Poland’s tax system is mainly based on three key taxes: Corporate Income Tax (CIT), Personal Income Tax (PIT), and Value Added Tax (VAT). Below is an overview of how each of them works, along with other important taxes applicable in Poland.
Corporate Income Tax (CIT)
Corporate Income Tax is imposed on the profits of legal entities, such as companies and partnerships with legal personality.
The standard CIT rate is 19% and applies to most business activities. A reduced rate of 9% is available to small taxpayers whose annual revenues do not exceed EUR 2 million and to newly established businesses. In addition, under specific conditions, companies may apply the Estonian CIT model, which allows a 0% tax rate on retained profits until they are distributed.
Companies that have their registered office or place of management in Poland are treated as Polish tax residents and are taxed on their global income. This includes Polish subsidiaries of foreign corporations. Non-resident companies are subject to CIT only on income earned within Poland. The final tax burden may be reduced if a double taxation treaty applies between Poland and the company’s country of residence.
Polish CIT regulations also provide access to tax incentives, such as research and development (R&D) relief and exemptions related to Special Economic Zones.
Personal Income Tax (PIT)
Individuals who are considered Polish tax residents are taxed on their worldwide income. A person qualifies as a tax resident if their main personal or economic interests are located in Poland or if they spend more than 183 days in Poland during a tax year. Non-residents are taxed only on income sourced in Poland.
The progressive PIT rates are:
- 12% on income up to PLN 120,000
- 32% on income exceeding PLN 120,000
An additional 4% solidarity surcharge applies to residents whose annual taxable income exceeds PLN 1 million.
Double taxation is mitigated through international tax treaties or Polish domestic tax rules, often allowing foreign taxes paid to be credited against Polish tax obligations. Individuals may also benefit from various deductions and allowances, including child-related reliefs, charitable donations, and joint tax filings for married couples.
Value Added Tax (VAT)
The Polish VAT system follows the general framework used across the European Union.
There are several VAT rates:
- 23% – standard rate
- 8% and 5% – reduced rates
- 0% – mainly for exports and intra-EU supplies
- VAT exemption – for selected transactions
VAT applies to:
- Domestic supplies of goods and services
- Imports from non-EU countries
- Exports outside the EU
- Intra-community acquisitions and supplies within the EU
Businesses subject to VAT must register as VAT taxpayers. Monthly VAT returns are standard, although small taxpayers may choose quarterly reporting.
Other Important Taxes
Capital Gains Tax (CGT)
In Poland, capital gains are generally taxed as part of corporate income tax at a rate of 19%.
For companies, capital gains are combined with other taxable income and reported in the annual CIT return. This approach simplifies compliance, as businesses do not need to calculate or file a separate tax for capital gains.
In some cases, exemptions or reliefs may apply, for example under participation exemption rules or double taxation treaties, which can significantly reduce or eliminate the tax burden on qualifying transactions.
Withholding Tax (WHT)
Withholding Tax in Poland applies to certain types of income paid by Polish entities to non-resident recipients. The tax is withheld at source, meaning it is deducted by the Polish payer before the payment is made to the foreign entity.
- 19% on dividends
- 20% on interest, royalties, and certain intangible services
WHT ensures that Poland collects tax on income earned within its territory by foreign companies or individuals. However, Poland has an extensive network of double taxation treaties, which may reduce the applicable rate or provide a full exemption, provided that specific conditions (such as beneficial ownership and proper documentation) are met.
Dividend Tax
Dividends are typically taxed at 19%. However, dividends paid to companies based in the EU, EEA, or Switzerland may be exempt if specific conditions are met. Treaty provisions may further reduce or eliminate taxation.
Transaction Tax (PCC)
Certain civil law transactions are subject to PCC, including:
- 0.5% on loan agreements
- 1% on transfers of shares
- 2% on the sale of real estate or movable property
Poland’s tax system is broadly aligned with EU standards and provides a clear framework for both individuals and businesses, with CIT, PIT, and VAT as its core pillars. However, the applicable rules, reliefs, and treaty benefits depend on factors such as tax residency, income type, and business structure.
If you need support navigating Polish tax regulations or planning your market entry, contact Polylocal for tailored guidance and hands-on assistance.
