Income taxes are one of the obligatory benefit payments to the state. Their amount depends on the income and deductions used. What income taxes does the Polish tax system distinguish? How to calculate their amount? What exemptions and deductions can a taxpayer use? Everything you need to know about income tax in Poland you can find in the article.
Personal income tax (PIT)
The Personal Income Tax Act (PIT) governs the taxation of income earned by natural persons and enterprises in inheritance. The income of other entities is not subject to this tax. Age and citizenship do not matter for the status of a natural person as a taxpayer of income tax.
What is the amount of the personal income tax (PIT)?
Pursuant to Art. 27 of the PIT Act, income tax is determined on the basis of its calculation according to the tax scale.
One of the most noticeable tax changes in 2022 was the increase in the tax-free amount from 8,000 PLN to 30,000 PLN.
The first tax threshold applies to an amount not exceeding 120,000 PLN. From the 1st of July 2022, the tax rate is 12%, and the amount reducing the tax is 3,600 PLN.
The tax rate for the second tax threshold, above 120,000 PLN, is 32%. In this case, the amount reducing the tax amounts to 10 800 PLN.
Moreover, natural persons are obliged to pay a solidarity levy. It comes down to the obligation to pay 4% of the basis for the levy’s calculation, for those earning over 1,000,000 PLN. The solidarity levy is a statutory charge independent of the income tax in Poland.
Additionally, you can reduce income tax in Poland by using various tax reliefs and deductions. Among them, we distinguish child tax relief, single parents relief, Internet relief or relief for return from emigration.
The object of PIT taxation
All types of income are subject to income tax. Income classified by the PIT Act to the category of exemptions is an exception to this rule. The same applies to the income from which tax collection has been abandoned in accordance with the Tax Ordinance.
If a taxpayer receives income from several sources, the object of taxation is their total sum.
According to Art. 10 of the PIT Act, sources of income include:
- a service relationship
- employment relationship
- activity performed in person,
- non-agricultural economic activity
- letting, sub-letting, lease, sub-lease and other contracts of similar type.
The PIT Act don’t apply to revenues subject to the provisions on inheritance and donation tax, or revenues resulting from activities that cannot be the subject of legally effective contracts.
Annual personal income tax return
According to the regulations, the deadline for submitting the annual tax return is the 30th of April of the year following the tax year. Or, at the beginning of May if the 30th of April falls on Saturday or Sunday. The deadline for paying tax is not the same as the deadline for sending a PIT return. Sending the settlement does not close the possibility of regulating the underpayment.
Corporate income tax (CIT)
According to the Corporate Income Tax (CIT) Act, corporate income taxpayers are:
- legal persons,
- capital companies in organisation
- organisational units without legal personality, except for companies without legal personality,
- limited partnerships and limited joint-stock partnerships with registered offices or management boards in Poland,
- general partnerships with their registered office or management in Poland, after meeting conditions specified in the Act,
- unincorporated partnerships without legal personality with registered office or management in another state. But only if they are treated as legal persons according to the tax legislation of that state. Their entire income must be taxable in that state, regardless of where it was obtained.
Tax capital groups may also be taxpayers of income tax in Poland.
Certain entities are exempt from paying CIT. We distinguish among them the State Treasury, the National Bank of Poland, budgetary entities or the National Health Fund.
What is the amount of the corporate income tax (CIT)?
The CIT rates are as follows:
- 19% of the tax base
- 9% of the tax base on revenue (income) other than from capital gains for small taxpayers and new companies.
A reduced 9% income tax rate in Poland can be applied to:
- small taxpayers whose gross sales revenue did not exceed 2 million EUR in the previous tax year. The amount shall be converted at the average exchange rate announced by the NBP on the first business day of October of the previous tax year. It should be rounded to 1,000 PLN.
- taxpayers whose revenues other than capital gains achieved in the tax year did not exceed the net amount of 2 million EUR. The amount shall be converted at the average exchange rate announced by the NBP on the first business day of the tax year. It should be rounded to 1,000 PLN.
Start-ups in the first tax year may also use the preferential tax rate.
The object of CIT taxation
According to art. 7 of the CIT Act the object of taxation with this tax in Poland is income. It is the sum of income earned from capital gains and earned from other sources.
The CIT Act, besides subjective exemptions, also contains a catalog of objective exemptions. According to Art. 17 of the CIT Act, such exemptions apply to the income of organisational units of Volunteer Fire Brigades. It also applies to the income of local government units and the one generated by country housewives’ clubs.
Also, taxpayers may reduce the income tax in Poland by deductions from income shown in CIT-8. The main deductions used by CIT taxpayers are deductions for religious worship. Also the ones for research and development, or professional education for public schools.
Annual CIT tax return
The annual CIT settlement consists in submitting CIT-8 tax return. It also includes the payment of the tax which results from the return. If in a given period the taxpayer didn’t generate revenues and did not incur costs, he must still submit a tax return. Namely, a zero CIT-8 form.
You must pay the amount of this income tax in Poland by the end of the third month of the year following the tax year. If the tax year coincides with the calendar year, the deadline for submitting the tax return is on March 31.
Income taxes in Poland – summary
Income taxes in Poland are both important and complicated. Constant changes and modifications make the tax system unclear and unfriendly. The settlement of income tax becomes a challenge for taxpayers.
You don’t know how to find your way around tax regulations? Do you want to know which reliefs and exemptions you can take advantage of? Do not hesitate to contact us. Our experts will answer your questions, provide support and clarify any doubts.