The tax system in Poland: General overview for beginners

Poland’s tax system has a reputation as one of the most transparent and structured among the European Union countries. It provides convenient access to information and calculations for taxpayers, including foreigners living and working in the country. Understanding the basic principles of taxation in Poland is important for those who plan to work here, start a business or earn income. In this article, we will look at the main types of taxes, the structure of tax rates, and reporting requirements.

Main types of taxes in Poland

The Polish tax system includes several main types of taxes:

1. Personal income tax (PIT) – a tax on personal income.
2. Corporate income tax (CIT) – a tax paid by companies.
3. Value added tax (VAT) is an indirect tax on goods and services.
4. Social contributions and health insurance are mandatory deductions for employees.

Let’s look at these taxes in more detail to get a general idea of the obligations and rates that apply to individuals and legal entities.

Personal income tax (PIT)

The personal income tax (PIT) applies to both Polish citizens and foreigners who earn income in Poland. PIT is calculated on a progressive scale, depending on the level of annual income.

For 2024, the basic PIT rates are as follows:

• 12% – for income up to PLN 120,000 per year.
• 32% – for income over PLN 120,000 per year.

There are also a number of tax exemptions and deductions available, e.g. for children, charitable contributions, health insurance, etc.

Corporate income tax (CIT)

Corporate income tax, or CIT (Podatek Dochodowy od Osób Prawnych), is paid by legal entities, including foreign companies, registered in Poland. Main CIT rates:

• 19% – the standard rate for most companies.
• 9% – for small businesses with annual income not exceeding EUR 2 million.

This tax is levied on the company’s net profit, which is calculated as the difference between income and expenses. The Polish tax system offers certain tax incentives for investors and new businesses, particularly in special economic zones.

Value added tax (VAT)

Value added tax (VAT, or Podatek od Towarów i Usług) is the main indirect tax in Poland. It is levied on the sale of goods and services provided within the country. The standard VAT rates are as follows:

• 23% – the basic rate for most goods and services.
• 8% – for certain food, medicines, healthcare and construction services.
• 5% – for basic foodstuffs and certain printed publications.

VAT reporting is mandatory for most companies selling goods and services in Poland. They have to file a declaration on a monthly or quarterly basis, depending on the volume of their activities.

Social contributions and health insurance

Social security contributions (ZUS) are mandatory for employed persons and cover such aspects as pension insurance, accident insurance, health insurance and other social funds. Contribution rates are based on salary and amount to about 20-25% of an employee’s earnings. Part of the contributions are paid by the employer and part by the employee.

The system of social contributions provides access to the state healthcare and social security system, including pensions and unemployment benefits.

Tax benefits and discounts

The Polish tax system offers various benefits and discounts for citizens and residents. Some of them include:

• Child tax credits – a deduction for each child that reduces the total amount of tax liability.
• Charitable contributions – a certain portion of donations to charity can be deducted from the tax base.
• Benefits for new businesses – special discounts and rates for startups and small businesses.

These benefits allow taxpayers to reduce the amount of tax they pay, increasing the overall efficiency of the system.

How to file a tax return

Most tax returns in Poland are filed through the e-Deklaracje electronic system, which is available to residents and non-residents. It allows you to quickly and conveniently submit all the necessary documents, calculate the tax liability and monitor the status of the declaration. The PIT declaration must be submitted by the end of April of the year following the reporting year.

A brief summary of the Polish tax system

The tax system in Poland is a well-structured system with a progressive scale for individuals, attractive rates for small businesses, and a transparent reporting mechanism. An important advantage is the availability of various benefits and discounts that stimulate entrepreneurship and social support. For newcomers to Poland, understanding the basics of taxation is a necessary step for financial stability and successful adaptation to life in the country.