The tax base for CIT purposes is the overall income, which is the difference between aggregated taxable revenue and aggregated tax-deductible costs. A tax-deductible cost is defined as a cost incurred for the purposes of deriving revenues, as well as for the purpose of securing or preserving a source of revenue.
Subject to numerous exemptions, the tax base includes all sources of income. Consequently, there is no special treatment for income such as capital gains or interest.
In practice, taxable income is calculated by adjusting the profit reported for accounting purposes. The relevant adjustments are necessary due to differences between tax and accounting treatment of numerous revenue and cost items. As a result, the taxable base is usually higher than the accounting profit.
There is a separation of income/loss sourced from capital transactions from other income/loss sources. Taxpayers have to recognise revenues and costs related to each ‘basket’ separately. There is no possibility to set-off income derived from one ‘basket’ with loss borne in the other ’basket’. Income in both baskets is taxed at 19% CIT.
Generally, the value of inventory shortages may be included as a tax-deductible cost. Other write-offs in the value of inventory are not recognised for tax purposes until the inventory in question is sold.
When inventory is lost or sold, a tax deduction is allowed for the costs incurred when the inventory was purchased. The methods acceptable for inventory valuation for tax (and accounting) purposes are standard cost, average (weighted) cost, first in first out (FIFO), and last in first out (LIFO).
There is no separate capital gains tax. Capital gains or losses are aggregated with an entity’s other taxable income or losses. Capital losses are tax-deductible.
Domestic dividend income
Dividends received from Polish residents (domestic dividends) are excluded from overall income. Instead, such dividends are subject to a 19% WHT, which is withheld and remitted to the tax office by the payer of dividends. Based on a participation exemption, however, domestic dividends are not subject to the 19% WHT if the Polish beneficiary holds at least a 10% share in the paying company for at least two years.
The revenue arising from voluntary redemption of shares is not treated as a dividend for tax purposes and does not enjoy the benefits of the participation exemption (i.e. the method of redemption, whether voluntary or automatic, will matter).
Dividend income from abroad
Generally, dividends received by a Polish corporate tax resident from a non-resident are treated as regular income and taxed at the standard CIT rate. CIT on such dividends paid in other countries may be credited proportionately against Polish CIT.
Additionally, dividends received from entities seated in the European Union (including Poland), EEA member states, or Switzerland can benefit from CIT exemption if the Polish company owns, respectively, at least 10% (in respect to companies seated in the EU/EEA member states) or 25% (in respect to companies seated in Switzerland) in the share capital of the payer for two consecutive years (and certain other conditions are met).
Dividends received from non-EU/non-EEA member states may benefit from underlying tax credit. If a Polish company or a PE of a company from an EU/EEA member state located in Poland receives a dividend from a company seated in a non-EU/non-EEA country, it may deduct the tax paid by the payer on profits out of which the dividend was paid. The deduction is only possible if the Polish company/company from EU/EEA, which PE is located in Poland, holds (for two consecutive years) at least 75% of shares of the dividend payer. The tax may be deducted in an appropriate proportion. Furthermore, the deduction is possible if there is a DTT. Based on the provisions of the relevant DTT or other agreement concluded by Poland, the Polish tax authority may exchange tax information with its counterparty.
The participation exemption on dividends and other profit-sharing payments does not apply to the legal transaction or series of legal transactions that, having been put into place for the main purpose or one of the main purposes of obtaining a tax advantage, are not genuine, having regard to all relevant facts and circumstances.
Based on the introduced provisions, a ‘not genuine’ legal transaction is such transaction that is undertaken in order to benefit from the tax exemption but does not reflect economic reality (i.e. it is not conducted for valid commercial reasons and its result is, in particular, transfer of shares’ ownership of the company paying the dividend or achieving, by this company, income [revenue] paid in the form of a dividend).
Interest income is aggregated with an entity’s other taxable income.
A 20% WHT is imposed on royalties paid to non-residents. Royalties paid to resident companies are taxed as ordinary income at the level of the beneficiaries of the royalties. There is no WHT on royalties if the conditions for the application of the EU Interests & Royalties Directive are met.
Only a beneficial owner is able to apply exemption from WHT on royalties.
Resident corporations are taxed on their worldwide income unless there is an applicable DTT in place between Poland and the relevant country that provides that the foreign income shall be exempt from taxation in Poland (see Foreign tax credit in the Tax credits and incentives section).
Controlled foreign company (CFC) rules entered into force as of 1 January 2015 (see Controlled foreign companies [CFCs] in the Group taxation section for more information).
Taxation of limited partnerships
The provisions will apply from May 1, 2021, however, the taxpayer may decide whether to become CIT taxpayers between January 1 and May 1, 2021.
The basic income tax rate will be 19% on the income earned. If the limited partnership can be recognized as a small taxpayer, the rate will be 9%.
Taxation of some general partnerships
CIT is to be imposed on those general partnerships in the case of which income taxpayers participating in the profits of such general partnerships will not be disclosed.
The changes to the regulations included in the amendment stipulate that the income of partners of limited partnerships will be classified as income from participation in the profits of legal persons (similarly to dividends) and thus taxed according to the PIT rate of 19%.
Optional tax rules, so called "Estonian CIT"
Estonian CIT is effective as of January 1, 2021.
The law is addressed to capital companies that meet the following criteria:
- revenues do not exceed PLN 100 million gross,
- the shareholders are exclusively natural persons,
- have no shares in other entities,
- company employs, apart from the shareholders, at least 3 employees on the basis of an employment contract (or incur monthly salary expenditures in the amount of at least three times the average monthly salary),
- passive income does not exceed operating income,
- demonstrate an appropriate level of capital expenditures.
There is no tax payment until the profit is retained in the business. The tax will be paid when the profit is paid out.