Understanding Personal and Corporate Taxes in Poland: A Guide for individuals and Companies

Personal Income Tax in Poland

Individuals earning income in Poland are subject to personal income tax (PIT), which is progressive and applies to both residents and non-residents. Below are the key aspects of PIT:

Personal Income Tax Rates

Individuals earning income in Poland are subject to personal income tax (PIT), which is progressive and applies to both residents and non-residents. Below are the key aspects of PIT:

Personal Income Tax Rates

Poland applies a progressive tax system with two main brackets:
• 12% for annual income up to 120,000 PLN
• 32% for annual income exceeding 120,000 PLN Additionally, a tax-free allowance applies to lower-income earners, and certain deductions and allowances are available, including for families and self-employed individuals.

Flat Tax for Entrepreneurs

Self-employed individuals in Poland can opt for a flat tax rate of 19%, which may be beneficial for those with higher incomes, as it simplifies tax calculations and avoids the progressive tax scale.

Social Security Contributions

In addition to income tax, employees and self-employed individuals must contribute to Poland’s social security system (ZUS). These contributions cover pensions, healthcare, and unemployment benefits. Employers also contribute on behalf of their employees, making labor costs an important factor for businesses operating in Poland.

Corporate Tax in Poland

For businesses operating in Poland, corporate income tax (CIT) is one of the key financial considerations. Here’s what you need to know:

Standard CIT Rates

• 19%: Standard corporate income tax rate.
• 9%: Reduced rate for small businesses and startups with annual revenue below 2 million EUR (applies only to income from operational activities, not passive income).

VAT (Value-Added Tax)

Poland applies VAT to most goods and services, with standard and reduced rates:
• 23%: Standard VAT rate.
• 8%, 5%, and 0%: Reduced rates for specific categories, such as food, medical supplies, and books. Businesses registered for VAT must submit periodic VAT returns and comply with Polish tax regulations regarding invoicing and tax deductions.

Special Tax Regimes and Incentives

Poland offers various tax incentives for businesses, including:
• IP Box: A preferential 5% CIT rate for qualifying intellectual property income.
• R&D Tax Relief: Deductions for companies investing in research and development.
• Polish Investment Zone (PIZ): Tax exemptions for businesses investing in certain regions of Poland.

Tax Compliance and Reporting

Individuals and companies in Poland must file annual tax returns and ensure timely payments. The Polish tax year follows the calendar year, and tax returns for individuals are due by April 30 of the following year. Corporate tax filings depend on the company’s financial year but generally follow similar deadlines.

Final Thoughts

Poland’s tax system is structured to support both individuals and businesses, offering competitive rates and incentives for investors. However, navigating tax regulations can be complex, especially for foreign entrepreneurs. Seeking professional tax and accounting assistance can help ensure compliance and optimize tax liabilities. If you are considering starting a business or relocating to Poland, our team at Bunect provides expert tax and business consulting services. Contact us today to ensure a smooth and successful transition into the Polish market.