Social security contributions
In Poland, social security consists of:
- pension insurance
- disability insurance
- accident insurance
- labour fund
- sickness insurance.
The Polish social security system covers people economically active, like employees or self-employed people. Social insurance may be mandatory or voluntary.
Employees and employers: General rules
Both the employer and the employee are obligated to contribute to the Polish social security system. Apart from paying its own share, the employer is obligated to withhold the employee‘s share of the social security contributions and remit them to the Social Security Authorities (ZUS). In both cases, the relevant payments shall be made monthly.
As of 1 April 2015, the employer pays total contributions in a range of 19.21% to 22.41% of the employee’s gross salary (the employer’s contribution rate includes an accident insurance element that varies according to the number of employees insured and the business sector). The contribution rate for the employee is 13.71% of gross salary. The social security shares payable by the employer and the employee are tax-deductible items in their respective PIT settlements.
Part of the above rates apply to salaries below the cap of PLN 177,660 in 2022. The cap is changing every year. After exceeding this cap, the salary is subject to a contribution rate of 3.22% to 6.41% payable by the employer and 2.45% payable by the employee.
Details of the social security contribution calculation are shown in the following table:
|Contribution||Contribution amount||Paid by|
|Pensions and disability insurance||16.26% of total gross salary (up to the cap of PLN 177,660 in 2022)||Employer|
|11.26% of total gross salary (up to the cap of PLN 177,660 in 2022)||Employee|
|Sickness insurance||2.45% of total gross salary||Employee|
|Accident insurance||1.67% of total gross salary for employers that employ up to nine employees. 0.67% to 3.33% of total gross salary for employers that employ more than nine employees (the precise rate depends on the business sector). In practice, a flat rate of 1.67% is applied in respect of foreign employers.||Employer|
|Labour Fund||2.45% of total gross salary||Employer|
|Employee Guaranteed Benefits Fund||0.10% of total gross salary||Employer|
Social security for mobile employees
The social security position in Poland of mobile employees depends on whether:
- European Union (EU) coordination regulations can be applied
- bilateral totalisation agreement regulations should be applied, and finally
- whether the international transfer is made to or from a third country with whom Poland does not have any international agreements, in which case only Polish domestic regulations will be applicable.
Social security contributions of self-employed
As a rule, self-employed persons pay social security contributions in a lump sum, regardless of their actual income. The base for social security contributions, thus the amount of contributions, depends on the forecast average monthly wage for a given year (i.e. calculation basis amounts to 60% of the forecast average monthly wage).
Self-employed persons whose income in the previous year did not exceed PLN 120,000 may pay contributions from the income obtained in the previous year (provided that they meet additional criteria).
There is also a relief for starting a business. Individuals under self-employment do not have to pay social security for the first six months of their activity. For the next 24 months, they can pay so-called 'preferential contributions' that are significantly lower than normal ones.
Employees, board members and proxies
The monthly contribution rate for health insurance is 9% of the assessment base. In the case of obligatory participation, the assessment base is equal to the individual's gross income decreased by the amount of the employee’s part of social security contributions. Until 1st January 2022 the amount of 7.75% of assessment base was deducted from the employee’s PIT liability, while the remaining 1.25% was financed from the employee’s net income. However, as of 1st January 2022 according to the new regulations introduced by the Polish Deal the amount of 7.75% of the health insurance assessment base is no longer tax deductible for taxpayers reconciling their income with the tax scale, thus the 9% of contribution rate for health insurance is financed from the employee’s net income.
Please note that there is no cap on the health insurance contributions’ assessment base.
Also, from 2022, the method of calculating the health insurance contributions for entrepreneurs has changed. Currently, the rules for paying the health insurance contributions depend on the method of taxation of business activity and are as follows:
- 4.9% of income for sole proprietorships taxed at flat rate (19%);
- 9% of income for sole proprietorships taxed according to the tax scale (12% / 32%);
- however, the health insurance contribution cannot be lower than PLN 270.90 per month (value for 2022). Please note that there is no amount of the maximum contribution indicated.
- a specific contribution depending on the amount of annual revenues for sole proprietorships taxed with a lump sum on recorded revenues, i.e.:
- for revenue up to PLN 60,000.00 - PLN 335,94 per month,
- for revenue between PLN 60,000.00 and 300,000.00 - PLN 559,89 per month,
- for revenue exceeding PLN 300,000.00 - PLN 1,007.81 per month.
Additionally, as a result of the changes introduced on 1July 2022, the entrepreneurs can deduct health insurance contributions under modified rules.
According to the changes, such possibility will be provided for entrepreneurs who tax their income (revenues) differently than according to the tax scale, i.e:
- a flat rate tax,
- a lump sum on registered revenue, or
- tax card.
However, the amount of the deduction is to be limited, depending on the chosen form of taxation:
- up to PLN 8,700 of deduction from income (or inclusion in tax deductible costs) for sole proprietorships taxed at flat rate (19%);
- up to 19% of health insurance contribution paid for those entrepreneurs using the tax card (deduction from tax);
- up to 50% of health insurance contributions for those entrepreneurs paying the lump sum tax (deduction from the tax base).
Property tax is imposed on the following real properties:
- buildings or parts of buildings - taxed on usable area,
- structures or parts of structures, used for an economic activity - taxed on initial value adopted for tax purposes, not reduced by depreciation write-offs, and
- land (if not subject to the farming tax) - taxed on area.
Taxpayers liable to property tax are individuals and other entities which are:
- the owners or independent possessors of properties,
- possessors of properties that are state-owned, or
- permanent landholders.
Property tax rates for buildings and land are established on yearly basis fixed by municipalities within limits set in the Law on Local Taxes and Fees. In 2022, land used for business purposes is subject to a rate limit of PLN 1.03 per square metre. Buildings used for business purposes are subject to a rate limit of PLN 25.74 per square metre. Property tax rate for structures is fixed at 2% of the initial value
Inheritance, estate, and gift taxes
Polish gift and inheritance tax is levied on the value of assets and property rights located in Poland that are transferred on death to an heir and on lifetime gifts. Polish gift and inheritance tax may be imposed on assets and property rights located abroad if the heir or donee is a Polish national or is a Polish permanent resident at the time of the transfers or death or when the donation contract is concluded.
Non-residents who do not hold Polish citizenship are not obligated to pay gift and inheritance tax if movable property and property rights are inherited or donated in the Polish territory, provided that the donor is not a Polish resident and has no Polish citizenship.
The following are examples of some of the most common exemptions from gift and inheritance tax:
- Acquisition of property and property rights by means of inheritance and donation by members of the transferor’s/donor’s nearest family (e.g. spouse, children, parents, stepparents, brothers, sisters; except for children-in-law and parents-in-law) provided that they fulfill reporting requirements described in the Polish gift and inheritance tax law.
- Acquisition of a farm (except buildings).
There are some tax-free amounts. The tax-free amounts depend on the character of the personal relationship between the purchaser and the person from whom assets and property rights are acquired.
In the case of multiple acquisitions from the same person (within the last five years), the value of all acquisitions are accumulated for gift and inheritance tax calculation purposes, and the total sum is reduced by the amount of tax already paid. Gift and inheritance tax is payable by the donor in case of a gift, and by the heir in case of inheritance. Tax is charged on the fair market value of the gift or inheritance on the day when the tax point arises (i.e. when the heir/donee accepts inheritance/donation), less a deduction for any debt or burdens on the amount transferred, that is, the net value. The tax varies according to the relationship with the deceased or the donor.
As of 1 January 2019, an important change concerning the sale of real estate received by inheritance was implemented. Until 2019, the law provisions exempted from tax the sale of real estate property after five years from the date of opening the inheritance, which is usually the date of death of the testator. In respect to the new law provisions, the five-year period will be counted from the date of acquisition of real estate by the testator. The taxpayer will also be allowed to use the housing allowance for the extended time period. The previous provisions have released income from the sale of real estate under condition that the funds for one's own housing purposes were spent within two years after the sale. Starting from 1 January 2019, the deadline is extended to three years. In order to benefit from the exemption, the taxpayer should become the owner of the property.
Value-added tax (VAT)
The VAT rates are 23% (standard rate), 8%, 5%, 0%, and exemption. See Other taxes in the Corporate tax summary for more information.
Luxury and excise taxes
Excise duties are levied on the production, sale, import, and intra-community acquisition of ‘excise goods’, which are listed in the excise duty law and include (among others) alcohol, cigarettes, energy products (e.g. petrol, oils, gas), passenger cars, and electricity. See Other taxes in the Corporate tax summary for more information.
The introduction of exit tax to the Polish tax system, as of 2019, results from an obligation to implement the Directive (UE) 2016/1164, adopted in 2016. The mentioned Directive establishes provisions in order to prevent tax avoidance practices, which may have an indirect impact on the functioning of the internal market.
A crucial assumption of the exit tax is taxation of unrealised profits in connection with moving one’s assets to another country, as well as those that are part of a PE.
The tax will also be due in case of change of the residency status of a taxpayer that deprives Poland from taxation of income that arises in connection with disposal of the individual’s property.
The general assumption of introduction of exit tax was only to cover assets with value exceeding PLN 4 million. This is the case involving moving of assets abroad.
The exit tax rate is equal to 19% and 3%. The lower rate is applicable when the income is not to be decreased by tax deductible costs. In practice, the most common tax rate will be 19%.
Type of assets covered by exit tax
In case of moving the tax residency abroad, exit tax will be due only on the following assets:
- Rights and obligations in a partnership.
- Shares in a company.
- Stock and other securities.
- Derivatives and certificates.
It should be emphasised that exit taxation will not be limited to assets acquired during one’s Polish tax residency, but will also apply to assets acquired before the individual’s arrival in Poland.
Postponement of the provisions on exit tax
Another change in PIT is to extend the exit tax deadline to:
- the seventh day of the month following the month in which the taxpayer lost all or part of the assets subject to taxation of that tax if all or part of the assets were lost before 1 December 2023, and
- 31 December 2023 in other cases.