Poland Introduction into Polish tax system

Brief history Main types of taxes Tax revenue statistics

Personal Income Tax (PIT)

Subject Scope of tax liability Object Sources of revenue Tax allowances and deductions Tax rates Flat tax rate and lump-sum taxation options Collection

Objectives of PIT
VIU Taxation of Business Entities Fall 2011

Located in the middle

part of Europe

Covers area of 312,685km2 (size of New Mexico) Population of 38,186,860 Under communist regime till 1989-90 Member of EU, NATO, UN, WTO, OECD Local currency is the zloty ($1= 3.22 ZL as of 11/10/2011)

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New democratic country needed new tax system First major reforms:
Personal income taxation (PIT) in 1992 Value added tax (VAT) in 1993

PIT 1992-today

Progressive system with three nominal tax rates: 20%, 30%, and 40% Since 1992 gradually reformed
tax rates changed tax scope extended some deductions and reliefs added or eliminated

Reforms supported by process of adapting and harmonizing Polish law with EU law In1997 - allowances deducted from tax amount and not tax base In 1999 - created health insurance system based on separate contributions and changed way of payment of social insurance contributions In 2008 - reduced personal income rates to 18% and 32%

VIU Taxation of Business Entities Fall 2011

Direct taxes
Corporate Income Tax (CIT) Personal Income Tax (PIT) Tax on Civil Law Transactions (TCLT) Real Estate Tax Tax on Means of Transport Inheritance and Donations Tax Agricultural Tax Forestry and Tonnage Tax Tax on Dogs

Indirect taxes
Value Added Tax (VAT) Excise Duty Game Tax

VIU Taxation of Business Entities Fall 2011

in Mio. ZL

2000
Total tax revenue Indirect taxes of which: Value added tax VAT Excise tax Income taxes of which: Corporate income tax Personal income tax
Source: Central Statistical Office GUS (2011)

2005
155,860 115,672 75,401 39,479 40,185 15,762 24,423

2009
214,879 154,958 99,455 53,927 59,921 24,157 35,764

2010
222,553 165,190 107,880 55,684 57,363 21,770 35,593

119,644 79,671 51,750 27,312 39,956 16,868 23,088

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Structure of tax revenue in Poland (2010)

PIT 16% VAT 49% CIT 10%

Excise tax 25%

Source: Central Statistical Office GUS (2011)

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Regulated by the Act of 26 July 1991 on Personal Income Tax (PITA)

Refers to income of individuals

VIU Taxation of Business Entities Fall 2011

Each natural person with his/her income Each tax resident in Poland is obligated to pay taxes, independent of the source and origin of the income
If any personal or economic interests located in Poland or If more than 183 days of the tax year spent in Poland

Option of joint taxation for couples

Married for the whole tax year No earned income subjected to the flat tax rate of 19% Tax due: twice the amount of income tax due on half of a joint income

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Unlimited

Residence in Poland Over 183 days of the tax year spent in Poland Center vital interests located in Poland Subject to taxation on their worldwide income

Limited

No residence in Poland Subject to taxation only with the income gained in Poland

Tax treaties
Used in case of conflict between jurisdictions Determine in which country the person is the tax resident Prevent double taxation Poland has tax treaties with 60+ countries, i.e. USA, UK, Germany

VIU Taxation of Business Entities Fall 2011

Gross employment income

Base salary Bonuses and awards Compensation for unused holidays Overtime payments Partnership in the meaning of Polish Civil Code Registered partnership Professional partnership Limited partnership Limited joint-stock partnership

Income from partnerships

Income from
joint ownership joint enterprise joint possession or joint use of things or property rights

Dividends
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Exemptions:

Scholarships Social distributions Indemnities (incl. indemnities from the insurance of property and person) Benefits from the employer received under health and safety regulations

Revenues

obtained from illegal actions from most agricultural activities and forestry falling under the Act on Inheritance and Donation Tax resulting from separation of property co-owned by spouses of ship owners which is subject to tonnage tax

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Revenue from: Dependent services Independent, personally performed services Business activity Forestry and special sectors of agriculture Rental and lease services Financial investments and property rights The sale of tangible and intangible property Ship owners activities Other revenue
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If income from more than one source the sum of all sources taxed with exceptions of:
revenue which is subject to lump-sum taxation income which is subject to flatrate tax

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Standard reliefs non-refundable credit of PLN 556.02 per person. tax credit of PLN 1112.40 for each underage child and adult child attending school. Health insurance contributions (up to 7.75% of 9%) Social security contributions in full amount Social and health insurance mandatory contributions made in EU, EEA, and Switzerland work-related expenses
workplace = place of residence workplace place of residence

Non-standard reliefs Expenses for rehabilitation of disabled taxpayer or taxpayer who supports the disabled Blood donation, donations for the public benefit and religious practices except donations for natural person or business entities (up to 6 %) Cost of internet up to PLN 760 Donations to public benefit organizations up to 1% Expenses of purchase of new technologies

one workplace two or more workplaces

PLN 1335.00 PLN 2002.00

PLN 1668.73 PLN 2502.06

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Tax base in PLN Tax Over Up to

PLN 3,091

Tax free
18% minus amount decreasing the tax PLN 556.02 PLN 14,839.02 + 32% of surplus over PLN 85,528

PLN 3,091 PLN 85,528

PLN 85,528

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19 percent flat rate

Income from:
non-agricultural activity (if not already taxed) transfer against payment of securities and financial derivatives transfer against payment of shares in companies with legal personality

Lump-sum taxation
Income from:
Royalty payments received by person with limited tax liability in Poland (20%) Dividends and other revenues from involvement in profits of legal entity (19 %) Interests or funds in a form of savings, holding or investment (19%)

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Income treated separated from other sources

Not stated in the annual tax returns

Subject to flat-rate tax revealed in a separate tax return on income from capital gains and income from business activity No tax allowances and deductions available

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Charged on yearly basis Tax payments in advance required except lump-sum tax Should be collected and transferred by the 20th day of the following month except taxpayers who started their own business activity Annual tax return filed by 30th day of April of the following year together with the payment of the difference between final tax due and the tax advances Required to be collected and transferred by the taxpayer himself except in case of remitters
service relationship employment relationship retirement and disability pensions in most cases of lump-sum taxation

Flat-rate of 19 percent undergoes the general rules on submission of the annual tax statements
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1.

2.

3.

4.

To collect revenue for the government To encourage or discourage certain behavior To decrease of social inequality in the country To implement the principle of fair distribution of public expenses

VIU Taxation of Business Entities Fall 2011

VIU Taxation of Business Entities Fall 2011