Contents
- Classification of taxes in Poland: division into “direct” and “indirect” taxes
- Value Added Tax (VAT)
- Corporate Income Tax (CIT)
- Personal Income Tax (PIT)
- Legal methods of tax “optimization”
Having read this article completely, you will learn:
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“Complex tax rules!” — is one of the most popular phrases within our company walls. And we are sure you understand why. Haven’t you, at times, spent hours studying innovations in tax legislation, delving into the intricacies of calculating CIT for an LLC (Sp. z o.o.), or choosing the optimal form of taxation? In this article, we will talk about the Polish tax system: from basic concepts to key taxes and rates.
Thanks to taxes, new roads are built, schools are funded, hospitals are supported, and much more… These are mandatory payments and the main source of state revenue.
But for business owners, taxes are a completely different story. Although Poland tries to create comfortable conditions for doing business, the reality is that company owners still overcome many difficulties. As a rule, this happens due to basic ignorance or lack of information.
So how can double taxation problems be avoided? How is CIT calculated? Which expenses will the tax authorities definitely “recognize”? And this complex accounting — is it really mandatory?! We understand how easy it is to get confused about everything.
Therefore, to understand the Polish tax system, we recommend starting with the basics.
Classification of taxes (podatków) in Poland: division into “direct” and “indirect” taxes
All types of taxes in Poland can be divided into “direct” and “indirect”.
“Direct” taxes, for example, on income or real estate, are paid directly by the person on whom they are imposed by law. By the way, these taxes cannot be included in the cost of a good or service, i.e., transferred to another person.
“Direct” taxes:
- Personal Income Tax (PIT).
- Corporate Income Tax (CIT).
- Inheritance and gift tax.
- Property tax.
- Tax on civil law transactions.
- Forest tax and others.
“Indirect” taxes, on the contrary, allow the transfer of the financial burden to another person. For example, in a situation where the consumer bears the actual cost (the tax is included in the price), although they do not pay the tax directly to the tax office.
“Indirect” taxes:
- Value Added Tax (VAT).
- Excise duty (tobacco, alcohol, gasoline).
- Gambling tax and others.
By the way, regarding excise duties: if you plan to bring a car from abroad, be sure to study our article “Entry without barriers”.
Did you know that the amount of taxes depends on the structure of your company and the type of activity? Therefore, competent tax planning BEFORE registering a company is the key to successful business. Why? The fact is that the form of taxation can only be changed once a year.
You will find even more information on this topic in our detailed review. Follow the link and read the article “Tax Challenge”.
Now let’s analyze the main types of taxes in Poland in detail.
Value Added Tax (VAT)
Value Added Tax (VAT) is an indirect tax that is ultimately paid by the consumer (as part of the price), but all responsibility for its correct calculation and collection falls on the business.
Different VAT rates apply in Poland (23%, 8%, 5%, and 0%). And right from the start, you might face the first challenge: how to determine the correct rate for a particular transaction without errors?
However, choosing the rate is just the tip of the iceberg. In practice, business owners face difficulties when filing reports, dealing with foreign transactions, or reclaiming VAT. Plus, there is strict control from the tax authorities: errors can lead not only to fines but also to imprisonment.
Want to understand how VAT affects your company’s finances? You will find key insights in our material “In Search of Balance”. Follow the link to reach a new level in VAT management.
Corporate Income Tax (CIT)
CIT (Corporate Income Tax) is the main tax that your Polish company, for example, a Sp. z o.o., pays on its income. At first glance, the rates seem predictable: 9% for small or new companies and 19% for all others. But that’s not all.
After the company pays CIT, personal income tax (PIT) of 19% is also withheld, for example, from dividends. The total taxes (CIT+PIT) will amount to more than 26% of the initial profit.
But the good news is that there are perfectly legal ways to “optimize”. We constantly share these strategies, including options for deferring CIT payments, on the pages of our blog “Kogart HUB”.
Very soon we will publish material on the topic: “Double Taxation and CIT”. While you wait, you can already learn ALL about dividend payouts.
Personal Income Tax (PIT)
Now let’s talk about personal income tax (PIT) — this is the tax on the income of individuals in Poland. While CIT is paid by the company itself (legal entity), PIT concerns personal income: employee salaries, profit from sole proprietorship (JDG), pensions, rent, or interest on deposits.
When calculating PIT, the source of income must be considered. Salary from employment, income from zlecenie/dzieło contracts, JDG profit, or board member remuneration — all are taxed differently. This affects base calculations, advance payments, and the choice of the annual declaration (PIT-37/36/28, etc.).
But did you know that none of this is possible without one document? We are talking about the PIT-11 declaration from the employer or client. Without this data, you cannot file your annual PIT (especially PIT-37). Follow the link to learn how not to get bogged down in documents.
The amount of PIT tax is not always fixed. Polish legislation provides for a number of tax reliefs and deductions: for children, for the internet, for donations, for rehabilitation, and much more.
And what are the consequences for non-payment of taxes in Poland? The consequences can be much more serious than you think — even if you made a mistake accidentally. Want to know exactly how to avoid penalties? The whole truth is in our article “Non-payment of taxes and contributions”.
Legal methods of tax “optimization”
Now that we have reviewed the key taxes, it’s time to find out: how can this tax burden be managed effectively? Of course, tax “optimization” helps with this.
Tax “optimization” is a perfectly legal way to reduce or even avoid paying tax. This is not about “gray schemes”, but about competent financial and legal planning.
Therefore, one should not confuse legal “optimization” with illegal tax evasion. Aggressive “optimization” is a violation of the law, for which sanctions, fines, and even criminal liability are provided.
So how do you know if “optimization” is legal or not?
Of course, effective “optimization” requires knowledge and careful analysis of the specific situation. We regularly publish such proven and safe schemes. Want to learn more about specific methods? All the secrets of “optimization” are in this article.
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Subscribe to our blog to always be one step ahead! Find out how quarterly tax payments can optimize your cash flow in the material “Quarterly Taxes”. Put an end to any doubts regarding ZUS contributions — you will find all the answers in the article “ZUS and Sp. z o.o.”. And don’t forget to prepare for innovations by studying “Taxes of the Future”. Moreover, to ensure you are always aware of current events, check out the “News” section.
And we at “Kogart HUB” will continue to break down all the nuances, risks, and business opportunities for you in our future articles and guides. Read, discuss, and apply the knowledge in practice — and the “Kogart HUB” team will always support and help at every stage!
