Direct taxes in Poland include income tax from individuals (Personal Income Tax – PIT), income tax from legal entities (Corporate Income Tax – CIT), inheritance and gift tax, tax on civil law transactions, agricultural tax, forestry tax, real property tax, tax on means of transport, tonnage tax and tax on the extraction of certain minerals. Indirect taxes include goods and services tax (VAT), excise tax and tax on games of chance.
Companies as a general rule pay corporate income tax. The Corporate Income Tax Act defines taxpayers as legal persons, tax capital groups (groups of at least two commercial law companies having legal personality that are related by capital and meet the conditions set out in the Act).
The tax is 19 per cent of the taxable amount (otherwise called the taxable base). Those taxpayers who engage in transactions with affiliated entities or entities which are resident or established in the so-called tax havens have to prepare detailed tax documentation on such transactions. If they do not provide the tax office with such documentation, their books will be examined by revenue inspectors. The inspectors may determine that the income was higher (or the loss was smaller) than the one declared by the taxpayer – the difference will be taxed at the rate of 50 per cent.
The taxable base is, in principle, the income after deducting, for instance, any donations for specific purposes. Such donations, however, may amount to no more than 10 per cent of income and making them is subject to some detailed rules laid down in the Act. Donations to charity and welfare activity may also be deducted, pursuant to the so-called “Church Acts”, and in this case up to 100 per cent of income.
Subject to certain conditions, 50 per cent of expenses incurred for purchase of new technologies may be also deducted from the taxable base. Moreover, the incentives consisting in CIT exemptions are also available to companies investing in Special Economic Zones.
The corporate income tax applies generally to all income, regardless of the type of revenue sources from which it is derived. Income is defined as the surplus of revenues over costs of earning the revenues. If the costs of obtaining revenues exceed total revenues, we can talk of a loss.
A taxpayer who sustained a loss in a given tax year may deduct it from his income throughout the next five consecutive tax years. However, the amount of such deduction in any of those years may not exceed 50 per cent of the amount of the loss. Detailed provisions apply to determination of income from a share in the profits of legal persons (such as dividends), income of foreign entities from royalties (such as interest) as well as income of entities related by capital.
The Act lays down a rather precise definition of revenues. It specifies that revenues are cash and cash equivalents received, including foreign exchange gains, and the value of things, rights and benefits received free of charge or partially free of charge. Revenues include also “amounts due”, even if they have not yet been actually received, after excluding the value of returned goods and granted discounts.
As a general rule, for determining the date on which revenues were generated it is assumed that the revenue is generated on the date on which the thing was delivered, the property right was sold or the service was performed, including partially performed service. This cannot be later than on the date of invoicing or payment of amounts due. Services paid based on fixed settlement periods or electricity or gas supplies are subject to more detailed principles of determining revenues. The Act specifies also certain categories which cannot be treated as revenues.
Moreover, the Act provides also a detailed definition of tax deductible costs and lays down the principles of their accounting. Deductible costs do not include expenses incurred for acquisition or own production of certain assets. Those are for example buildings, structures, machines, means of transport and proprietary rights, including licences and copyrights. In this case we are dealing with the so-called depreciation write‑offs, recorded by companies as deductible costs.
There are also specific rules on taxation of parties to a lease agreement. According to the Act, the tax settlement in this regard depends, among other things, on the stipulations of the signed agreement.
The Corporate Income Tax Act specifies that companies do not file tax returns throughout the tax year but instead must make advance payments on account of tax. Small taxpayers and those who have just started to run their own business may opt for making advance payments on a quarterly basis. The annual tax return has to be filed by the end of March and the same deadline applies for payment of the tax due or the difference between the tax due on the income shown in the return and the total of advances paid.
According to the Act, CIT payers, if their registered or head office is in Poland, are liable to pay tax on the entirety of their income, regardless of where it is earned. Those companies who do not have their registered or head office in Poland are liable to pay tax only on the income earned in Poland.
Since Poland is a member of the EU, Polish VAT regulations are in general consistent with the EU regulations. The differences concern certain details and are allowed for the most part by the EU law. A company who is a VAT taxable person calculates the amount of tax due on their own and then pays it to the appropriate tax office. The VAT due is the difference between the VAT gained from the sales of goods to customers (output VAT) and the VAT paid for the purchase of goods (input VAT). There are separate rules for deducting the input VAT charged for the purchase of passenger cars, as well as fuel and spare parts for such cars.
As a general rule VAT is remitted by the seller but in order to avoid abuses in the trade of certain goods the so-called reverse VAT charges have been introduced for certain products. This applies, among others, to greenhouse gas emissions, trade in scrap metal or in certain steel products. In these cases VAT is paid by the buyer and not by the seller.
VAT becomes chargeable upon the release of goods or completion of services, and should be paid by the 25th day of the next month.
In order to protect the national budget, on 1 January 2011 the VAT rates were raised by 1 percentage point. They are planned to be in force until the end of 2016. The basic rate is 23 per cent, while the rate of 8 per cent applies to certain foodstuffs and construction services, and the rate of 5 per cent covers basic foodstuffs and books. The VAT rate for intra-community supply of goods and for export of goods is 0 per cent. The same zero rate applies also to goods and services connected with sea and air transport and the means of such transport, as well as to services connected with export of goods and to international transport services.
In the EU, excise tax, just as VAT, is a harmonised tax. This means that the Polish regulations on excise are to a great extent compliant with the EU regulations. This is true for energy products, electricity, alcohol and alcohol beverages as well as tobacco products. Other products, such as passenger cars, are subject to excise tax imposed according to specific Polish regulations, which is allowed by the EU regulations. Pursuant to the applicable regulations, the rate of excise tax on motor fuel is PLN 1,565 for 1,000 litres, on diesel oil – PLN 1,196 for 1,000 litres, on electricity – PLN 20 for 1 MWh, on ethyl alcohol – PLN 5,704 for 1 hl of such 100 % alcohol. In the case of passenger cars with cylinder capacity of more than 2,000 cm3 excise tax is 18.6 per cent of the taxable base, and in the case of other passenger cars it is 3.1 per cent of the taxable base.
Shipping companies which provide international sea transport services and decide to pay special tonnage tax are exempt from payment of corporate income tax. Tonnage tax may be paid by companies which use vessels of specified capacity and within the extent provided for by the law. This tax may also be chosen by businesses conducting operations connected with lease and use of containers, loading, unloading and repairs as well as management of passenger terminals.
It is a monthly tax, with the rate of 19 per cent of the taxable base. The taxable base in this case is the income of the shipping entrepreneur calculated as the product of the daily rate (which depends on a vessel’s net capacity) and the time of use of all the vessels belonging to the entrepreneur in a given month.
TAX ON MEANS OF TRANSPORT
Companies and individuals who have, among other things, lorries, face the obligation to pay the tax on means of transport. It applies to lorries with the allowable total weight of more than 3.5 t, selected truck and ballast tractors, as well as trailers, semitrailers and buses.
The taxpayers subject to this tax are natural and legal persons who own means of transport, and organisational units without legal personality who are registered users of a means of transport. The rates of tax on means of transport are set by the local municipal council [rada gminy] within the limits specified by the provisions of the Act on Local Taxes and Charges.
Property owners remit property tax. Subject to taxation in this case are: land, buildings or their parts, constructions or their parts related to running a business. Payers of this tax are e.g. owners, perpetual usufruct users or the so-called autonomous possessors. The levels of tax rates are determined by local municipal councils by way of resolution. The local government takes into account the upper limits for tax rates which are announced officially by the Finance Minister. The municipal council also decides on exemptions from property tax which go beyond the list of the exemptions contained in the law.
In accordance with the Law on Local Taxes and Charges exempted from the property tax are e.g. farm buildings or their parts used for forestry or fishing activities; land and buildings recorded individually in the register of historic monuments; land located in areas covered by strict protection; wasteland, ecological sites, wooded and bushy land.
The following entities do not pay the tax either: sheltered workshops, research institutes (except for taxable items used for business activities) and entrepreneurs with the research and development centre status (in relation to taxable items used for the purposes of research and development).
AGRICULTURAL AND FORESTRY TAX
Land designated as agricultural land or as wooded and bushy land as part of agricultural land are subject to agricultural tax (with the exception of the land used for business activities other than agricultural activities). This tax must be paid by e.g. land owners; autonomous land possessors; perpetual usufruct users; holders of land owned by the State Treasury or local government entities; farmland tenants.
The agricultural tax rates depend on the type of land and refer to the price of the so-called rye conversion hectare. A municipality council may reduce the purchase price of rye assumed as the basis for calculation of the agricultural tax within the area of the municipality.
Forests, in turn, are subject to forestry tax (except for forests used for activities other than forestry activities). This tax is paid by forest owners, autonomous forest possessors, perpetual usufructs holders of forests and holders of forests owned by the State Treasury or local government entities.
Forestry tax rates computed per hectare depend on the monetary equivalent of 0.22 cubic meters of wood calculated on the basis of the average sales price of wood obtained by the forest inspectorate for the first three quarters of the year preceding the tax year. In the case of protected forests and forests in nature reserves and national parks 50% of the rate is applied. A municipality council may reduce the level of the average wood purchase price used as the basis for calculation of the Forestry Tax within the area of the municipality.
TAX ON CIVIL LAW TRANSACTIONS
For entrepreneurs the tax on civil law transactions might be of great significance. A series of transactions are subject to this tax: contracts of sale, loan contracts, granting the right of usufruct against remuneration, a company's or a partnership's articles of association and their amendments (deeds of association, statutes and their amendments).
Regulations define which actions are to be treated as an amendment to the articles of association. In the case of a partnership those will be: making or increasing a capital contribution, which increases the assets of the partnership or its share capital; loan granted to the partnership by its partner; an additional payment or delivering goods or property rights to the partnership by its partner for a free of charge use.
In the case of a company those will include e.g. an increase of the share capital of the company out of contributions, company assets or additional payments, conversion or merger of companies, if the result is the increase of the assets or the increase of share capital.
The amendment of articles of association is also required in the case of moving the actual centre of management of a company or its registered office to Poland from another country outside the EU.
Taxpayers of the tax on civil law transactions are individuals, legal persons and entities without legal personality which are parties to civil law transactions. For example in the case of a sale agreement the taxpayer will be the buyer, in the case of a replacement agreement – both parties, and in the case of a donation agreement – the donation recipient. In the case of making a partnership deed the taxpayers are the partners, and in the case of deeds of other types of partnerships or companies – the company itself.
If the tax obligation rests upon several entities, they are jointly and severally liable to pay the tax. The Law provides for a number of exemptions from the tax on civil law transactions, both in respect of the objects (relating to specific transactions) and the subjects (involving specific entities such as local government entities).
The law specifies the taxable base separately for each legal transaction. For example in the case of a sale agreement it will be the market value of the goods or property rights. If the taxpayer does not specify the value or the value specified does not reflect the market value, it will be determined by the tax authority on the basis of the opinion of an expert or valuation of an appraiser. If the so established value differs by more than 33% of the value specified by the taxpayer, the opinion's costs will be borne by the taxpayer.
The tax rates range from 0.5% (in the case of a company's articles of association) to 20% – e.g. in the case of a loan, when tax due was not paid, or where a person receiving the money (immediate family member) failed to substantiate that the money was paid to the bank account.
TAX ON GAMES OF CHANCE
Entrepreneurs who organise games of chance are taxed with the tax on games applicable to games of chance (e.g.: poker, dicing, bingo, lotteries), betting and playing on slot machines. Taxpayers of the tax on games of chance are individuals, legal persons or organisational entities without legal personality which organise gambling games on the basis of a licence or a permit, entities which organise games covered by state monopoly as well as poker tournament participants.
The Gambling Law specifically defines the tax basis for each game. For example in the case of a cash lottery, raffle and the telebingo game the tax basis will be the total proceeds from the sale of lottery tickets or other evidence of participation in the game, and in the case of betting – the sum of stakes paid. As regards poker played in the form of a tournament the taxable base will be the winning amount reduced by the amount of the entry fee for participating in the tournament, and with respect to the slot machine games – the difference between the amount deposited in the machine in the form of chips and the sum of the winnings obtained by the participants of the games.
Depending on the type of gambling the rates range from 2.5% (sports betting) to 50% in the case of e.g. machine slot games or dicing.
TAX ON MINERALS
Companies extracting deposits of copper and silver are subject to the tax on the extraction of certain minerals. Tax obligation arises on the date of manufacturing a concentrate from the copper ore dredged by the taxpayer. Where the taxpayer does not produce a concentrate from the dredged material, the tax liability arises on the day of extraction of the material.
The taxable base subject to taxation is the amount of copper and silver contained in the manufactured concentrate. Where a taxpayer does not produce a concentrate from the dredged material, the taxable base is the amount of copper and silver contained in the dredged material. Tax rates are determined separately for tons of copper and kilograms of silver. They are calculated monthly based on the arithmetic mean of the daily quotations for copper on the London Metal Exchange (LME) and the arithmetic mean of the daily quotations for silver at the London Bullion Market Association and the arithmetic mean of the exchange rates of the US dollar against zloty announced by the National Bank of Poland.
It is the responsibility of the taxpayer to measure the content of copper and silver in the dredged copper ore. In the case of copper it must be done each day, and in the case of silver once a month on the basis of samples taken daily.
In Poland, personal income is subject to income tax on individuals. In principle, this tax is payable in accordance with the scale using the tax rates of 18% and 32% (the higher rate applies to income in excess of the amount of 85,528 zl). Individuals who run a business or carry out specific agricultural production may, subject to certain conditions, pay 19% of tax. They are not, however, entitled to tax reliefs provided for in the PIT Law. The rate of 19% applies to income from capital, for example from the sale of securities or from interest on bank deposits.
Taxpayers who pay taxes using the scale may e.g. make use of tax reliefs for children or of the rehabilitation allowance.
Income of individuals who run a business (also in the form of a civil law partnership) may also be taxed – subject to certain conditions – with the so-called lump sum tax on registered revenues. The taxable base in this case is the revenue without any reduction for the costs of obtaining the revenue. The tax rate depends on the type of business run. And so, for revenues in the field of free professions it is 20%, whereas in the case of revenues from intermediation in wholesale trade, hotels, car hire – 17%. In the case of manufacturing operations or construction works the rate of 5.5% will be applied.
In the case of single-person entrepreneurs there is also a possibility of income taxation in the form of tax cards. Taxpayers taxed in this way do not have to keep accounting books or records, file tax returns or pay income tax advances. The tax card rates are set in quota terms and their amount is dependent on e.g.: the nature and extent of the operations; the number of employed workers; the number of inhabitants in the locality in which a business is run.
INHERITANCE AND DONATION TAX
Under the Polish law the inheritance and donation tax is also one of personal taxes. It covers, for example, the acquisition of goods or property rights by way of e.g.: inheritance, donation, donor instruction, acquisitive prescription, guaranteed share in inheritance, free of charge allowances and easements. In addition, the tax is paid on the acquisition of rights to the savings deposit following a deposit instruction in the event of death, and the acquisition of share units following an instruction of an open investment fund participant or an instruction of a specialised open investment fund participant in the event of his or her death.
The amount of tax or of the tax exemption depends on the so-called tax group which specifies the personal relation of the acquirer to the person from whom or through whose death he or she obtained things and property rights. The rates range from 3% to 20%. In principle, immediate family is exempted from the Inheritance and Donation Tax subject to certain conditions. The Law provides for tax-free amounts which depend on the tax group. Preferences are also obtained in respect of donations to be used for the purchase of an apartment or building of a house.
Marcin Musiał (PAP)