Tax rates on business in Poland
Taxation of business income in Poland depends on the form in which business will be conducted. In general, Poland is considered to be a low income tax country compared to Western European states, where the taxation scale is much more progressive.
There are two income taxes in Poland : PIT – for natural persons, including sole traders and with some exceptions for partners in partnerships; and CIT – for corporate entities. Taxation of income means that cost deductions are available (unlike a situation where pure revenue is taxed).
Below we present the levels and rules of taxation depending on the form of business activity:
SOLE TRADER – subject to PIT, as a rule according to the general scale below, per year:
1) Income up to PLN 3091 (€ 690) is exempt from tax;
2) Income from 3091 PLN to 85 528 PLN (19 000 €) is taxed at a 17% rate;
3) Income above 85 528 PLN is taxed at a 32% rate.
A sole trader may also choose to be taxed at a flat rate of 19%. Certain groups of entrepreneurs, in particular freelancers, may choose a flat-rate revenue tax, which simplifies accounting with the tax office. The rates are diversified, depending on the activity performed.
PARTNERS IN PARTNERSHIPS – partnerships do not have legal personality under Polish law. This means that technically it is not the company that pays tax but its partner. A partner may, just like a sole trader, choose taxation according to a general scale (17%, 32%) or a flat income tax rate (19%).
LIMITED PARTNERSHIP – the rules of taxation of limited partnerships changed in 2021. Currently, a limited partnership is a CIT taxpayer and the tax is paid on the partnership income at the rate of 9% or 19%, where the 9% rate applies to taxpayers whose annual revenue does not exceed €2 million. The general partner may then reduce their PIT by their proportion of CIT paid by the company. The limited partner, in turn, may only deduct 50% of the tax and only if they are not related to the general partner in any way.
LIMITED LIABILITY COMPANY and JOINT-STOCK COMPANY – profits of limited liability companies as legal persons are subject to CIT at the rate of 9% or 19%, depending on annual revenue. Moreover, a shareholder is obliged to pay 19% PIT on dividends received.
Apart from the taxation itself, one should take into account additional charges related to social security contributions. Currently the contribution rates are flat and amount to about 400 PLN (85 €) per month for health insurance and about 1400 PLN (310 €) for social insurance (ZUS).
Przemysław Antas