Taxes are one of the basic revenues of the national budget. Their function is to cover the expenses of the state. Their next function is redistribution, i.e. distribution of budget income obtained from taxes between citizens and public-law unions. In addition, they stimulate the economy to develop and enable the development of infrastructure, education, health care, military, among others. Running one’s own business involves the necessity of paying taxes. Regardless of whether the business made a profit or a loss. Read the article to the end and find out what taxes an entrepreneur pays in Poland.
Taxes in Poland – Income tax
Income tax is a direct tax, i.e., it is paid on the entrepreneur’s income. Its amount and payment term depend on the form of taxation chosen.
The PIT Act distinguishes two forms of income taxation:
- 17% and 32% tax scale (from PLN 85,528 income)
- 19% flat tax (regardless of the income earned, this form of taxation excludes most tax allowances and joint taxation with a spouse).
In case of companies that have the status of a legal entity and thus are subject to the Corporate Income Tax Act (also called CIT Act). Advance payments for CIT (19% or preferential 9%) must be paid by taxpayers every month or every quarter.
Taxes in Poland – Value Added Tax (VAT)
VAT brings in more than half of the revenue collected by the state from taxes. It is imposed on every good or service at all stages of production and distribution. It is the difference between the VAT on the sale of goods and the VAT paid on the purchase of goods. The current VAT rates are 23%, 8% and 5%. There is also so called preferential VAT rate – 0%, which is applied only after fulfilling certain conditions. In practice, you may also encounter the rate “zw” (exemption from VAT) or “np” (not subject to VAT).
Taxes in Poland – Tax on civil law transactions (PCC)
This tax is imposed on certain types of transactions occurring in business transactions. Contracts subject to this tax are:
- sale and change of things and property rights,
- loan of money or things marked only as to their kind,
- on the dissolution of co-ownership,
- establishment of a mortgage,
- irregular deposit agreements,
- partnership agreements.
The PCC rate depends on the type of agreement. The most common ones are 1% or 2% of the value of the concluded transaction. It applies to a purchase for a company from a private person who does not conduct business activity.