Poland Tax & Business Guide - Deloitte

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Basic facts
Population 38.1m Inflation 1.1% (2006)*
Main languages Polish GDP per head US$8,870*
Currency Zloty (PLN) GDP growth 5.5% (2006)*
Economic communities European Economic Area, EU, OECD, WTO
GDP sources 4.8% agriculture, 31.9% industry, 63.3% services
*Economist Intelligence Unit estimates.
Political environment

Poland is a parliamentary democracy with a bicameral legislature.

The president is Lech Kaczynski.
Foreign trade and investment
Exports US$115.9bn (2006)* Imports US$120.4bn (2006)*
*Economist Intelligence Unit estimates.

Leading export markets: EU countries, particularly Germany, France, Italy and the UK, and Russia and Ukraine.

Major exports: Machinery and transport equipment, other manufactures, food and animals.

PolandÌs trade is still concentrated on the EU, with other EU members accounting for 77.5% of Polish exports and 62.8% of Polish imports in the first three quarters of 2006. Exports to non-EU east European countries grew by 30% year on year in the first nine months of 2006, with exports to Ukraine (up by 58% year on year) rising particularly strongly.
Business and financing
Business forms Joint stock companies, limited liability companies

Companies can take a variety of forms, including the joint stock company, limited liability company, limited joint stock partnership, registered partnership, limited partnership, professional partnership, sole proprietorship and civil-law partnership.

Foreign investors enjoy national treatment if they are permanent residents or nationals of a country where reciprocal treatment is provided to Polish firms.

The financial centre is the capital, Warsaw. Major banks are also located in Poznan, Katowice, Krakow and other large cities.
Labour environment
Unemployment rate 16.2% (2006)* Minimum wage PLN 899 (monthly)
*Economist Intelligence Unit estimate.

The national minimum wage for a 40-hour working week increased to PLN 899 per month on January 1st 2006, from PLN 849.

Under the Polish social security law, an individual working under a Polish employment contract is required to contribute to the mandatory social security in Poland. Employee social security contributions amount to 18.71% of the first PLN 72,690 of employment income, and 2.45% thereafter. The employer must pay social security contributions at rates of 19.83% to 22.72% (depending on the core business) up to a ceiling of PLN 72,690, and at 3.57Ò6.46% thereafter.

Apart from the above, the employee must also pay healthcare contributions of 8.5% of gross employment income less the amount of social security contributions deducted. As 7.75% of the assessment base is deductible from the amount of tax payable on the individualÌs income, only 0.75% of the contribution is borne by the individual.
Taxation
Corporate tax
Main rate 19%

Resident companies are taxed on their worldwide income; non-resident companies are taxed only on income sourced in Poland. A company is resident in Poland if its legal seat or management office is situated in Poland. Tax is imposed at a rate of 19%.

Dividends paid to corporate and individual resident shareholders are subject to a withholding tax of 19%, unless the dividends are paid between members of a tax group or the dividends qualify for exemption under the EC Parent-Subsidiary Directive. A corporate group may be formed where there is a 95% shareholding, subject to certain conditions.
Individual tax
Progressive rates up to 40%

Under the Polish Personal Income Tax (PIT) Law, individuals may be subject to limited or unlimited tax liability in Poland. The tax status of an individual depends on whether the individual has a permanent residence in Poland (a place at which the person stays with an intention to remain permanently). Polish residents are taxed on worldwide income, whereas individuals with non-resident status are taxed only on Polish-source income.

Generally, personal income tax is levied at progressive rates of 19%, 30% and 40%. A flat rate tax of 19% applies to certain types of income such as dividends and interest. Under some conditions, an individual may elect to be taxed at a flat rate of 19% on business income.
Capital gains
Gains on disposal of business assets are taxed as income

Capital gains of companies and individuals from the disposal of business assets are taxed as income. Capital gains of individuals from the sale of shares are taxed at a 19% rate (separately from income). Income derived by an individual on the sale of a dwelling, other building or land not used for business purposes is subject to a 10% rate. Such gains may be exempt from taxation if the proceeds are used to purchase another asset within two years or if the sale takes place five years after the purchase or creation of the asset.
Indirect tax
VAT standard rate 22% Lower rates 7%, 3%

Value-added tax (VAT) applies to most transactions (supplies of goods and services) at a standard rate of 22%. Items subject to the reduced rate of 7% include food, books and newspapers, services relating to agriculture and forestry, and some healthcare products. A 3% rate applies to agricultural products and some unprocessed food products. Exports are zero-rated. Exemptions include financial services and services related to science, the development of technology (in certain cases) and certain cultural services.

Registration is compulsory for businesses with annual turnover above ƒ10,000. Taxpayers from outside the EU that register for VAT in Poland must appoint a tax representative.
Tax administration and compliance
Tax year Corporations: accounting year; Individuals: calendar year

Companies make monthly advance tax payments, based either on the estimated liability for the current year or on one-twelfth of the liability disclosed in a return filed in the year preceding the tax year (simplified method). An annual tax return is due within three months of the end of the tax year, and a final payment of tax is due by the same date.

Employment income of individuals is taxed by withholding. Individuals earning other types of income may be required to make monthly advance payments, with a final payment due after the end of the tax year. The tax return is due by April 30th following the end of the tax year. VAT returns are due by the 25th day of the month (or quarter in some cases) following each subsequent month (or quarter respectively).
Additional tax information
Withholding taxes Dividends 19%, Interest and Royalties 20% (for non-residents). Rates for non-residents may be reduced or eliminated under tax treaties and EC directives.
Tax treaties Poland has concluded more than 80 tax treaties.
Dividends Dividends are subject to a 19% final withholding tax.
Revenue protection There is transfer-pricing, thin-capitalisation legislation and an anti-avoidance rule concerning mergers and divisions.
Groups There is provision for group taxation.
Incentives There are special economic zones.
Other taxes Agricultural/forestry taxes, Import duties, Inheritance and gift tax, Local urban property tax, Market duty, Stamp duty, Civil law transactions tax, Excise duty, Transportation tax.