This document summarizes key aspects of Poland's tax system according to a 2016 brochure by Baker & McKenzie. It outlines the corporate income tax rate of 19%, personal income tax rates ranging from 18-32%, and a standard VAT rate of 23% with some reduced rates. It also discusses social security contributions that are split between employers and employees, as well as other taxes such as tax on civil law transactions and real estate tax.

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This is chapter 5 of Baker & McKenzie
“Doing Business in Poland 2016” brochure
Tax System
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VAT
PIT
CIT

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Corporate income tax
Corporate income tax is currently levied
at the rate of 19 per cent on net profit. As a
rule, net profit is calculated as the difference
between revenues and tax-deductible costs.
Polish tax residents (e.g. companies, includ-
ing limited liability companies, companies
in organization and joint-stock limited part-
nerships) are subject to corporate income
tax on their worldwide income. Non-tax
residents are subject to taxation in Poland
on the revenues earned on the territory
of Poland (tax is either settled by such
non-residents – in the case of permanent
establishments in Poland – or withheld
at source by a Polish withholding agent
(for example, in the case of dividends,
interest, royalties).
Companies with legal personality and their
shareholders are treated separately for taxa-
tion purposes. Dividends are subject to
a withholding tax at the 19 per cent rate or
are tax exempt (where the conditions de-
scribed below are met). The amount of with-
holding tax is often reduced to the
5 per cent rate under bilateral agreements
for the avoidance of double taxation. Poland
has implemented the regulations of the
Council Directive on the common system
of taxation which is applicable in the case of
parent companies and subsidiaries
of different Member States. Therefore, in-
come from dividends is exempt from with-
holding tax if the following conditions are
fulfilled:
• the entity paying the dividend is a compa-
ny that pays income tax with its seat
or management in Poland;

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• the entire income of the company receiv-
ing the dividend, regardless of where
it is earned, is subject to taxation in one
of the EU states or European Economic
Area member countries;
• the company receiving dividends
is directly entitled to at least 10 per cent
of the Polish company’s shares during
an uninterrupted period of at least two
years;
• the company receiving dividends does
not benefit from exemption from taxation
of all its income, regardless of where
it is earned.
There is an anti-abuse clause with respect to
dividends and other profit-sharing payments
paid between related companies.
Some tax incentives are provided by tax law.
For example, exemption of income earned
due to business activity being carried out in
special economic zones or partial double
deduction of expenses borne for research
and development.
Polish tax law provides for transfer pricing
regulations in accordance with the general
OECD provisions. It is possible to conclude
an advanced pricing agreement with the
tax administration in order to secure the
correctness of the transfer pricing method
being applied. There are also thin capital-
ization restrictions applying to intra-group
financing. Polish tax residents can form tax
capital groups.

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Personal income tax
Residents of Poland are subject to personal
income tax with respect to their worldwide
income. Non-residents of Poland are subject
to tax on income earned from work done
in Poland and any other income earned in
Poland.
Personal income tax law provides for sever-
al categories of revenue source. As a rule,
income from employment, personal services,
business activities and from other sources
is subject to progressive tax rates of 18 per
cent and 32 per cent. The 32 per cent rate
applies to income over PLN 85,528 per an-
num (i.e. approximately USD 28,900). Income
from business activities may, however, be
taxed at the flat 19 per cent rate. The flat
19 per cent rate also applies to capital gains,
dividends and interest.
Persons who are not tax residents in
Poland are generally taxed in the same way
as Polish tax residents. However, in the case
of revenues from certain kinds of personal
services (also revenues for membership on
a board of directors or supervisory board)
the flat tax rate of 20 per cent of revenues
applies.

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VAT
Currently, the following activities are subject
to Value Added Tax (VAT):
• supply of goods;
• supply of services;
• intra-Community supply of goods;
• intra-Community acquisition of goods;
• export of goods;
• import of goods.
The VAT rate is currently 23 per cent, with re-
duced rates of 0 per cent, 5 per cent or 8 per
cent for certain types of goods and services.
As a rule, Polish VAT law is based on the EU
Directive on the common system of value
added tax 2006/112 and other EU regula-
tions. Until the end of 2017, the VAT rates
may vary between 22 per cent (reduced
– 7 per cent) and 25 per cent (reduced
– 10 per cent), depending on the condition of
certain macroeconomic factors set out in the
Act on VAT.

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Social security
Social security contributions are paid to the
Social Insurance Institution (ZUS). Contribu-
tions are compulsory in employment con-
tracts and most personal services contracts.
The contributions consist of:
• retirement pension insurance 19.52 per
cent (paid 50/50 by employer and em-
ployee);
• disability pension insurance 8 per cent
(6.5 per cent paid by employer and
1.5 per cent paid by employee);
• sickness insurance 2.45 per cent (paid
by employee);
• insurance against accidents at work
(withheld by employer).
The premium for accident insurance is
generally set between 0.67 per cent and
3.86 per cent, depending on the classifica-
tion of the employer’s activities in the PKD
(Polish Classification of Activities), as listed
in the REGON register (National Register
of Polish Business Entities). There is also a
health care insurance payment amounting
to 9 per cent of the base (as a rule, taxable
revenue less social security contributions).
However, 7.75 per cent of the base is deduct-
ed from personal income tax advances.

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Other taxes
Tax on civil law transactions is levied in case
of several kinds of civil law actions, e.g. rais-
ing share capital (0.5 per cent), sale of goods
and property rights (1 per cent or 2 per cent),
and loans (2 per cent). As a rule, tax is not
levied where VAT applies. Several exemptions
are applicable to loans.
There is also real estate tax and some other
minor local taxes.
There is also a tax on certain financial institu-
tions, including domestic and foreign banks,
insurers, reinsurers, and credit
consumer institutions.

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All of the information included in this document is for informational purposes only, and may not reflect the most current legal developments, judgments, or
settlements. This information is not offered as legal or any other advice on any particular matter. The Firm and the contributing authors expressly disclaim
all liability to any person in respect of anything, and in respect of the consequences of anything, done or not done wholly or partly in reliance upon the whole
or any part of the contents of Baker & McKenzie’s Doing Business in Poland brochure. No client or other reader should act or refrain from acting on the basis
of any matter contained in this document without first seeking the appropriate legal or other professional advice on the particular facts and circumstances.

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