Poland

Find legal, tax and practice information for Poland, and search for branches, firms and members in the jurisdiction. If you have any comments on the report please contact [email protected]

*Updated March 2020*

Editorial Board

Richard Wernick TEP, SRC-Time, Poland

Important new developments

On 1 April 2020, a new matrix of VAT rates will enter into force. The amendment introduces new lists of goods and services, subject to reduced VAT rates. The new list is based on the Combined Nomenclature for goods and the current Polish Classification of Goods and Services for services.
Since 1 October 2019, the lower rate of personal income tax has been reduced to 17 per cent from 18 per cent and the level of tax-deductible costs for employees has been increased to PLN3,000.
A new incentive has been introduced to exempt young employees from taxation (see below).
The revenue threshold for the lower 9 per cent rate of corporate income tax has been increased to EUR2 million.

Legal system

Poland is a civil-law jurisdiction with German and Austrian influences predominating.

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Inheritance and succession

Succession

The Civil Code of 1964 (the Civil Code) contains deemed heirship provisions that apply in the absence of a will or in the case of an incomplete will. There are also special provisions relating to agricultural land. The basic rule is that the national succession law of the deceased person applies to that estate. Polish international private law applies the concept of renvoi, but does not recognise the choice of governing law when applied to succession.

Family law and defined inheritance rules

Family law is also regulated by the Civil Code as well as the Family and Guardianship Code of 1964. Polish forced heirship provisions apply to the spouse of the deceased, their direct descendants (their children or, in the event of children being already deceased, their grandchildren) and the parents of the deceased. They are entitled to share in the reserved portion of the estate. In total, the reserved portion which limits the testator’s right to dispose freely of their assets cannot exceed two-thirds of the estate. The beneficiaries of the reserved portion can relinquish their share before the death of the testator in the form of a notarial deed.

Probate process

There is no concept of probate in Poland.

Mental capacity

There are no official procedures or guidelines for the assessment of legal competency. It is determined, if necessary, on the basis of an interview and psychiatric examination carried out by a doctor or specialist in psychiatry. A person who, due to mental illness, mental deficiency or any other mental disorder is not able to control their conduct, may be declared completely legally incapacitated. However, a person whose condition does not justify the declaration of complete incapacitation, but who needs assistance to manage their affairs, may be declared partially legally incapacitated. The court appoints a guardian after a petition is filed by the person’s spouse, a close relative, or a prosecutor. The guardian is obliged to perform their duties with due diligence, following the ward’s and community’s interest.

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Estate planning

Use of trusts in estate planning

Trusts are not recognised in Poland.

Use of foundations in estate planning

A foundation opened in Poland is created with no membership for pursuing non-profit objectives. These objectives may be protection of historical landmarks, advancement of health, education and technology, culture, literacy, social services and others. It will be not taxed on donations and gifts.

The foundation’s statute regulates its aims, internal governance, and management. A foundation acquires legal personality after registering in the register of Polish foundations (the Register), maintained in Warsaw by the District Court. For this, the statute and relevant application forms are necessary. All the information from the Register is public and can be accessed by anyone interested. A foundation has the obligation to submit a report regarding its activities to the Register every year.

Types of entities

A foundation can additionally apply to be registered as a public benefit organisation (Organizacja pożytku publicznego). The Law on Public Benefit Activity and Volunteerism allows such entities to receive 1 per cent of income tax from individuals as a donation and thus qualify as tax deductible organisations. To receive such status a foundation must be involved in specific activities related to public benefit as described by the law, and be sufficiently transparent in its activities, governance and finances.

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Taxation

Income tax system

Legal entities: the regulations are set out in Law on Corporate Income Tax of 15 February 1992 as further amended. Companies incorporated in Poland or with their management in Poland are subject to tax on worldwide income and capital gains. Non-resident companies are subject to tax only on Polish-source income and capital gains.
Individuals: the basic legislation is contained in the Law on Personal Income Tax of 26 July 1991 as further amended. A person who has their domicile in Poland (miejsce zamieszkania) or who is present for more than 183 days in a calendar year in Poland is subject to tax on their worldwide income, while a person who does not is subject to tax only on Polish-source income (limited tax liability). Residence-determination provisions of double taxation avoidance agreements apply when two countries seek to simultaneously tax an individual.

Personal income tax rates

Progressive rates apply to most sources of income. These are 17 per cent and 32 per cent (in 2020 on incomes above PLN85,528). The self-employed can elect for a flat rate tax of 19 per cent or the standard progressive rates. Flat rate tax of 19 per cent applies to dividends received from companies as well as loan and bank interest. Persons with limited tax liability may be taxed at a flat rate of 20 per cent on director’s fees and certain types of consultancy agreements.

From 1 August 2019, a broad tax incentive was introduced for employees under the age of 26. Earnings of individuals under 26-years old will not be subject to taxation at all and the 17 per cent rate is in effect, 0 per cent. However, income over the threshold of PLN85,528 per annum will be taxed at the current tax rate of 32 per cent. Social security contributions are unchanged.

Corporate income tax rates

There is a standard tax rate of 19 per cent. Poland has thin capitalisation rules under which the debt-equity ratio should not exceed 1:1. The controlled foreign corporation rules apply to both personal and corporate income tax payers. Foreign companies in which a Polish resident has a direct or indirect 25 per cent ownership of capital or right to profits are affected. At least 50 per cent of the company’s income must be passive and the income be taxed at 14.25 per cent or less. There are also comprehensive transfer-pricing rules dealing not only with connected party transactions, but also with transactions with entities resident in ‘tax havens’. If satisfactory documentation is not provided, the tax office may apply a special penalty rate of 50 per cent to additional taxable income determined by them. Losses may be carried forward for five subsequent years and up to half of any year’s loss can be used in any subsequent year of assessment. Dividends received by a Polish resident company from qualifying subsidiaries located in the EU are tax exempt, provided that it holds 10 per cent of the subsidiary’s share capital for at least two years.

A lower 9 per cent rate is to be used by small taxpayers (whose gross sales revenues did not exceed EUR2 million) and taxpayers setting up a business. The latter may use the preferential rate in the tax year during which they have set up their business.

Capital gains tax

Capital gains are included in a company’s income and are taxed at 19 per cent.

For individuals, a flat rate tax of 19 per cent applies to capital gains on the disposal of securities and real estate. If sales proceeds from the sale of real estate are re-invested into other residential property in Poland or the EU (which the taxpayer will use as their main residence) within 24 months of the sale, or the taxpayer has owned it for at least five years, the disposal is tax exempt. In the case of inherited property the five-year period starts from the date of its acquisition by the deceased.

Non-residents taxable on

Polish sources of income unless a double taxation agreement provides otherwise.

Withholding tax rate (non-treaty)

Dividends: 19 per cent; interest and royalties: 20 per cent.

Withholding tax rate (treaty)

Dividends: 19 per cent; interest and royalties: 10 per cent.

Taxation at death

The provisions are contained in Law on Inheritance and Gift Tax of 28 July 1983 as further amended. The main feature is the division of heirs and recipients into three groups for tax purposes (immediate family, distant family and others) with tax rates of 3 to 7 per cent, 7 to 12 per cent and 12 to 20 per cent, respectively. Annual exempt amounts in 2020 are PLN9,637, PLN7,276 and PLN4,902 respectively. Certain assets may be exempt from this tax, such as agricultural land and small residential property. 

Gifts and inheritances above the exempt amount between persons belonging to the first group have been exempted from taxation provided that the transactions are reported on tax form SD-Z2 to the appropriate tax office within six months of the donation or inheritance. Otherwise, normal tax will be due. Non-residents are taxed only on gifts and inheritance of real estate located in Poland, which are not otherwise exempt from the tax. Polish citizens and residents are taxed on their worldwide inheritances and gifts. In the case of gifts made by notarial deed, the notary public is responsible for collecting and remitting the tax. In all other cases, it is the taxpayer’s responsibility.

Other taxes

Gift tax: as above. There is no wealth tax.

Tax treaties

Poland has signed 93 double taxation avoidance treaties, of which four are not yet in force.

Tax information exchange agreements (TIEAs)

Poland has signed 15 TIEAs of which those with Andorra, the Bahamas, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Guernsey, the Isle of Man, Jersey and San Marino are in force. Poland began exchanging information under the Multilateral Competent Authority Agreement in 2017.

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Residence and domicile

Special rules on becoming resident

NOT APPLICABLE

Special rules on ceasing residence

NOT APPLICABLE

Domicile concept for gifts and inheritance

The same basis as for residency for personal income tax purposes.

Taxation of holdings by non-residents on death and of gifts

Gifts: see above.
Death: see above.

Reporting/auditing requirements

Yes. Personal income tax is reported on an annual tax return filed by 30 April of the following year and the tax is paid with it.

Corporate income tax is normally paid monthly. Taxpayers must self-assess and pay advances of income tax by the 20th of the following month. The final calculation of tax liability should be made within three months of the end of the tax year.

Gift and inheritance tax is reported on form SD-3 within 30 days of the gift or inheritance being acquired, exempt transactions between the first group members are reported on form SD-Z2 to the appropriate tax office within six months of the donation or inheritance.

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Other relevant information

Asset protection laws

No.

Foreign currency restrictions

No.

Foreign ownership restrictions

Yes. Non-EU foreigners are subject to restrictions on buying agricultural land in Poland.

AML/due diligence and other requirements and regulatory procedures for advisors

To establish a trust: not applicable.
For incorporation: there are no mandated rules, but advisors should maintain copies of ultimate beneficial owner’s (UBO’s) identity documents and proof of residential address as a minimum.
To open a bank account: banks will require UBO identity documents, proof of residential address, bank reference translated into Polish and possibly other documentation to satisfy the legal requirements set out in the Law on Countering the Introduction into Financial Circulation of Property Values Derived from Illegal or Undisclosed Sources of 16 November 2000 as further amended.

Other points of interest

Polish anti-money laundering rules are set out in Law on Countering the Introduction into Financial Circulation of Property Values Derived from Illegal or Undisclosed Sources of 16 November 2000 as further amended. This law gives authority to the General Inspector of Financial Information to gather and analyse information reported by designated institutions. These institutions are required to register transactions, either single or linked, exceeding EUR15,000 and to identify their clients. Legislation has been enacted in order to bring Poland into compliance with the EU Fourth Anti-Money Laundering Directive (2015/849/EC).

Key resources for further information

Ministry of Finance: www.mf.gov.pl 
Ministry of Foreign Affairs: www.msz.gov.pl 
Polish Information and Foreign Investment Agency: www.paiz.pl

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