Personal Taxation in Poland
Individuals pay tax at progressive rates rising to a top rate of 32%.Capital gains are generally taxed at the same rates as income, but gains on the sale of shares in resident companies are taxed at a rate of 19%. Capital gains on the sale of immovable property in Poland are exempt where the individual has owned the property for five years before the sale.
Non-resident individuals are subject to a final withholding tax of 19% on dividends and a final withholding tax of 20% on interest, royalties, technical fees and directors’ fees paid from Poland.
There is no tax relief on life insurance premiums, and the proceeds of life insurance contracts are not taxed.
Every adult taxpayer is allowed to save for a pension through an individual pension account known as an IKE. Contributions are from taxed income but returns will benefit from capital gains tax exemption on contributions not exceeding 150% of the national monthly average earnings. These accounts can only be liquidated when the holder reaches age 60, or 55 if eligible for early retirement.
Corporate income tax
Corporate income tax is charged at a rate of 19%. Resident companies pay tax on their worldwide inome, while non-resident companies are subject to taxation on their income arising in Poland. Dividends paid to non-resident companies are subject to a 19% withholding tax, while royalties, technical fees and management fees paid to non-resident companies are subject to a 20% withholding tax. Withholding tax rates may be reduced under the provisions of the EU parent/subsidiary directive, the EU interest and royalties directive or an applicable double tax treaty.
Poland has concluded a wide network of bilateral double taxation treaties. These allocate taxing rights between the two contracting states, generally permitting taxation of business profits of a non-resident company only when it has a permanent establishment (e.g. a fixed place of business) in Poland. Most double taxation treaties also provide for maximum withholding tax rates on dividends, interest and royalties, provide for the elimination of double taxation by way of a tax credit or exemption and provide for a dispute resolution process where taxation arises that is not in accordance with the terms of the treaty.
Special Economic Zones
A number of Special Economic Zones have been established in Poland. Enterprises investing at least EUR 100,000 in a zone may receive cash grants up to the amount of regional aid applying in the zone, amounting to 30% to 50% of the amount of qualifying expenditure by the enterprise. Regional aid relates to making new investments or to creating new employment. In the case of making new investments, the aid may apply as a percentage of the amounts paid for acquiring land, constructing buildings and buying plant. The business activities must continue for at least five years, or three years in the case of small and medium enterprises. The assets must be owned by the enterprise during the whole of that period, and at least 25% of the investment must be made using the enterprise’s own resources. The qualifying expenditure for the cash grant for creating new employment relates to the labour costs for two years in respect of taking on new employees. These new employments must continue for at least five years, or three years in the case of small and medium enterprises. Enterprises may also be eligible for some relief from corporate income tax and tax on real estate.
Value Added Tax (VAT)
Value added tax (VAT) applies to goods and services supplied in Poland, including imports. The standard rate of VAT is 23% (from January 2011). A reduced rate of 8% applies to certain goods and services and a 5% rate applies to basic food items. Exports are zero rated. Exemptions include financial services, education, healthcare services, culture, technology development and postal services. The turnover threshold for compulsory registration for VAT is PLN 150,000. Voluntary registration is possible for businesses whose turnover is above PLN 100,000.
Capital duty is charged at a rate of 0.5% on initial capital contributions to a new company and on the transfer to Poland, from outside the European Union, of the registered office or effective place of management of a company.
A transfer tax applies to the sale or exchange of property located in Poland, at a rate of 2%. The tax also applies to the transfer of other goods and property rights at a rate of 1%, if they are not subject to VAT. The transfer of shares and other securities is subject to the tax if the rights attaching to them are exercised in Poland, subject to certain exemptions such as Treasury Bills and certain other bonds issued by the central bank.
“Poland Foreign Investment Incentives” on Worldwide Tax
“Investing in Poland” KPMG in Poland
gdansk2.jpg by schick on morguefile
This post is part of the series: European Taxation Guide 2010
Succinct oveview of taxation in European countries. The series will gradually increase each month and will also eventually cover Asia and Australasia. Articles will be updated as and when taxation changes occur.