MAZARS IN POLAND

Corporate taxes and other direct taxes

Subject to taxation are limited liability and joint stock companies, as well as limited joint-stock partnerships (since 2014) that are Polish residents. Other partnerships are neither CIT nor PIT payers, and income generated by partnerships is directly attributed to shareholders (in proportion to their shares) and – depending on their status (companies or natural persons) – subject to CIT or PIT. CIT in Poland is payable on the income, i.e. on revenues decreased by tax-deductible costs. The standard CIT rate is 19%. Moreover, in January 2019, a reduced rate of 9% replaced the previous preferential rate of 15%. The reduced rate will be applied to income earned in 2018. However, only selected taxpayers will be able to benefit from it, as additional requirements are imposed.

  • Starting from 1 January 2019 came into force many important amendments, in particular: a new tax incentive was introduced, so-called Innovation Box. The new relief is to reward entrepreneurs earning revenues from intellectual property rights by applying a 5% tax rate to these incomes;
  • the previous cost limit regarding depreciation and insurance of "luxury" cars increased from 20,000 EUR up to PLN 150,000 PLN (and in the future PLN 225 thousand for electric cars);
  • Exit Tax, consisting in imposing a tax on unrealized capital gains, in connection with the taxpayer transferring the assets of his enterprise or tax residency to another country, was introduced;
  • new regulations regarding commercial property tax came into force. Since 2019, this tax will apply to all types of buildings, including residential, warehouse, production, etc. Previously, this tax was paid only on commercial and service buildings and office buildings rented, if their initial value exceeded PLN 10 million.

There were also defined far reaching changes in regulations relating to transfer pricing.

Transfer pricing in Poland
Arm’s length principle since 1997
Documentation liability since 2001
APA since 2006
Country-by-Country liability since 2017
Master file-local file (OECD BEPS 13) applicable since 2017
Penalty
lack of documentation 20% (30%) of the amount of overstated loss or understated income (is over PLN 15 000 000) + late payment interest + personal liability of the members of the Company’s Board
tax shortage 10% of the amount of overstated loss or understated income + late payment interest / incorrect pricing in controlled transaction
20% of the amount of overstated loss or understated income + late payment interest/ incorrect pricing in controlled transaction is over PLN 15 000 000 or lack of documentation
30% of the amount of overstated loss or understated income + late payment interest / incorrect pricing in controlled transaction is over PLN 15 000 000 and lack of documentation
Related parties 25%
<
direct or indirect capital relations, personal relations
Safe harbours low value added services: 5% mark-up
loans: basic interest rate on IC loans is determined by the Minister of Finance, for 2019 basic interest rate from the loans as WIBOR 3M, LIBOR USD 3M, EURIBOR 3M, LIBOR CHF 3M, LIBOR GBP is 2%

Level of attention paid by Tax Authority:

10/10

There is a general duty to collect withholding tax from dividends, interests, royalties and fees for certain kinds of immaterial services paid by a Polish company to a foreign company. Withholding tax (WHT) on dividends should be collected with 19% rate, on interest, royalties and certain kinds of immaterial services withholding tax should be collected with 20% and 10%, respectively. However, the WHT rate can be reduced by double tax treaties (there are specific regulations regarding payments exceeding 2.000.000 PLN to the same entity). Poland has a wide international treaty network with approximately 90 double tax treaties. In accordance with the EU interest and royalties directive interest and royalties paid by Polish corporate residents to associated EU companies may by subject to full exemption of WHT (on certain conditions). Since 2016 a “small anti abusive clause” has been implemented for dividends related to activities whose only purpose was to gain tax benefits and which were not real. Real property tax and transport tax are charged as local taxes in Poland. Real property tax is paid by owners of real estate. Banks and financial institutions tax is taxable with 0.0366% rate (monthly levy) of the total assets (exceeding indicated minimal value).

VAT and other indirect taxes

The standard VAT rate is 23%. Preferential rates of 8% and 5% apply to certain goods and services. Other goods and services (e.g. exports, intra-Community supplies of goods, international transport services) may be zero-rated or exempt. The options/limits based on the EU Directive and Polish VAT regulations:

VAT Options in Poland Applicable / limits
Distance selling PLN 160,000 /year
(approx. EUR 40,000)
Call-off stock
VAT group registration
Cash accounting PLN 20,000/year
(approx. EUR 5,000)
Import VAT deferment
Local reverse charge supplies of scrap; paper waste; certain kind of electronics above limit of PLN 20,000 (approx. EUR 5,000)
Option for taxation
- letting of real estate
- supply of used real estate
VAT registration threshold PLN 200,000 /year
(approx. EUR 50,000)

Other indirect tax types in Poland are excise duty and gambling tax. Some civil acts such as contracts of sale, loan agreements, foundation deeds of partnership or company, if not subject to VAT, may be subject to civil law activity tax (CLAT), the rates of which are from 0.1% to 2%. Transactions related to filling a power of attorney and public administrative actions (submitting application forms, issuing certificates, granting permissions, etc.) are subject to stamp duty.

Personal income tax / Social security system

PIT is generally calculated on the income (i.e. on revenues reduced by tax-deductible costs). However, the income calculation differs depending on the source from which the income is earned (for example, employment contract, sole traders’ activity, personally performed activities, etc.). PIT is calculated according to the progressive tax scale at the rates 18% to 32%. A specific rate applies to individuals pursuing business activities as sole proprietorships or partners in partnerships, who may opt for a flat 19% PIT rate. Due to the above flat rate, as well as other rules applicable to this type of income, the taxation of sole traders is based on similar provisions as described in the previous chapter on corporate income tax (CIT).

Active incomes fall under the scope of the SSC system: individual social contributions (capped) and other insurances equal altogether 13.71%; employer’s contributions equal altogether approximately 21%. Additionally, the individual is obligated to pay a 9% contribution to health insurance, out of which 7.75% is deductible from the tax and 1.25% from the net income. The examples below show the cost of the employer and of the employee in case of minimum wage level and the average wage in the private sector.

Wage-related taxes in Poland Minimum wage Average wage in private sector****
Exchange rate PLN / EUR*** 4.3 in EUR in PLN in EUR in PLN
  523 2 250 1 227 5 275
TOTAL WAGE COST 633 121,00% 1 484 121,00%
Employer's social security* 85 16,26% 199 16,26%
Other insurance (approx.) 25 4,74% 58 4,74%
Gross salary 523 100,00% 1 227 100,00%
Employees' contributions 72 13,71% 168 13,71%
Healthcare insurance 41 9,00% 95 9,00%
Personal income tax** 31 18,00% 93 18,00%
NET SALARY 380 72,59% 870 70,96%

* capped at income of PLN 142 950 zł - over this amount only other insurance and healthcare insurance is charged

** taxable base = gross salary – employee’s contributions – statutory tax deductible costs – health insurance (tax deductible part)

*** Average exchange rate announced by National Bank of Poland as at January 25, 2019

**** Average wage in private sector in December 2018 according to Central Statistical Office

Since 2019 came into force the new regulations about tax free amount (dependable on the value of the tax base). Currently the tax free amount is PLN 8000.

POLAND
MAZARS AUDYT SP. z o.o.
00 - 549 Warsaw, Piękna 18, Poland
 
Kinga Baran
Head of Tax Advisory