc. Other property rights may be subject to 1% TCLT rate (if separated in the sales agreement).

Share deal

A capital gain on the sale of shares is subject to Polish corporate income tax at the standard rate of 19%.

If the selling party is a foreign shareholder, the applicable tax treaty influences the tax implications of such a transaction.

Significant part of Polish tax treaties (e.g. with Spain, France, Denmark, Sweden, Germany, Luxembourg) provide that a sale of shares in a company holding mainly real estate assets should be regarded as a sale of real estate. Consequently, income earned on the sale of shares in the Polish company will be taxed in Poland (the so called real estate clause).

The sale of shares in the Polish company is subject to a 1% civil law transaction tax (on the fair market value of shares) payable by the buyer. This is irrespective of where the transaction takes place or where the parties to the transaction are tax residents. A share transaction is not subject to Polish VAT. However, where a share transaction is treated as being made in the course of business activity (rather than as a one– off transaction), it may be classified as a VAT exempt financial service. However, it will still be subject to civil law transaction tax.

Costs which must be incurred in order to acquire shares (e.g. purchase price and notary fees) may be recognized as tax deductible costs upon the sale of shares.

Other costs indirectly connected with acquisition of shares such as financing costs may be recognized as tax deductible costs when incurred (in certain cases recognition over time may occur).

While in the realm of transfer pricing, the year 2024 will not bring groundbreaking changes, taxpayers will still be required to adhere to the existing regulations concerning the documentation and reporting of transactions. Increased scrutiny and growing interest from tax authorities in this area demand particular attention and precision in documentation from entrepreneurs. Business owners must be prepared to meticulously document transactions with related entities to avoid potential issues during tax inspections.
This is particularly crucial in the context of international business operations, where transfer prices may be a subject of heightened interest for tax authorities.

Below we present the key information in the area of transfer pricing in Poland.

Download the latest 2024 transfer pricing overview for Poland, or read more below.

Transactions subject to transfer pricing documentation

Entities shall be deemed to be related entities where, directly or indirectly, significant influence is exerted.

Significant influence according to the CIT Act means:

Direct or indirect holding of at least 25%:

  • shares in the capital
  • voting rights in the company
  • shares or rights to share in profits or assets or their benefits.

The natural person’s actual ability to influence key economic decisions of the legal person or a flawed legal person

Marriage or kinship or affinity to the second degree

Entities deemed as related are required to prepare transfer pricing documentation if the volume of individual transaction exceeds the value:

  • 10 000 000 PLN – in case of goods transaction
  • 10 000 000 PLN – in case of financial transaction
  • 2 000 000 PLN – in case of service transaction
  • 2 000 000 PLN – in case of other transactions

Regardless of the prerequisites for the existence of relationships between entities, transfer pricing regulations may be applied to transactions, agreements or undertakings with entities from tax havens:

  • exceeding PLN 2 500 000 – in case of financial transaction
  • exceeding PLN 500 000 – in case of transactions other than financial

Scope of transfer pricing documentation

The three-level concept

The general concept of the transfer pricing documentation has been maintained. The three levels of reporting consist of:

Local file + benchmarking study

Master file

Country by Country reporting

Local file + Benchmarking

Represents local documentation containing details of transactions or other events between the Polish company and other group companies disclosed in the accounting books.

The taxpayer is obliged to prepare transfer pricing documentation in the case of perform a controlled transaction with a related entity, if its value exceeds the threshold indicated in the Act.*

The local file shall include in particular:

  • Description of the taxpayer including description of the management structure and organisation chart
  • Description of the main activities of the taxpayer
  • Description of the transaction, including analysis of the functions, risks and assets
  • Information about related entities (parties to the transaction)
  • Transfer price calculation method
  • Benchmarking analysis or compatibility analysis (obligatory part under the new regulations)
  • Financial data
  • Description of any agreements or tax interpretations related to the transaction (including Advance Pricing Agreements)
  • The source documents (i.e. contracts).
  • Description of any agreements or tax interpretations related to the transaction (including Advance Pricing Agreements)
  • The source documents (i.e. contracts).

*PLN 2/10 millions

Benchmarking study is an analysis of the settlements between unrelated entities in transactions all over the market deemed as comparable to conditions established in controlled transactions. Benchmarking study is usually prepared based on specialized databases and market reports.

Comparability analysis’ goal is to prove that the terms and conditions under which the controlled transaction was executed comply with those which would have been determined by unrelated parties (transaction complies with arm’s length principle).

Entities obliged to prepare a TP documentation (local file + benchmarking study) are required to submit the statement that:

  • The documentation has been prepared
  • The prices applied to the controlled transactions are arm’s length.

Under the changes effective January 1st, 2022, the statement is included in the TPR return.

The taxpayers who execute both transactions subject to the documentation obligation and transactions exempted under Art. 11n (1) of Polish CIT Law are obliged to submit TP-R report.

Master file

Master file should be prepared by taxpayers:

  • Obliged to prepare TP documentation
  • Members of a group of companies that consolidate the financial data with a full or proportional method, if the consolidated group revenues exceed PLN 200 000 000.

The master file shall include the following:

  • Description of the entity preparing the documentation including the organizational structure
  • The Transfer Pricing policy
  • Description of the group’s business activity
  • The group’s financial situation
  • Detailed information on intellectual property (including especially the group strategy on creation, development and maintenance of intellectual property)
  • Description of any agreements concerning income taxes made between the group components and the tax authorities in other countries (including unilateral APAs).

TPR

The new TPR return requires the taxpayers to provide a detailed overview of transfer pricing surrounding, including the financial indicators, ratios and information of a given entity based on financial statements.

TPR is an obligatory part for entities which conclude controlled related party transactions fulfilling the criteria for transfer pricing documentation (simply, as a rule: if you are obliged to prepare Local File – then you have to submit TPR), as well as (in a limited scope) entities qualifying for the so-called domestic exemption under which they are not obliged to prepare transfer pricing documentation.

Country-by-country reporting (CbCR) and notification (CbCP)

The report on global allocation of income and tax within the group (required for groups in which the parent company consolidating the accounts is located in Poland). This document has to be filed by the holding company and if consolidated revenues of the group exceed EUR 750 mln.

The CBC-P is required to be submitted by each entity in the group to which the CbCR obligations apply. The CBC-P notification, under the new amended rules, can be submitted only electronically, with the deadline expiring within 3 months following the end of a tax year.

Exceptions

According to the current regulations, the following categories of transactions are not subject to Transfer Pricing documentation:

Concluded by related parties having their registered office, place of residence, seat or management on the territory of the Republic of Poland, as long as they:

  • do not benefit from tax exemption under the Act on Special Economic Zones
  • do not benefit from a CIT exemption
  • do not benefit from the tax exemption on the basis of the Act on Support for New Investments
  • have not incurred a tax loss.

Concluded between foreign fixed establishments of related entities located in the territory of the Republic of Poland, having their place of residence, registered office or management board in the territory of a Member State of the European Union or another state belonging to the European Economic Area other than the Republic of Poland

Concluded by a foreign fixed establishment, located in the territory of the Republic of Poland, of an entity having its place of residence, seat or management board in the territory of a European Union member state or another state belonging to the European Economic Area, other than the Republic of Poland, with an affiliated entity having its place of residence, seat or management board in the territory of the Republic of Poland

For which APA has been concluded

Whose value does not constitute revenue or tax-deductible cost on a permanent basis (exceptions – financial transactions, capital transactions, investment, fixed assets or intangible assets transactions)

If the relationship results only from a connection with the State Treasury or local government units

In which the price was determined by means of an open tender on the basis of the Public Procurement Law

Consisting of the attribution of income to a foreign permanent establishment situated in the territory of the Republic of Poland by non-residents, if the regulations of relevant international agreements to which the Republic of Poland is a party provide that such income may be taxed only in a State other than the Republic of Poland

Between companies forming a tax group

Consisting only in making a settlement between related parties of expenses incurred for the benefit of an unrelated party, as long as they,

  • no added value is created and the settlement is made without taking into account the margin or profit mark-up
  • the settlement is not directly related to another controlled transaction
  • settlement occurred immediately upon payment to an unrelated party
  • the related party is not an entity that has its place of residence, registered office or management in a territory or country applying harmful tax competition

Constituting low added-value services – if the conditions set forth in art. 11f of Polish CIT Law are met or

Concerning a loan, credit or bond issue – if the conditions specified in art.11g of Polish CIT Law are met.

Transfer pricing methods

Generally, the transfer pricing methods accepted by the tax authorities are based on the OECD Guidelines. These methods are:

CUP (Comparable Uncontrolled Price Method)

Resale Price Method

Cost Plus

TNMM (Transactional Net Margin Method)

Profit Split Method

When selecting a price calculation method, taxpayer should make sure it is appropriate for the transaction. Since 2019, there is no obligation to use traditional methods before profit-sharing methods.

The new regulations also allow for the use of another method, including a valuation technique, if none of the five above methods can be used.

Safe harbours

Since 1st January 2019, the so-called Safe Harbour institutions is introduced into Polish transfer pricing regulations. Safe harbour means that some of the transactions executed by the taxpayer will not be subject to estimation, as long as they are executed under the conditions indicated by the legislator.

These transactions are:

  • Low added-value services
  • Loan (credit and bond) agreements.

Safe harbour for low value-added services could be applied where the cost mark-up for these services has been determined on the basis of the cost plus or TNMM method and is equal to:

  • No more than 5% of the costs in case of purchase of services
  • Not less than 5% of the costs for the provision of services

Moreover, the service provider does not have its place of residence, registered office or management in a tax haven and the recipient of the service should has a service price calculation including the type and amount of costs included in the, the manner of application and justification for the selection of allocation keys for all related parties who use the services and a description of the transaction, including an analysis of the functions, risks and assets.

The condition for the application of the safe harbour for loans, on the other hand, is that the interest rate of the loan is determined on the basis of the type of base interest rate and margin set out in the Minister of Finance notice. In addition, the loan agreement must not contain any provision for remuneration other than interest to be paid to the lender and the loan must not be concluded for a period exceeding 5 years.

The Ministry of Finance has decided that from January 1, 2024, for the purposes of safe harbour regulations for loan, credit and bond issues, the margin will be changed so that the maximum margin for borrowers will be 3.10 percentage points, while leaving the minimum margin for lenders at the current level of 2.20 percentage points.

It should be remembered that in order to benefit from the protection offered by the safe harbour for loan transactions, the total level of liabilities or receivables of the company with related parties cannot exceed PLN 20,000,000 or the equivalent of that amount, and the lender may not have a residence, registered office or management in a tax haven.

Deadlines

The regulations in force since 1st January 2022 have significantly modified the deadlines for the obligation to submit the TPR and to prepare the documentation itself. These obligations must be fulfilled until:

  • the end of the 10th month following the end of the tax year – preparation of TP documentation
  • the end of the 11th month after the end of the tax year (with the same rule – for transactions occurred in 2023 and next years) – submission of TPR return.

A separate TP statement will no longer be required.

In case of benchmarking study, the analysis should be updated at least once every 3 years (if the business circumstances change in a way affecting the analysis the benchmarking analysis should be reviewed earlier).

Moreover, according to the present regulations, the tax authorities may request the taxpayer to prepare documentation in respect of transactions / events even if the value does not exceed the limits, provided that the circumstances suggest that their value could have been underreported in order to avoid the documentation obligation. In that case, Transfer Pricing documentation should be submitted within 30 days of the request. This obligation does not apply to micro-entrepreneurs.

For the “standard” TP obligations (after exceeding the thresholds) taxpayers are obliged to present complete TP documentation within 14 days of the tax authorities’ request (previously : within 7 days).

Country-by-country reporting

The Country by Country reporting obligation applies to:

Polish entities, which simultaneously:

  • are the ultimate (dominating) entities in their groups
  • are the entities consolidating financial reports
  • operate directly or indirectly outside of Poland
  • their last year’s consolidated income within and outside of Poland is over the equivalent of EUR 750 Mio.

Entities not being the ultimate parent if there is no other entity designated to provide such information in the group if one of the following criteria are met:

  • the ultimate parent entity is not obliged to file a CbCR for the reporting year in its tax jurisdiction
  • the appropriate jurisdiction in which ultimate parent entity is resident for tax purposes has not undertaken to share information about the entity group within 12 months of the end of the given reporting year
  • the tax jurisdiction of the ultimate parent entity suspended automatic sharing of CbCR or failed to fulfil the obligation without notifying the dominating entity.

According to the present tax regulations members of groups of entities will be obliged to:

  • notify that they are the ultimate parent entity or designated entity (or a different entity obliged to file the CbCR), or
  • indicate the entity obliged to file CbCR together with its identity and tax residence.

The notification should be filed up to 3 months following the end of the reporting financial year of a group of entities. The new regulation* indicates what information should be included in the information about a group of entities.

The tax regulations provide fines for failure to fulfil these obligations (maximum amount: PLN 1 mln).

*The Regulation of the Minister of Finance of 13 June 2017 on the detailed scope of data to be included in the information about a group of entities.

Advance Pricing Agreements

Currently, the APA is up to the Head of National Fiscal Administration (KAS) decision, which is a confirmation of the selection and application of a method for determining transaction prices between related parties.

The main advantage of obtaining such decision is elimination of the risk of challenging transfer price methodology (assuming that the taxpayer complied with the APA provisions) and protection from penal and fiscal sanctions for individuals responsible for tax settlements.

Additional benefit of an APA is the right to recognize as a deductible cost subject to limitation under Article 15e of Polish CIT Law (low added value services). From 2022 onwards, art. 15e of Polish CIT Law has been repealed and the benefits of APA highly reduced.

Some further rules regarding APA are as follows:

  • The possibility of applying for an APA by a foreign investor considering doing business in Poland by establishing a subsidiary company
  • The APA is valid from the beginning of the tax year in which the application has been submitted
  • Clarification of the elements of the application – following the model of local transfer pricing documentation
  • Applying for APA covering transactions under proceedings or tax control during one of the last two tax years preceding the tax year in which the application is made is no more possible.

The fee is 1% of the value of the transaction covered by the APA limited by the following:

  • For a unilateral APA referring to domestic entities only – min. fee: PLN 5 000 (approx. EUR 1,150) and max. fee PLN 50 000 (approx. EUR 11,500)
  • An APA referring to a foreign entity – min. PLN 20 000 (approx. EUR 4,600) and max. PLN 100 000 (EUR 23,000)
  • A bilateral or multilateral APA – min. PLN 50 000 (approx. EUR 11,500) and max. PLN 200 000 (approx. EUR 46,000)*.

Renewal fees are half of the amount of the fee for the renewed APA.

*1 EUR = 4.3480 PLN (ex. rate 29/12/2023)

Recharacterizations and disregard of transaction

The legislation in force since 1 January 2019 has introduced new mechanisms available to tax authorities when estimating revenue.

Possibilities are:

  • Recharacterization of a transaction
  • Disregarding of a transaction.

Recharacterization and disregarding of the transaction may be applied under the opinion of the tax authorities, if in comparable circumstances, unrelated parties guided by economic rationality would not have entered into the controlled transaction concerned.

In assessing these facts, the tax authorities shall take into consideration the conditions that have been agreed between related parties and the fact that the conditions agreed between them do not allow the transfer price to be set at a level that would have been agreed by economically unrelated parties based on considerations of realistically available options.

The effect of disregarding of a transaction by the tax authorities could lead to assessing the income or loss of the taxpayer without taking into account the controlled transaction, while the effect of recharacterization could lead to assessing the income or loss of the taxpayer with respect to the relevant transaction (i.e. the one that would be made by unrelated entities).

Tax authorities cannot use the above tools just because of:

  • Difficulty in verifying the transfer price
  • Lack of comparable transactions between unrelated parties in comparable circumstances.

Transfer pricing adjustments

To meet the taxpayers’ expectations, the legislator pointed out that a taxpayer can recognize a transfer pricing adjustment by changing the amount of revenues or expenses if the following cumulative conditions are met:

  • Controlled transaction was performed at arm’s length
  • There was a change in significant circumstances affecting the terms of transaction or costs/revenues influencing the transfer pricing became known and the prices must be adjusted to comply with market terms
  • The taxpayer has a statement from the related party that if has adjusted the transfer prices in the same way. Beginning in 2022, it was allowed to have a statement or accounting proof from the related party.
  • The related party has its place of business in Poland or in a country or territory with which Poland has an agreement to avoid double taxation and there is a legal basis for exchanging tax information with that country

Cooperation agreements

The cooperation agreements have been introduced to the Polish tax system due to the Act on Resolving Double Taxation Disputes and Concluding of Advance Pricing Agreements of 14th November 2019.

The cooperation agreement is designed to ensure that a taxpayer complies with tax law in conditions of transparency of undertaken activities and mutual trust and understanding between the tax authorities and the taxpayer, taking into account the nature of the taxpayer’s business.

The agreement may be concluded by taxpayers with revenues of at least 50 million EUR. The main benefits of the agreement are:

  • Exemption from reporting of national tax schemes (MDRs)
  • A 50% reduction of the fee for submitting an APA application
  • Attributing good faith to the taxpayer.

The taxpayer, being a party to the cooperation agreement, has the opportunity to discuss (with the Head of the National Revenue Administration) important issues related to the tax settlements, such as:

  • Interpretations of tax law
  • Determinants of transfer pricing
  • Non-applicability of the general anti-avoidance rule
  • The amount of advance income tax
  • Other, necessary to ensure the proper implementation of the cooperation agreement.

Penalties

At present, the sanctions for the use of non-market prices are as follows:

  • 10% (basic rate) of the sum of the undue or overstated tax loss and not reported (in whole or in part) taxable income to the extent resulting from this decision
  • 20% (increased rate):
    • if the basis for determining the additional liability is exceeding 15 000 000 PLN
    • in the case of failure to submit transfer pricing documentation
  • 30% (increased rate): the cumulative fulfilment of both conditions above

Furthermore, the Fiscal Penal Code provides a fine up to 720 daily rates per day in the following situations:

  • late submission, factually incorrect or failure to submit a statement that the Transfer Pricing documentation has been prepared. Late submission, factually incorrect or failure to submit TP-R information.

On the other hand, 240 daily rates per day are provided in the following situations:

  • preparation of transfer pricing documentation after the deadline
  • late submission of the TP-R information.

Affecting both domestic and foreign businesses, a number of actions triggers the obligation to register for Value-added tax in Poland. To provide a basic overview, our Polish experts prepared a comprehensive eBook on value-added tax. Find out more about VAT rates, registration of taxable persons, communication with local tax authorities, compliance and VAT return filing, VAT refund to EU member states or third countries and penalties.

Download our free eBook on VAT in Poland, or read more below

VAT rates

Basic and reduced VAT rates

The basic VAT rate in Poland is 23%. Reduced VAT rates of 0%5% and 8% apply to a wide range of goods which may change over time (special decree is issued in this respect). In general, lower rates apply to specific hygiene products, books, newspapers and food products. Each product or service should be considered individually.

Export within and outside the European Union

Intra-community supplies of goods and exports outside the EU are under several conditions subject to exemption with deductibility right (0% tax rate is applied).

Taxable amount

The taxable amount is understood as any kind of remuneration received or due in exchange for the supply of goods or provision of service. The tax base also includes other additional payments of similar nature, which have a direct impact on the price of goods or services supplied by the taxpayer.

VAT registration of domestic taxable persons

Voluntary and obligatory registration

In Poland, voluntary VAT registration is possible for entrepreneurs whose income in the last tax year did not exceed PLN 200 000. This VAT exemption is related to sales limit with some limitations for specific sectors. The possibility of voluntary registration is also available
in selected cases whereas a VAT exemption rule is applicable.

The threshold for compulsory VAT registration is PLN 200 000 turnover. Entities exceeding this amount are obliged to register. Performing taxable transaction or exceeding the threshold triggers the registration duty which should be performed by filing specific form.

Group registration for taxable entities

From 1 January 2023, it is possible for related entities to settle VAT jointly through a VAT group.

A VAT Group is  a group of financially, economically, and organizationally related entities. In simplified terms, entities belonging to a VAT Group are treated as a single VAT taxpayer.

Other specifications of the VAT registration

In Poland there are formal and material conditions stated in the VAT regulation, therefore even entities who do not have the status of VAT taxpayers formally can still be considered as entities performing activities subject to VAT.

If an entity intends to do business with foreign contractors from EU countries, they must register as
a taxpayer of EU VAT. Although they are not obliged to register as an active VAT taxpayer, however, if they make an intra-community acquisition of goods (WNT) and the total value of these transactions exceeds PLN 50 000 during the tax year, they are obliged to account for VAT on these transactions (despite the fact that there is no obligation to settle VAT in respect of other business activities). The obligation to register for EU VAT (irrespective of the VAT exemption) also applies to: 

  • The purchase of services from contracting parties in the EU for which the place of performance is in the purchaser’s country
  • Intra-community supply of services for which the place of taxation of the transaction is in the country of the person acquiring the goods.

If the entity is exempt from VAT and registers as a taxable person of EU VAT, they do not lose the right to be exempt from VAT.

VAT registration of foreign taxable persons

Definition of foreign taxable persons

In Poland, foreign entities are understood as legal persons, organisational entities without legal personality and natural persons with registered office or a fixed place of business outside the territory of Poland, carrying out activities which are subject to Polish VAT regulations.

Obligatory registration for foreign taxable persons

Foreign entities are obliged to file a registration application with the Head of the Tax Office before the date of the performance of their first taxable activity. For distance sellers from the EU, who are selling the goods to customers in Poland, the VAT registration threshold (for Intra-Community Distance Sales of goods) is PLN 42,000.

Communication with authorities

Local statutory representation for VAT

Representation of the taxable person in front of the Polish tax authority by a tax advisor is not obligatory. The obligation of representation occurs when the taxable person does not have a registered office or a fixed establishment in the territory of a EU Member State.

Statutory language

In communication with the tax authorities, only Polish language may be used.

Communication with authorities

A taxpayer may communicate with the tax authorities both electronically and by post. However, the VAT returns must be submitted electronically.

Starting from July 1, 2020, companies in Poland have been obliged to submit the JPK_VAT files containing both the VAT returns and the Standard Audit File (SAF), while the VAT records must be kept in an electronic system.

VAT compliance and return filing

Tax period and deadline for JPK_VAT (SAF-T) filing

The tax period equals the respective month, or the calendar quarter (only for small taxpayers registered for more than 12 months as active VAT taxpayers, with some exceptions).

In Poland, there is no “traditional” VAT return, but there is a requirement to file a JPK_VAT (SAF-T) covering both the declaration part and the recording part of VAT settlements. The deadline for filing JPK_VAT (SAF-T) is the 25th day after the end of a settlement period. Taxpayers settling VAT quarterly submit monthly (to 25th day after the end of month) the recording part of JPK_VAT (SAF-T) and on
the 25th day of each month following the quarter submit the recording and declarative part of JPK_VAT (SAF-T).

Upon the demand of the authorities, the following electronic documents should be submitted:

  • Accounting books (JPK_KR)
  • Bank statement (JPK_WB)
  • Magazine (JPK_MAG)
  • VAT invoice (JPK_FA)
  • Tax revenue and expense ledger (JPK_PKPIR)
  • Income records (JPK_EWP).

EC sales list and other documents

EC sales list (or the so-called VAT_UE return) should be submitted electronically by the 25th day of the month for the previous month – the same time as in case of the JPK_VAT (SAF-T).

VAT refund to EU member states

Minimum amount and applicable period

In order to file for refund, the value of VAT may not be less than the PLN equivalent of the following amounts:

  • EUR 400 – in case the period (for which a refund request is filed) is shorter than the tax year, but exceeds 3 months
  • EUR 50 – in case the period (for which a refund request is filed) concerns the whole tax year or a period shorter than the last 3 months of the year

The conversion of the amounts mentioned above expressed in EUR shall be carried out according to the average exchange rate of the euro announced by the National Bank of Poland or by the European Central Bank, in force on the last business day preceding the date of issue of the invoice or customs document.

The amounts used to determine the tax base determined in a foreign currency may be converted by a taxpayer into PLN in accordance with the rules for conversion of income determined in a foreign currency resulting from the income tax regulations applicable to that taxpayer for the purpose of settling a given transaction.

Given entity may apply for a tax refund for a period exceeding 3 months and not longer than 1 tax year, or for a period shorter than the last 3 months of the year. The requested amounts of tax in the given period is established based on the invoices documenting the acquisition of goods and services or based on the customs clearance documents in case of import.

Deadline and place of filing for VAT refund

The deadline for filing a VAT refund request falls on September 30th of year following the year covered by the request. It should be submitted in Polish to the tax administration in electronic form.

The deadline for tax refund falls on the 4th month after the request for refund is filed, including all supportive documents. The tax office will refund the indicated amount of tax no later than within 10 working days from the day of taking a decision on the amount to be refunded.

Refund for foreign taxable persons

Upon the fulfilment of specific conditions VAT refund for a foreign taxable person is possible.

VAT refund to third countries

VAT refund conditions

VAT refund to third countries is possible, upon the fulfilment of specific conditions.

Minimum amount and applicable period for VAT refund

In case of VAT refunds to third countries, the same rules apply as in case of VAT refund to EU member states (see VAT refund to EU member states – Minimum amount and applicable period for more information)..

Deadline and place of filing for VAT refund

The deadline for filing a VAT refund request in case of refunds to third countries is the same as in the case of EU member states, i.e., it falls on September 30 of next year and must be submitted electronically in Polish language. The deadline for VAT return also falls on the 4th month after the request for refund is filed, while the tax office conducts the refund also within the 10 working days after taking a decision on the amount to be refunded.

Special VAT regulations

White List

For VAT settlements, the White List is of great importance. It is a generally available register of VAT taxpayers where registration and bank account must be verified before an invoice is settled.

Payment to an account outside the White List in certain cases involves joint and several liability and the exclusion of the expense from the tax-deductible costs for income tax purposes.

Split payment

Split payment is a payment mechanism under which payment for goods or service is made by the purchaser to the supplier’s bank account and:

  • The net sale amount is credited to the supplier’s basic settlement account
  • The VAT amount is paid to a dedicated VAT account that it automatically created by the bank as an additional account to every business/trading settlement account.

In principle, the use of split payments is voluntary and depends on the purchaser’s decision to apply it. However, in the case of making payments for goods or services listed in Appendix 15 to the VAT Act, documented with an invoice in which the total amount due exceeds the amount of PLN 15,000, purchasers are obliged to apply the split payment.

National System of e-Invoices (KSeF)

From January 1, 2022, taxpayers can use the National e-Invoices System (KSeF). KSeF is a system that enables the issuing and sharing of structured invoices. The system is currently voluntary, but under a draft EU Council decision of June 10, 2022, the system may become mandatory as fast as possible on January 1, 2024 and will be effective until December 31, 2026 with the possibility of extension. 

Taxpayers will not be obliged to issue electronic invoices in KSeF in 2024. KSeF remains a voluntary solution at this point. KSeF will be obligatory for domestic entities and all taxpayers with a registered office or permanent place of business in the country.

Penalties for VAT non-compliance

Depending on the situation, the VAT sanctions amount to:

  • up to 100%
  • The highest penalty rate in VAT is when a tax person knowingly participates in tax fraud by deducting VAT from the invoice:
    • issued by a non-existent entity,
    • stating activities that have not been performed, in the part concerning these activities,
    • providing amounts inconsistent with reality, in the part concerning these items,
    • confirming the activities to which the provisions of Art. 58 and Art. 83 of the Civil Code (Journal of Laws of 2020, item 1740, as amended) – in the part relating to these activities.
  • up to 30%
  • This applies when the submitted VAT return has indicated:
    • the amount of the tax liability is lower than the amount due
    • the amount of the refund of the tax difference or the amount of the input tax refund higher than the amount due
    • the amount of the tax difference to reduce the amount of tax due for the next settlement periods higher than the amount due
    • the amount of the refund of the tax difference, the amount of the input tax refund or the amount of the tax difference to reduce the amount of tax due for the next settlement periods, instead of showing the amount of the tax liability to be paid to the tax office.

This sanction also occurs in the case of non-filing of the tax return and non-payment of the tax liability amount.

  • 20%
  • The penalty applies if, after the tax audit or customs and tax audit, the taxable person submitted:
    • VAT return adjustment taking into account the identified irregularities and paid
      the amount of the tax liability or returned the undue amount of the refund no later than on the date of submission of this correction
    • VAT return and paid the amount of the tax liability on the date of submission of
    • the declaration at the latest
    • , after the tax audit or customs and tax audit, the taxable person submitted:
  • 15%
  • If the taxable person submitted the VAT return adjustment and paid the amount of the tax liability returned the undue amount of the refund no later than on the date of submission of the VAT return adjustment.

Apart from sanctions under the VAT Act, there are also sanctions in the Fiscal Penal Code that should be taken into consideration.

The One Stop Shop or OSS in Poland procedure is an electronic one-stop shop for simplifying the settlement of output VAT on sales of goods and services to consumers from other EU countries, i.e. individuals who do not conduct business activities.

The premise of the OSS procedure in Poland is to enable settlement of VAT on the above transactions with the tax administration in one EU Member State. The taxpayer submits to one tax administration information on his sales of goods and services to individuals from other EU countries and pays the VAT. Based on the declarations submitted, the tax administration distributes and remits the appropriate part of the VAT paid in the country of identification to the relevant EU country of consumption.

The OSS procedure reduces the taxpayer’s obligations to register and settle VAT in different EU countries. Without OSS procedures, a supplier would generally be required to register in each Member State in which he sells goods or services to individuals.

Download our eBook, or read more below

Who can benefit from the OSS

There are two procedures available under the OSS procedure: the EU procedure and the non-EU procedure.

The EU procedure can be used, among others, by taxpayers established in the EU who:

  • supply services to natural persons in a Member State where they are not established, or
  • make intra-Community distance sales, i.e. a supply of goods made to individuals from other EU countries.

How to register for the OSS

Registration for the OSS procedure is made in a single Member State, the so-called Member State of Identification. In principle, the Member State of Identification is the Member State in which the taxpayer has its seat of economic activity.

The tax authority competent for the OSS procedure in Poland is the Head of the Second Tax Office Warsaw-Downtown.

To register for the OSS procedure, the following documents should be submitted:

  • VIU-R application in electronic form           
  • Original PPS-1 power of attorney (if acting by proxy)
  • Confirmation in Form VIU-R that the address details are up to date and consent to receive letters electronically.

Registration for the OSS procedure will be effective for taxpayer from the first day of the calendar quarter following the quarter in which the VIU-R form was submitted.

What transactions should be reported in the OSS

Once registration to the OSS procedure is done, then VAT must be declared and settled on all supplies of goods or services covered by this procedure.

This means that after registration via the OSS procedure, output VAT will have to be reported on supplies of goods to individuals from other EU countries. It regards also supplies of below services to individuals from other EU countries:

  • accommodation services in hotels or and buildings with similar function;
  • cultural, artistic, sporting, scientific, educational, entertainment and similar services, such as trade fairs and exhibitions, as well as ancillary services to these services;
  • transport services;
  • services of valuation of and on movable tangible property;
  • services ancillary to transport services, such as loading, unloading, reloading and similar activities;
  • services connected with immovable property;
  • services for the rental of means of transport;
  • restaurant and catering services;
  • telecommunication, broadcasting and electronic services.

How to record transactions in the OSS

Once the OSS procedure has been notified, additional records of transactions covered by this procedure should be kept. These records are in electronic form and shall be kept for a period of 10 years from the end of the year in which the transaction took place.

These records should include the following data:

  • the Member State of consumption to which the goods or services are supplied;
  • the type of services or the description and quantity of goods supplied;
  • the date of the supply of the goods or services;
  • the taxable amount indicating the currency used;
  • any subsequent increase or reduction of the taxable amount;
  • the VAT rate applied;
  • the amount of VAT payable indicating the currency used;
  • the date and amount of payments received;
  • any payments on account received before the supply of the goods or services;
  • if an invoice is issued, the information contained on the invoice;
  • in respect of services, the information used to determine the place where the customer is established or has his permanent address or usually resides and, in respect of goods, the information used to determine the place where the dispatch or the transport of the goods to the customer begins and ends;
  • any proof of possible returns of goods, including the taxable amount and the VAT rate applied.

It should be emphasised that entities notified to the OSS are obliged to provide their records in electronic form whenever requested by the tax administration of both the Member State of identification and consumption.

How to report transactions in the OSS

VAT return (VIU-DO)

A taxpayer registered for the OSS procedure in Poland is required to submit via the e-Declaration system: VAT returns (VIU-DO).

The return shall be submitted on a quarterly basis by the end of the month following each consecutive quarter.

The table below shows the deadlines for submitting VAT returns (VIU-DO).

Settlement period – calendar quarter Date of submission of return for OSS
Q1: 1 January do 31 March 30 April
Q2: 1 April do 30 June 31 July
Q3: 1 July do 30 September 31 October
Q4: 1 October do 31 December 31 January (next year)

Amounts on the VAT return shall be expressed in euro and shall not be rounded up or down.

The VAT return for the OSS is supplementary and does not replace the VAT return that the taxpayer submits in his Member State as part of his domestic VAT obligations.

This means that after registering for the OSS procedure, taxpayer will be obliged to submit, as before, JPK_VAT files (in which should be reported retail sales in Poland and distance sales from warehouses in Poland to Polish buyers), and in addition will submit VAT returns (VIU-DO) by the end of the month following each subsequent quarter.

A taxpayer using the OSS procedure shall submit a VAT return for each calendar quarter, irrespective of whether the supply of goods or services covered by the procedure has taken place.

This means that if there are no activities covered by the OSS procedure and no adjustments have been made relating to previous returns of the settlement period, a nil VAT return (VIU-DO) shall be submitted.

It should be underlined that the VAT return (VIU-DO) cannot be submitted before the end of the settlement period.

The deadline for submitting the return also expires if that day falls on a Saturday or a public holiday.

Adjustment of VAT return (VIU-DO)

Where mistakes are found in the VAT return (VIU-DO) submitted, the adjustment shall be made in the return submitted for the current tax period, but no later than 3 years after the expiry of the deadline for submission of the VAT return in which the mistakes were found.

The VAT return (VIU-DO) in which the correction is made shall indicate the Member State of consumption concerned, the tax period and the amount of VAT in respect of which the correction is made.

Nevertheless in the case of:

  • the expiry of three years from the deadline for submission of the original declaration,
  • discontinuation of the OSS procedure,
  • exclusion from the OSS procedure,
  • change of Member State of identification

– an adjustment of the VAT return (VIU-DO) shall be submitted electronically via a special IT application to the Łódź Tax Office.

Payment of the VAT amount in respect of which the adjustment is made should be done in euro to the bank account of the Łódź Tax Office.

How to pay VAT in the OSS

Once the VAT return (VIU-DO) has been submitted, it will be assigned a unique reference number (UNR).

The reference number (UNR) of the VAT return must always be indicated when making a payment. Without a reference number, it is not possible to make an effective payment and you should expect that such a payment will not be recognised and will be returned to the payer’s account.

The unique reference number for the EU procedure consists of the code of the Member State of identification, the VAT number and the period (quarter/year) for which the return is submitted.

An example of a UNR number for an EU OSS procedure is – PL/PLXXXXXXX/Q3.2023

The deadline for payment of VAT is the last day of the month following each consecutive quarter.

The deadline for submitting the return also expires if that day falls on a Saturday or a public holiday.

VAT resulting from the VAT return (VIU-DO) shall be paid in euro to the following bank account of the Second Tax Office Warsaw-Śródmieście:

  • 84 1010 1010 0165 9315 1697 8000
  • PL84 1010 0165 9315 1697 8000 (BIC code: NBPLPLPW) – for payments from abroad.

The distribution of payments between the Member States of consumption is carried out by the tax authority on behalf of the taxpayer.

Example of how to complete the VAT return (VIU-DO)

La Makeup intends to apply for the OSS procedure and report in its VAT return (VIU-DO) the distance selling of goods to individuals from various EU countries.

To correctly complete the return for the above transactions, it is necessary:

  • in section C2 report deliveries of goods from warehouses in Poland to buyers from other EU countries;
  • in section C3 to report deliveries of goods from warehouses in EU countries other than Poland to buyers from EU countries other than the country of dispatch.

In addition in section C.5. adjustments to the VAT amounts indicated in the returns for previous periods resulting from corrections to supplies of goods or services (no later than 3 years after the deadline for submission of the original return) should be reported.

In section C.6. the balance of output tax should be reported for each Member State of consumption. This position is filled in automatically and is the sum of the VAT amounts from Sections C.2, C.3, C.4 and C.5 for the Member States of consumption indicated. It should be noted that the value of the amount of output VAT for specific Member State of consumption can be in negative (in the case of adjustments in minus).

Section C2 – deliveries of goods from Poland to buyers from other EU countries

This section should report supplies of goods from warehouses in Poland to buyers from other EU countries. In each part of this section, the values of total sales in the given settlement period to a specific EU country should be reported.

Individual items should be completed as follow:

  • Member State of consumption – indicate the name of the Member State of consumption on whose territory the supply of services and goods took place during the relevant settlement period.
  • Type of supply – indicate whether it concerns a supply of services or a supply of goods dispatched or transported.
  • Type of VAT rate – indicate the appropriate type of VAT rate – standard or reduced.
  • VAT rate – indicate the rate applicable to the Member State of consumption.
  • Taxable amount for a given VAT rate – provide the taxable amount for the rate (standard, reduced) indicated in the field “VAT rate type”.
  • Amount of VAT at given VAT rate – enter the amount of tax at the rate (standard, reduced) for the Member State of consumption concerned. The amount expressed should be given in euro.

Example:

A taxpayer registered for the EU procedure in Poland has made supplies of goods to Cyprus in the third quarter of 2022 for €20,000 (VAT rate 19%).

The supply transactions to this country should be reported in the VAT return (VIU-DO) as follows:

Section C3 – deliveries of goods from EU countries other than Poland to buyers from EU countries other than the country of dispatch

This section should report deliveries of goods from warehouses in countries other than Poland to buyers in EU countries other than the country of dispatch. In each part of this section, the values of total sales in the given settlement period to a specific EU country should be reported.

Individual items should be completed as follows:

  • Member State of consumption – indicate the name of the relevant Member State of consumption on the territory of which services were provided and goods were supplied during the settlement period.
  • Country of establishment – indicate the name of the country where the fixed establishment, other than the Member State of identification, from the territory of which the supply of services or goods took place, is located.
  • VAT identification number – indicate the domestic VAT identification number that was provided in the registration declaration (field 20. in section B.4 in VIU-R (3)), where the taxpayer has a fixed establishment outside the Member State of identification.
  • Tax identification number – indicate the tax identification number that was provided in the registration declaration (field 21. in section B.4 in VIU-R (3)), in case there is no VAT identification number.
  • Type of supply – indicate whether it concerns the supply of services or the supply of goods dispatched or transported.
  • Type of VAT rate – indicate the appropriate type of VAT rate – standard or reduced.
  • VAT rate – indicate the rate applicable to the Member State of consumption.
  • Taxable amount for a given VAT rate – provide the taxable amount for the rate (standard, reduced) indicated in the field “VAT rate type”.
  • Amount of VAT at given VAT rate – indicate the amount of tax at the rate (standard, reduced) for the Member State of consumption concerned. The amount expressed should be given in euro.

Example:

A taxpayer registered for the EU procedure in Poland made supplies of goods from a warehouse in Belgium to Poland in the third quarter of 2022 for €15,000 (VAT rate 23%).

The supply transactions to this country should be reported in the VAT return (VIU-DO) as follows:

Poland’s already developed market is constantly emerging and is considered the biggest one in the CEE region. Its local economy has proven stability and immunity during the COVID crisis, which makes it a great destination during these turbulent and uncertain times.

Despite a relatively high inflation rate and issues with supply chain caused by the recent global situation, Polish economy shows relatively high and stable GDP of approx. 16.2%, according to the European Council ranked as the 3rd strongest economy in EC.

Attractive market with highly qualified employees, while still not as costly as in other EC jurisdictions, is a great “go-to” location, not only for passive equity investment, but also for R&D and logistic centers.

Download our eBook providing an informative overview about Poland, or read more below

Industries and investment incentives

Industries

Wholesale and retail, manufacturing, agriculture, logistics and transportation and IT play a vital role in Poland’s economy and are considered the largest industries.

The strongest workforce in Poland is centered in the listed industries.

Investment incentives

In Poland, favoured investment incentives are provided in the following forms:

  • tax exemptions
  • grants
  • investment loans on preferential terms
  • preferential taxation when developing your business

Poland offers a wide range of investment incentives, especially for the following industries:

IT

Renewable energy

Automotive

Manufacture

Logistics

Company formation

In Poland the most common legal form of business is a limited liability company (or LLC in short).

The incorporation time for an LLC is approximately 2-3 weeks. Registration in simplified procedures can be finished even within 24 hours. Tax ID is provided within 1-2 working days since registration in commercial register and registration to VAT takes up to 30 days.

The fee for establishing this type of company is PLN 600 of government fees. Other fees to consider are registered address fees, tax on civil law transactions in the amount of 0,5% of company’s capital, in case of not using simplified procedure the cost will increase by notary’s fee.

Setting up an LLC requires at least one shareholder (either individual or legal entity) and at least one director, who can be the same as the shareholder.

Official company register of Poland is open to public and can be accessible at https://ekrs.ms.gov.pl/

Corporate taxes

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 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.

A company is considered as a Polish tax resident if it:

Has a registered seat in the country

Has a place of management located in the country

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 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, 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 (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

Excise taxes

Excise tax is imposed on energy and electricity products, alcoholic products, tobacco products, other petroleum products.

Tax on means of transport

Tax on means of transport is charged on vehicles above 3,5 t, certain tractors and semi-trailers, buses.

Property tax

Property tax is imposed for land that is not agricultural or forest, buildings, flats, or separated business premises.

Inheritance and gift tax

The closest family members from group 0 are exempted from tax, in case transaction was notified to Tax Office, outside of this group depending on the closeness of family members and classification on Tax group there are different tax rates: 3%, 7% and 12%.

Retail tax

Retail tax is based on excess of retail sales in particular month above 17 million PLN, 0,8% when the Tax base is not higher than 170 million PLN, and 1,4 % above it.

Tax on financial institutions

Tax on financial institutions applies on financial institutions such as: domestic banks, and branches of foreign bank, credit institutions, cooperative savings and credit unions, domestic insurance and reinsurance companies, branches and main branches of foreign insurance and reinsurance companies, or lending institutions. Tax rate is 0,0366% of the tax base per month. Taxed are assets of institutions.

Tax on civil law transactions

Tax on civil law transactions is imposed for only transactions indicated in Tax Act are the basis for this Tax, i.e., sales, loans, mortgage, incorporation of company.

Minimum income tax

New tax obligation, which is applicable to taxpayers declaring tax losses or negligible income (=<2% of the revenue). The regulations are postponed until the end of 2023. As a result, the minimum tax will be applicable from 1 January 2024, and the first payment will occur in 2025.

The minimum income tax rate is 10%.

Withholding tax

Some payments made to non-residents are subject to WHT. The rate is 19% in case of dividends, and 20% in case of interest, license and management fees, fees for know-how, advisory, legal or accounting services.

Mineral Extraction tax

At the moment taxed are extracted minerals such as copper, silver, oil and natural gas.

Incentives

  • Investment incentives
    Special Economic Zone is a special incentive that under certain conditions guarantees investors 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 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 employees, elderly employees
    In case of employees under 26 years old employment income up to 85,528 PLN per year is exempt from tax

Labour law and employment

Entitlement to work

In Poland, the following natural persons are entitled to work:

  • Polish citizens
  • EEA citizens
  • Third country citizens with residence and work permits

Employment contracts

The following employment contract are available in Poland:

  • Contract for indefinite period
  • Contract for definite period
  • Contract for trial period

Employee taxes and contributions

Taxes on personal income

Polish tax residents pay PIT on their worldwide income. Non-residents are subject to Polish PIT on their Polish-sourced income only.

The personal income tax (PIT) rates in Poland are:

  • 32% or
  • 12% stake based on individual income

For personal income tax purposes, the taxable period is set as the calendar year.

The due date for PIT return is the 30 April of the following year.

Tax residents are considered the individuals who:

  • have a permanent residence in Poland
  • stay longer than 183 days in the country

Taxable incomes in Poland are net incomes from all income sources, that are not exempted.

Social security and health insurance contributions

Type of insurance Paid by employer Paid by employee Total
Pension Fund* 9.76% 9.76% 19.52%
Disability Fund* 6.50% 1.50% 8.00%
Bridging Pension Fund (FEP) 0.00% or 1.50% 0.00% 0.00% or 1.50%
Illness Fund 0.00% 2.45% 2.45%
Accident Fund 0.67% – 3.33% 0.00% 0.67% – 3.33%
Employees’ Guaranteed Benefits Fund 0.10% 0.00% 0.10%
Labor Fund 2.45% 0.00% 2.45%
Total (up to limit) 19.48% – 22.14% 13.71% 33.19% – 35.85%
Total (past limit) 3.22% – 5.88% 2.45% 5.67% – 8.3%

* Once an individual’s gross remuneration exceeds 30 average estimated national salaries for a given year (PLN 208,050 for 2023) the obligation to pay contributions toward these funds ceases

The health contribution is 9% of the base which is income less social security contributions. The health contribution is not deductible from income taxAs of July 1, 2022, selected groups of self-employed taxpayers again have the opportunity to deduct paid health contributions from income.

2021 brings a number of changes in tax and legal regulations. Apart from the widely discussed changes in the field of VAT reporting, no less significant changes concern income taxation, which will essentially affect the profitability of entrepreneurs and investors operating in Poland. In addition to crucial changes to the concept of certain legal forms taxation, a number of amendments were introduced to clarify the existing provisions. New regulations also show positive changes for taxpayers, such as an increase in the limit allowing the application of a reduced tax rate or extending the deadlines for applying the exemption from tax on income from buildings.

In case of doubts or questions, our experts will be happy to explain the intricacies of the new regulations.

Download our eBook or read more below

Limited partnerships and General partnerships as a CIT taxpayer in 2021

New rules

The amendment introduces treatment of limited partnership having their registered office or management in the territory of Poland as a corporate income tax taxpayer. With respect to general partnerships, CIT taxation will be imposed in the case when at least one partner is not natural person or all partners having profit share are not disclosed to the tax authorities.

Limited partnership is so-called tax transparent company. This means that income is taxed only at the level of the partners and not the company itself. In other words, limited partnership is not a taxpayer, income is attributed proportionally to the partners and they are liable to pay the income tax.

Recognition of a limited partnership as a CIT taxpayer will significantly reduce the attractiveness of this legal form, what is more, this procedure is in a certain extend contradiction to its very concept, which should combine the features of a partnership and a capital company. The introduced change will undoubtedly constitute an impulse for a number of capital restructuring and relocation of investments.

Taxation of partners

The regulations provide for mechanisms which, according to the explanatory memorandum to the draft act, were to eliminate the negative effects of double taxation. In this respect, limited partners are treated differently than general partners.

The exemption will apply to amounts corresponding to 50% of the revenues obtained by the limited partner from the share in the profits of the limited partnership, but not more than PLN 60,000. The limit is to be calculated separately for each limited partnership in which the taxpayer is a limited partner.

This exemption is not applicable to limited partner which:

  • Holds directly or indirectly at least 5% of shares (stocks) in a company with legal personality or a capital company in an organization being a general partner in this limited partnership.
  • Is a management board member of:
    • A company with legal personality or a capital company in organization being a general partner in this limited partnership, or
    • A company with legal personality or a capital company in organization being a general partner in this limited partnership, or
    • A company owning directly or indirectly at least 5% of shares (stocks) in a company with legal personality or a capital company in an organization being a general partner in this limited partnership, or
    • Is a related entity with a member of the management board or a partner of a company holding directly or indirectly at least 5% of shares (stocks) in a company with legal personality or a capital company in an organization being a general partner in this limited partnership.

The issue of general partner’s taxation is regulated separately. Pursuant to the new regulations, it will be possible to deduct the amount of tax paid by this partnership from the income tax calculated on the income from the share in the limited partnership’s profits. Deduction shall be done proportionally encumbering the general partner’s profit obtained from the participation in such a partnership. This means that in practice the general partner will receive a tax credit corresponding to the amount of tax paid by the partnership on the profits to which he is entitled. As a rule, this mechanism will eliminate double taxation, but only in an ideal situation when both the limited partnership and its partner show no tax loss.

Timing of changes

It should be emphasized that taxpayers can decide on their own whether the new taxation rules will apply from January 1st, or from May 1st, 2021. The choice of a later date means that the financial year lasting in 2020 will be extended until the end of April 2021.

Real estate company definition and taxation of share sale

Definition of Real Estate Company

The amendment introduces the definition of a Real Estate Company. It is an entity other than a natural person, obliged to prepare a financial statement based on the provisions on accounting, in which:

  • As at the first day of the tax year, and if the Real Estate Company is not a taxpayer of income tax – as at the first day of the financial year, at least 50% of the market value of assets, directly or indirectly, was the market value of real estate located in the territory of the Republic of Poland or rights to such real estate and the market value of these properties exceeded PLN 10,000,000 or the equivalent of this amount – in the case of entities starting their activity
  • As at the last day of the year preceding the tax year, and if the Real Estate Company is not a taxpayer of income tax – as at the last day of the year preceding the financial year, at least 50% of the balance sheet value of assets, directly or indirectly, was the balance sheet value of real estate located in the territory of the Republic of Poland, or rights to such real estate and the balance sheet value of these real estate exceeded PLN 10,000,000 or the equivalent of this amount
  • If the Real Estate Company is not a taxpayer of income tax – revenues included in the net financial result, from rental, sublease, lease, sublease, lease and other contracts of a similar nature or from the transfer of ownership the subject of which are real estate or rights to real estate, and from shares in other Real Estate Companies, constituted at least 60% of total revenues, respectively, included in the net financial result.

New taxation rules

From January 1st, 2021, the taxation will change in the event of the sale of shares or stocks in this type of companies, if one of the parties to the transaction is an entity without a registered office or management board in the territory of the Republic of Poland. In such a case, the company itself will be obliged to pay 19% income tax to the tax office by the 20th day of the month following the month in which the income was generated.

If the Real Estate Company does not have information about the amount of the transaction, the tax due is determined at the level of 19% of the market value of the shares to be sold, all rights and obligations, participation title or rights of a similar nature.

Reporting obligation

In addition, certain entities will be obliged to provide the Head of the National Revenue Administration by the end of the third month after the end of the Real Estate Company’s financial (or tax) year, information:

  • About entities holding, directly or indirectly, in this Real Estate Company shares (stocks), units or rights of a similar nature, together with the number of such rights held by each of them – in the case of information provided by Real Estate Companies
  • About the number of shares (shares), units or rights of a similar nature owned, directly or indirectly, in this Real Estate Company – in the case of information provided by taxpayers who are partners of Real Estate Companies
    As of the last day of the tax year of the Real Estate Company, and if the Real Estate Company is not a taxpayer of income tax – on the last day of its financial year.

Tax strategy reporting obligation

New duties

From 1st January 2021, certain entities will be required to publish a report on the implementation of the tax strategy on their website.

The obligated entities will be:

  • Tax capital groups
  • Taxpayers whose revenues in the tax year exceeded the equivalent of EUR 50,000,000
  • Real Estate Companies.

Failure to submit the report will be subject to a fine of up to PLN 1,000,000.

The report will have to be published by the end of the twelfth month following the end of the tax year.

Data to be reported

According to the amendment, the report will include:

  • Description of the taxpayer’s approach to:
    • processes and procedures for managing the performance of obligations under tax law and ensuring their proper performance
    • voluntary forms of cooperation with the bodies of the Tax Administration.
  • A description of the taxpayer’s approach to the fulfillment of tax obligations in the territory of the Republic of Poland, along with information on the number of information on tax schemes provided to the Head of the National Revenue Administration – MDR.
  • Information about:
    • transactions with related entities, where the value exceeds 5% of the balance sheet total of assets
    • restructuring activities planned or undertaken by the taxpayer that may affect the amount of tax liabilities of the taxpayer or related entities.
  • Information about submitted applications for:
    • general tax interpretation
    • interpretation of tax law
    • binding rate information
    • binding excise information.
  • Information on making tax settlements for the taxpayer in countries applying harmful tax competition – excluding information covered by trade, industrial, professional or production secrets.

Limitation of tax loss settlements

New limitation

The amendment provides for the extension of the catalogue of events that make it impossible to settle tax losses when taking over other entities.

As indicated in the justification, there are cases of tax optimization involving the acquisition by a loss-making entity that does not predict the possibility of producing profit in subsequent years, and thus utilizing the losses against the revenue of taken over entity. According to the Tax Authorities, some of these activities are carried out only to benefit from the tax and without any business justification.

Conditions of tax loss recognition

Starting from 2021, it will not be possible to offset the losses of the acquiring entity with the income of the acquired entity, enterprise or organized part of the enterprise if:

  • The subject of the actually conducted basic business activity by the taxpayer after such takeover or acquisition, in whole or in part, was different than the subject of the actually conducted basic business activity by the taxpayer before such takeover or acquisition, or
  • At least 25% of the taxpayer’s shares (stocks) are owned by an entity or entities that did not have such rights as at the end of the tax year in which the taxpayer suffered such a loss.

Taxation of in kind liquidation dividend

Tax on in kind settlement of liability

Polish CIT Act provides for a regulation which limit possibilities of tax optimization. The mechanism refers to settling the liabilities in kind. It provides that if the liability is satisfied by non-cash benefit, when its market value exceeds the value of the liability, this market value should be subject to taxation in the hands of the debtor.

Optimization avoidance

This rule should eliminate the situation when the liability, for example due to dividends, is satisfied by delivering goods with a value exceeding its nominal value, while the nominal value of the dividend is subject to taxation.

Starting from 2021 these regulations will be also applicable to the liquidation dividend settled in kind.

Changes in the transfer pricing obligations

COVID reliefs

The act provides for the following changes to the transfer pricing regulations:

  • No obligation for the taxpayer to have a declaration of a related entity about the fact that this related entity has made a transfer pricing adjustment in the same amount as the taxpayer – for the duration of the state of epidemic threat and state of epidemic announced in connection with COVID-19
  • Extension of the catalog of entities exempt from the obligation to prepare transfer pricing documentation to include entities whose revenues in the fiscal year affected by the COVID-19 crisis fell by at least 50% in relation to the total revenues obtained in the corresponding period preceding this year.

Tax havens

As part of the package of changes concerning transfer pricing, the provisions on transactions with tax havens are also modified. The key changes in this area concern:

  • Extending the scope of transaction value estimation, in particular to non-controlled transactions, if the beneficial owner has a tax residence in the tax haven
  • Extending the scope of transactions requiring documentation, in particular:
    • uncontrolled sales transactions as a result of which the payment of receivables from the so-called tax haven
    • controlled or non-controlled transactions, if the beneficial owner has tax residence in a tax haven
  • Extending the scope of the elements required in the local transfer pricing documentation for transactions with tax havens to include economic justification and a benefit test (description of expected economic benefits)
  • Increasing the value of the transaction amount obliging to prepare transfer pricing documentation from PLN 100,000 to PLN 500,000.

Exemptions and benefits

Preferential tax rate

According to hitherto regulations CIT taxpayers having revenues below equivalent of EUR 1,200,000 can benefit from diminished 9% CIT rate instead of 19%. Introduced regulation increase the limit of revenues to EUR 2,000,000 per annum.

Extension of the validity of the exemption from tax on income from buildings

Polish tax regulations impose additional income taxation to the entities deriving income from commercial buildings. The amendment provides for the extension of the deadline for using of the exemption from tax on revenues from buildings also in the event that after December 31st, 2020, the state of the Covid-19 epidemic is still in force.

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