Poland

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Tax Policy

TAX POLICY

Value Added Tax

In most cases, Value Added Tax is payable at a rate of 23%. (22% IN 2010).

There are reduced rates of 8% and 5% for certain products and services.

If the annual turnover is less than PLN 150,000, the owner of the business is exempt from VAT registration.

Reports must be filed monthly or quarterly with the VAT Authorities, with the report and payment being made by the 25th day of the month following the period relevant to the report.

Transactions that are VAT exempt

Some products and services are exempt from VAT:

·         Health services.

·         Milk products.

·         Insurance and banking services.

·         Mail and stamps.

·         Educational, art and science services.

·         Provision of services for export.

Inheritance / Gift Tax

·           In Poland, there is an inheritance tax and a tax on gifts.

·           For a Polish resident, the tax liability is on assets both in Poland and outside.

·           For a foreign resident, the tax liability is in respect of assets that are located in Poland.

·           When either the testator / the donor of the asset or the recipient / heir are not a Polish resident, there is an exemption from the payment of tax.

·           The percentage of tax payable is between 3% and 20%.

·           The percentage depends on the relationship of the heir / recipient of the gift to the testator / donor and the value of the asset.

·           As a general rule, the closer the relationship, for instance that of a spouse, son or daughter, the lower the rate of tax payable.

·           There is a basic sum that is exempt from tax, depending on the type of asset.

·           There is an exemption for a group of assets such as antique art, farms and more, subject to certain conditions.

·           The tax liability is imposed on the heir / recipient of the gift. The donor of a gift is also liable for tax.

Real Estate Taxes

·           Real estate tax applies to all sectors, including individuals and public bodies.

·           The tax is levied on non-agricultural buildings and plots.

·           Some local authorities allow a reduction of up to 50%.

Agricultural and Forestry Tax

·           Agricultural tax - The tax imposed takes three main factors into consideration:

o   The area of the land.

o   The type of agricultural crops

o   The area in which the land is located.

·           Forestry tax - Imposed according to similar principles while here the type of tree and its value is also examined.

Poland Income Taxes and Tax Laws 2011

Poland's taxation of an individual's income is progressive.

In other words, the higher the income, the higher the rate of tax payable.

The 2011 tax rate for an individual is 18% or 32%.

Individuals can choose, under certain conditions, paying a flat rate of 19% on business income without allowances.

In Poland corporate tax in 2011 is 19%.

Individual Income Tax

An individual pays tax on his income as a wage earner or as a self-employed person. The tax for an individual who meets the criteria of a "permanent resident" in Poland will be calculated on his income in Poland and abroad. A foreign resident who is employed in Poland pays tax only on his income earned in Poland.

An individual is a Polish resident if the center of life is in Poland, or if staying in Poland more than 183 days in a fiscal year. An employer is obligated to deduct, immediately on a monthly basis, the tax payable on an employee's salary. A self-employed person must prepay income tax that will be offset on filing an annual return. The advance payment is determined on the basis of the return made for the previous year. In the event of a new business, the advance will be calculated on the basis of estimates made by the owner of the business.

Certain payments are deductible from taxable income as detailed below.

Individual income tax rates 2011:

Tax Base (PLN)

Tax %

1 -85,528

18%

85,528 and over

32% of base exceeding PLN 85,528

Comment: There is an initial allowance of PLN 3,091 on the lowest income bracket.

Capital Gains

·           In general, there is no special tax rate for capital gains in Poland. Capital gains are usually added to the regular income of an individual/company and based on the normal tax rates.

·           Despite this, if real estate is sold by an individual more than 5 years after it was purchased the capital gain is exempt from tax. Sale within 5 years from the date of purchase is taxed at 19%.

·           Individual's capital gain from sale of shares is taxed at a final tax rate of 19%.

·           In Poland dividend and interest income for individuals is taxed at 19% rate.

Reporting Dates & Payment Dates

The tax year in Poland is the calendar year ending on December 31.

·           An Individual -An individual whose income is from a salary only is not obliged to file an annual return.

o   The employer who deducts income tax from the employee transfers the tax to the tax authorities each month.

o   An individual who is self-employed is obliged to make 11 monthly advance payments.

o   Each advance must be made by the 20th day of any month for the previous month (in December, an advance is paid for both November and December).

o   The date for filing the annual return is April 30.

·           A Company -Payment of advances on tax is similar in the case of a limited company to that of the individual.

o   The company is obliged to file an estimated return to the tax authorities by March 31, and to pay the difference in the tax.

o   The latest date for filing an annual return is September 30 (for the previous year).

Corporate Tax

·           Poland's corporate tax for the year 2011 is 19%.

·           A company is a Polish resident if registered in Poland, or managing its activities in Poland.

Deduction of Tax at Source

Taxation of Employees - Social Security

Social security payments include disability insurance, sickness and accident insurance.

Employer

Employee

17.48-20.14%

13.71%

Note: The social security payments are subject to a ceiling.

Other Deductions

Tax is deducted at source from the following payments to nonresidents according to the table below:

 

%

Dividend

19

Royalties

20

Interest

20

Services

20

Branch Remittance

0

Comment: The deduction at source for a dividend, royalties and interest for foreign residents is subject to the Double Taxation Prevention Treaty.

Dividends received by a resident company from an EU/EEA/Polish company are exempt from deduction at source.