Poland

Polish corporate income tax is, in general, due on income of legal persons, limited partnerships and limited joint-stock partnerships, as well as general partnerships - if it has any partner not being a natural person and does not submit information on shareholders (in other cases general partnerships are tax transparent).

Polish tax residents are subject to tax on their worldwide income, unless there is an applicable double tax treaty (DTT) in place exempting the foreign-sourced income from taxation in Poland. Non-residents are taxed only on their Polish-sourced income. DTTs may result in specific income being not taxable in Poland, irrespective of its source.

The standard CIT rate is 19%.

The reduced CIT rate of 9% can be applied to income, other than capital gains, if the taxpayer:

• is a small taxpayer (i.e. taxpayer whose value of sales revenue, including the amount of VAT due, did not exceed the amount corresponding to the PLN equivalent of EUR 2 million in the previous fiscal year) or
• started its business activity, provided the establishment of the company was not a result of transformation or merger (in the first tax year).

The lower rate does not apply to tax capital groups nor companies created as a result of certain restructuring operations (mergers, contribution of a going concern, etc.).

Revenues resulting from the receipt of dividends, interest and royalties are subject to special CIT withholding rates - 20% on interest and royalties (paid to non-residents), and 19% on dividends or other payments from participation in the profits of legal persons (paid to both residents and non-residents) (see the Withholding taxes section for more information).

Income or loss is qualified to one of two baskets: sourced from capital transactions (‘capital gains’) and from other income/loss sources (also referred to as income/loss from ‘operational activities’) (see the Income determination section for more information). 

There is no limitation on the percentage of foreign participation in Polish resident companies. Such entities are subject to the general CIT rules. The same rules apply to branches of foreign companies (see the Branch income section for more information).

Certain entities are explicitly excluded from the group of taxpayers under the CIT law (e.g. Treasury, National Bank of Poland). Polish and EU/EEA-based investment funds are also exempted on the grounds of such provisions. 

What is more, family foundations (introduced to the Polish legal system as of 22 May 2023), are exempt from CIT on the ongoing, permitted (statutory) activities. CIT liability arises only at the time of transfer of the benefit to the beneficiary (at 15% CIT rate). This solution is similar to the one used in the Estonian CIT mechanism.

Minimum income tax

Minimum income tax is a new tax obligation that is applicable to taxpayers declaring tax losses or negligible income (≤ 2% of revenue).

The regulations were initially introduced as of 1 January 2022. However, upon a postponement, the minimum tax is applicable from 1 January 2024, and the first payment will occur in 2025.

The minimum income tax rate is 10%. 

The tax base is calculated as a sum of the following:

• 1,5% of operational revenues (other than from capital gains), plus
• ’excessive‘ debt financing costs paid to related entities (generally debt financing costs exceeding 30% of the so-called ‘tax EBITDA’), plus
• costs of intangible services or royalties paid to related entities exceeding PLN 3 million plus 5% of the so-called ‘tax EBITDA’.

It is possible to choose an alternative method of determining the tax base amounting to 3% of the value of revenues other than from capital gains in the tax year.

The provisions provide for a list of reductions from the tax base (e.g. the amounts of donations or R&D relief, for prototypes and robotisation, SEZ/PIZ revenue, the value of expenses included in the tax year as deductible costs resulting from the acquisition, production, or improvement of fixed assets, including through depreciation).

The minimum income tax does not apply, inter alia, to financial enterprises, start-ups, entities whose profitability in any of three prior years was no less than 2%, and taxpayers who recorded over 30% decrease in revenues.

The amount of the minimum tax paid for a given tax year may be deducted from the due CIT calculated using the traditional method for the consecutive three tax years immediately following the year for which the taxpayer has paid the minimum income tax.

Exit tax

The concept of exit tax exists in Poland and assumes a taxation of unrealised capital gains in the case of transfer of assets, change of tax residence (including cross-border transformation, which may be interpreted as cross-border mergers), or change of taxpayer's PE outside the territory of Poland. The exit tax rate is established at 19%. The tax base is the surplus of the market value of assets, with respect to which Poland would lose taxing rights, over their tax value. Under certain conditions, taxpayers may be able to apply for payment in instalments for a period not exceeding five years.

Optional tax rules (so-called ‘Estonian CIT’)

From 2021, a new, optional, and autonomous system of taxation of companies was introduced into the Polish legal system, commonly referred to as 'Estonian CIT'. In this model, the tax is paid only when the income is distributed (e.g. in the form of a dividend). In 2022 and 2023, the Polish Deal packages introduced important amendments with regard to the scope and application of the lump-sum scheme of Estonian CIT. 

The main advantages of switching to Estonian CIT taxation are:

• lack of separate accounting for tax purposes (tax settlement is based on the net profit),
• tax due only when profits are distributed and is calculated on the amounts of distributions (not on reinvested profits), 
• as to the rule, tax payment deadline is deferred until the year following the year when distribution takes place and there are no tax advances (however, specific short deadlines apply to the other taxable events indicated below, such as ‘hidden profits’).

The scheme is addressed to entities operating as joint-stock companies, limited liability companies, limited partnerships, or limited joint-stock partnerships that meet the following criteria:

• The shareholders are exclusively natural persons.
• The company has no shares in other entities.
• The company employs, apart from the shareholders, at least three employees on the basis of an employment contract (or at least three persons engaged on the basis of other contracts, provided that it incurs monthly salary expenditures in the amount of at least three times the average monthly salary).
• Passive revenue does not exceed 50% of all company revenues obtained from its activities in the previous tax year, calculated including the amount of VAT due.

The lump-sum tax on income is accrued at the moment of the distribution of profit and in a different amount than the standard CIT. In order to avoid abuses, the tax base is extended to also other events similar to distributions to shareholders, such as ‘hidden profits’ (i.e. all kinds of benefits towards - directly or indirectly - a shareholder or a related entity), expenses not related to business activities (such as, for example, 50% of exploitation costs of passenger cars in case of the use not exclusively for business activity) or revenues and costs of undisclosed business operations.

After the amendment introduced in 2023, the deadline for paying the lump-sum tax falls by the end of the third month of the tax year following the year in which the profit was distributed (i.e. a resolution was adopted on the division or coverage of the net financial result or the net profit income was distributed); specific deadlines apply to the other taxable events.

For small taxpayers and for taxpayers starting business activity on these principles, it is 10% of the tax base. In the case of other taxpayers, it is 20% of the tax base. 

Considering the tax due from shareholders on profit distribution (at 19%) and special mechanism of reduction of PIT liability, the effective tax rate (i.e. combined CIT and PIT taxation) for Estonian CIT with regard to amounts calculated to the tax base  (assuming it is applied by the taxpayer for intended minimum period of four tax years) is:

• approximately 21% for non-small taxpayers (instead of 34,4% on regular CIT rules), and
• approximately 18% for small taxpayers (instead of 26,3% on regular CIT rules).

Family foundations

With the introduction of the legal form of a family foundation into the Polish legal system with effect from 22 May 2023, tax laws have been amended with regard to taxation of economic events related to the operation of family foundations, in particular in the field of CIT.

A family foundation is generally exempt from CIT. This exemption is not complete and does not apply to all tax-significant events from the perspective of the family foundation. In particular, the exemption does not apply to transferred or made available by a family foundation directly or indirectly:

1. benefits provided to beneficiaries in accordance with the principles of operation of the foundation (regardless of which group the beneficiary belongs to),
2. property transferred due to the dissolution of a family foundation (so-called "post-liquidation property"),
3. benefits in the form of hidden profits.

Income tax is 15% of the tax base. The tax base is the revenue corresponding to the value of the benefit or property transferred. In the event of dissolution of a family foundation, the revenue is reduced by the tax value of the property contributed by the founder or founders. A structure was used here in which CIT liability arises only at the time of payment/transfer of the benefit to the beneficiary. This solution is similar to the one used in the Estonian CIT mechanism.

Revenues from business activities other than permitted activities (i.e. "non-statutory" activities) are subject to ongoing taxation at a sanctioned CIT rate of 25%.

The CIT exemption for a family foundation also does not apply to the minimum tax on revenues from buildings.

Diverted profits tax

In 2022, the new provisions regarding ’diverted profits tax‘ were implemented (as part of the Polish Deal reform programme). The Act of 7 October 2022 amending, among others, the CIT Act (Polish Deal 3.0) introduced further amendments to the provision on diverted profits that apply as of 1 January 2023. Some of the introduced changes were defined as clarifying ones, having the impact not only on the income achieved in 2023, but also on settlements for the tax year 2022.

This tax can be imposed at 19% on ’diverted profits‘ understood as certain qualified costs (e.g. intangible services, royalties, debt financing cost, or payments for transfer of functions, assets, or risks) incurred for the benefit of non-resident related entities and treated as tax-deductible by the Polish taxpayer, provided that:

• the income tax paid by the recipient, with regard to a specific type of income of this entity from one of the individual titles listed in qualified costs list (e.g. income from interest, consulting services, or royalties), for the year in which it received the due amount from the Polish company is lower than 14.25% (¾ of the standard Polish CIT rate of 19%), or tax exempt, or excluded from the corporate income tax; and
• on the side of the payment recipient, such qualified costs borne by the Polish taxpayer or by other Polish companies related to the Polish taxpayer constitute at least 50% of the revenue obtained by that foreign related entity; and
• the payment recipient transfers at least 10% of the profits received from the Polish taxpayer and this taxpayer’s related Polish entities to another entity (in the form of expenses deductible for tax purposes or distribution of profits).

Diverted profits tax is payable if the sum of qualified costs incurred in a tax year towards related entities constitutes not less than 3% of the sum of tax-deductible costs incurred by the Polish taxpayer in that year in any form. 

Since 2023, the burden of proving that a given expense does not meet the definition of diverted profit rests on all Polish taxpayers making payments to foreign related entities.

As a ’safe harbour‘ mechanism, the ’diverted profits tax‘ should not apply if the above costs are incurred for the benefit of a related entity subject to taxation on its worldwide income in the EU/EEA (assuming that this entity conducts a genuine and material business activity). The assessment of whether actual economic activity is material takes into account in particular the ratio of revenues obtained by the related entity from its actual economic activity to its total revenues.

The “diverted income” is not combined with other income (revenue) of the taxpayer.

Minimum tax on buildings

Minimum tax on buildings is a special type of tax on ’deemed‘ taxpayer’s income from buildings, i.e. initial value of the taxpayer’s buildings, decreased by PLN 10 million.

The basic principles regarding minimum tax on buildings are as follows:

• It is calculated separately from the ’regular‘ CIT.
• Currently, all types of commercial buildings subject to lease/tenancy (including hotels) fall within its scope.
• It is payable on a monthly basis at the rate of 0.035% (which roughly translates to the rate of 0.42% per annum).
• It may be set-off against ’regular‘ CIT liability. Therefore, in practice, minimum tax on buildings results in additional tax burden only if: (i) no regular CIT is paid by the taxpayer or (ii) the taxpayer’s regular CIT is lower than the minimum tax on buildings.
• If this minimum tax is higher than the ’regular‘ CIT, the excess may be refunded by the tax office provided that no irregularities in regular CIT are identified in the course of a special proceeding initiated by the taxpayer.

Local income taxes

There are no provincial or local income taxes in Poland.