Tax law

Tax system in Poland

Corporate income tax

A company is treated as a polish tax resident if it has its registered office or place of management in the territory of Poland. In that situation, the company pays corporate income tax (CIT) on their worldwide income and capital gains.  If company does not have a registered office or place of management in Poland it is subject to tax only on income generated in the territory of Poland. The term “place of management” is in principle determined under the effective management test defined in many treaties (i.e. the place where the management board or equivalent meets and takes decisions).

The standard corporate income tax rate is 19%. A reduced CIT rate of 9% is applicable to small taxpayers earning revenues (inclusive of VAT) equivalent to €2 million or less.

An “Estonian” CIT regime is available for entities which fulfil the so-called ‘simple capital structure’ criteria. This means in practice that a company may be entitled to the Estonian CIT only if its direct shareholders are individuals (not companies or other entities) and at the same time the company does not have any subsidiaries. In short, the Estonian CIT allows corporate taxpayers to defer payment of CIT at the point of profit distribution, up to a few years. Moreover, the Estonian CIT is also more attractive compared to other forms of taxation – the effective taxation rate of income tax (both for companies and individuals – CIT and personal income tax (PIT)) may be as low as 18.1% (in case of entities whose turnover does not exceed €2 million) or 21.2% (for other entities). The Estonian CIT should be considered as an investment vehicle for non-Polish tax resident individuals interested in investing or doing business in Poland.


Polish VAT regulations are harmonized with European Union law and, in principle, are consistent with the regulations of other Member States. Basic transactions subject to VAT are supplies of goods and supplies of services deemed to be made in Poland. In some cases also free of charge supplies of goods or services can be subject to VAT.

The standard VAT rate in Poland is 23%.  There are reduced rates of 8% and 5% on certain food, books, newspapers and the supply of a limited number of other services.  A number of services are exempt from Polish VAT, such as financial and postal services.

Split payment system

Poland introduced the requirement to use the split-payment mechanism for selected transactions. In split-payment mechanism, payment for an invoice is split between two bank accounts: net value is transferred to the regular bank account and the VAT value is transferred to the specific VAT bank account.

VAT bank account is opened by the bank automatically and free of charge for all taxpayers, provided that taxpayer has a regular bank account in polish bank. VAT bank accounts are kept only in PLN. In the case the invoice is issued in other currency than PLN the invoice has to indicate the amount of VAT in PLN. There is no possibility of paying invoices under split payment mechanism (if the split payment mechanism is appliacable) in other currencies – hence the PLN must be used.


All VAT taxpayers in Poland, regardless the size, are obliged to submit data from VAT records and VAT declarations in the form of Standard Audit File JPK_VAT to the Ministry of Finance in respective settlement periods.

Personal income tax

Taxation on personal income tax applies to natural persons who have their place of residence in Poland – on all income, regardless of where the sources of income are located (unlimited tax liability in Poland). However, natural persons who do not have a place of residence in Poland are subject to tax only on income generated on the territory of Poland (limited tax liability in Poland). As a rule, a person domiciled in the territory of the Republic of Poland is a person who:

  • stays on the territory of the Republic of Poland for more than 183 days in a tax year, or
  • has a center of personal or economic interests (the so-called center of vital interests) on the territory of the Republic of Poland.

The above principles apply subject to the provisions of the respective double taxation conventions. Therefore, even if in the light of Polish internal regulations a person meets the criteria of residence in Poland, it is always necessary to apply the appropriate criteria contained in the international agreement to determine in which country his actual place of residence is for tax purposes.

In general, the PIT tax rate is 17% and after exceeding the income of 120.000 PLN the rate of 32%, although the 17% PIT tax rate is planned to be reduced to 12% tax rate. Certain income (revenue) categories are taxed in accordance with separate rules.

One of the most important differences between e.g. employment and running a business is the possibility to choose the form of PIT taxation. Natural persons conducting business activity, at their request, may tax their income with 19% flat-rate tax (however, it must be noted that the business is also subject to 4,9% health care contribution). Depending on the scale of business conducted, upon meeting specific criteria, the taxpayer may request the application of other simplified taxation forms, i.e. lump tax.

Mandatory Disclosure Rules (MDR)

Since 1 January 2019 new tax scheme disclosure rules came into effect, which are based on the EU Council Directive 2011/16 in relation to cross-border tax arrangements, known as DAC6. In general, the new regulations oblige an electronic reporting of the tax schemes to the Head of National Revenue Administration (NRA). The reporting does not limit only to tax optimisation but also other legal and factual arrangements specified in polish law. Lack of reporting is threatened with heavy fines from PLN 750 to PLN 21.6 milion.

Exit tax

Since 1 January 2019 the exit tax has been introduced to the Polish tax law. According to the new regulations, transfer of assets by a taxpayer from Poland to another country results in taxation of unrealised gains generated in the period when the assets were located in the territory of Poland. Moreover the individuals who changed their tax residency are also potentially subject to the exit tax. The basic exit tax rate is 19%, however a tax rate of 3% is specified regarding the personal income tax.

The following assets may be subject to the exit tax law:

  • rights and obligations in a partnership;
  • shares in a company;
  • stock and other securities;
  • derivatives and certificates.

Protection of personal data in Poland

Poland is covered by the Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of individuals with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46 / EC (GDPR or RODO). The entity that is the controller of personal data must be able to demonstrate that the data processing is carried out in accordance with its provisions.

Polish Investment Zone

The Polish Investment Zone (PIZ) is an incentive for new investment projects in the form of income tax break. This tax break is a public aid and can be obtained regardless of the form of business activity, size of the company, country of origin. It provides an opportunity for tax exemption for all investment in Poland over 10, 12 or 15 years given that they fulfil specific entry criteria. The PIZ exemption allows for CIT exemption or PIT exemption of income generated by activities covered by a decision on support and conducted within the territory specified in this decision. The level of tax exemption depends on location of the investment and size of the enterprise. It may amount to:

  • 10% – 50% for large enterprises,
  • 20% – 60% for medium enterprises,
  • 30% – 70% for micro and small enterprises.

In order to obtain the support under new scheme the investor is supposed to fulfill number of criteria (in some cases more challenging than before) i.e. both quantitative and qualitative. Quantitative criteria define the minimum value of investment costs. As investment costs may be deemed capital expenditures or two-year labor costs of newly created work places. The minimum required level of these costs depend on the unemployment rate in the district proper for location of the new investment (in comparison to the average unemployment rate in the country) and the size of the enterprise. The qualitative criteria differs according to the type of investment (slightly different criteria for industrial and service investments). In both cases criteria are divided into two groups:

  • sustainable economic development and
  • sustainable social development

The aid may be granted for both production and service investments. However, it must be noted that certain activities are not allowed to take advantage over PIZ. In terms of service projects the scope of activities that may benefit from tax exemption has recently been extended. The investments involving services that are classified as modern business services or R&D may take advantage of significantly lower quantity criteria. The same refers to micro, small and medium enterprises.

There are no application rounds – application for tax exemption can be submitted any time during the year. Investor apples for a decision on support to an Area Administrator for the relevant region. As a rule, the application process should not take longer than 30 days from submitting the application. However, the term may be changed in case of need for delivering additional documents for the application.

The decision on support specifies in particular:

  1. Duration period of the decision.
  2. Subject of business activity.
  3. Conditions that the entrepreneur is required to fulfil, in particular:
    1. number of new workplaces to be created by entrepreneur in connection with a new investment within the specified deadline,
    2. the value of capital expenditures to be incurred by the entrepreneur within the specified deadline,
    3. the deadline for the investment completion,
    4. the quantitative and qualitative criteria to which the entrepreneur has committed.
  4. The maximum amount of capital expenditure and two-year labor costs that can be taken into account while determining the maximum amount of state aid.
  5. The area where the investment will be carried out according to the real estate registration data.