Introduction to Polish Tax Law. Prof. W. Nykiel Centre of Tax Documentation and Studies University of Łódź. Part I. Glossary. Tax. compulsory unrequited payment to the government (OECD working definition). Unrequited.
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Polish Tax Law
Prof. W. Nykiel
Centre of Tax Documentation and Studies
University of Łódź
compulsory unrequited payment to the government
(OECD working definition)
benefits provided by government to taxpayers are not normally in proportion to their tax payments
tax declaration (usually a completed official form) by which a taxpayer reports income, sales and other details and calculates his/her tax liability
tax imposed on income received which is recognized for tax purposes by taxpayer, reduced by the allowable deductions, exemptions and credits
tax on income imposed at source, i.e. a third party is charged with the task of deducting the tax from certain kinds of payments and remitting the amount to the government
general term used to refer to the different forms of consumption and sales taxes
gross receipts, gross amounts due, from the sale of goods or services supplied by the entity
specific type of turnover tax levied at each stage in the production and distribution process
taxes typically charged on products such as alcohol, tobacco and motor fuels
taxes imposed on the transfer of property on death (death duty, inheritance tax, succession duty, tax on transfers by death)
tax imposed on gratuitous transfer of property among the living,
levied by reference to the value of a single gift or cumulative gifts during a certain period of time
tax imposed on owned
tangible movable or immovable property or both
one person is subjected to taxation twice in respect of the same income
imposition of comparable taxes on different taxpayers in respect of the same taxable income
Tax System in Poland
Tax Liability is a taxpayer’s obligation to pay tax for the benefit of the State Treasury or commune (gmina)
Art. 21 GTL
Tax liability arises on the day:
Tax on goods and servicesPolish value added tax
so-called real socialism there were two turnover taxes in Poland: turnover tax on the entities of nationalised economy and turnover tax on the entities of non-nationalised economy. They existed until 1993.
During the works on this tax, European solutions were taken into account to a great extent, however its construction differed greatly from the European standards.
The Act of 11th March 2004 on Tax on Goods and Services:section I general provisions, II scope of taxation, III taxpayers, IV tax liability, V place of supply, VI taxable amount, VII tax on imported goods, VIII tax rates, IX deduction and refund of tax, partial deduction, X registration, returns and summary information, payment of tax, XI documentation, XII special procedures, XIII amendments to provisions in force, transitory and final provisions.
Supply of goods for consideration and supply of services for consideration on the territory of Poland.
Export of goods.
Import of goods.
Intracommunity acquisition of goods for consideration on the territory of Poland.
Intracommunity supply of goods.
In connection with the accession to the EU and the introduction of notions of „intracommunity supply” and „intracommunity acquisition”, the notions of „import” and „export” have different meaning than so far. Today they refer only to sale and purchase of goods to or fromoutside the EU.
Taxpayers include legal entities, entities with no legal personality and individuals that independently carry out economic activities, regardless of the aim or results of these activities.
The economic activities comprise all activities of producers, traders and persons supplying services, including mining and agricultural activities, activities of the professions, also when the activity was performed only once but in circumstances suggesting the intention to perform this activity on a continuous basis. The exploitation of tangible or intangible property for the purpose of obtaining income, performed on a continuous basis, is also considered an economic activity.
Tax liability arises at the moment of delivery of goods or performance of services. However, if delivery of goods or performance of services should be confirmed by an invoice, tax liability arises at the moment of issuance of the invoice, no later thought than 7 days after the goods were delivered or the services were performed.
Small taxpayer (taxpayer, whose value of sale did not exceed during the last tax year amount equal to 800 000 Euros) may choose the tax accountingmethod according to which tax liability arises when the whole or part of the payment is effected, no later however than on the 90th day from the delivery of goods or performance of services.
goods dispatched or transported – the place where the goods are at the time when dispatch or transport to the person to whom they are supplied begins,
goods which are installed or assembled – the place where the goods are installed or assembled (simple activities which make it possible for the installed or assembled goods to function in accordance with their nature, are not considered to be installation or assembly),
goods not dispatched or transported – the place where the goods are when the supply takes place,
supply of goods to the ship, airplanes or trains during the part of passenger transport effected at the territory of the Community - the place where the passenger transport began.
in the field of culture, art, sport, science, education or entertainment,
ancillary transport activities such as loading, unloading, handling and similar activities,
valuation of movable tangible property,
work on movable tangible property,
the place of supply of services is the place where those services are physically carried out.
Taxable base in case of import is customs value plus customs duty due. However, if the subject of import are goods on which excise duty is levied, the taxable base is customs value plus the customs duty due and excise duty.
Reduced rate of 7% applies to goods and services of special social importance (e.g. foodstuffs, books, newspapers, some health-care products, services connected with agriculture and forestry).
Reduced rate of 3 % (applicable until 30th April 2008) applies to agricultural products and unprocessed food products (e.g. products of meat industry with the exception of meat preserves, poultry products, fishery products with the exception of tinned fish food, milk, honey, products of field and meadow cultivation, products of animal farms).
„In so far as the goods and services are used for the purposes of taxable transactions, the taxpayer shall be entitled to reduce the amount of the output tax by the amount of the input tax...”
As a rule, the right to reduce the output tax by the amount of the input tax arises for the period in which the taxpayer received an invoice or a customs document.
If in any accounting period the amount of input tax, exceeds the amount of output tax, taxpayeris entitled to deduct the difference from output tax for subsequent periods or to have a refund transferred to his bank account.
There is no reduction of the output tax by the input tax in casethe taxpayer purchases inter alia: goods and services, if the amounts paid for them are not considered costs for the income tax purposes, engine fuels for passenger cars, gastronomy services and services of providing accommodation.
Personal Income Tax
The taxable income from each source is as a rule the difference between the sum of receipts (both in cash and in kind) and related expenses incurred for the purpose of earning income, retaining or assuring the source of income.
income from dependent services, including employment and pension income,
income from independent services,
income from business,
income from particular agricultural sectors,
income from immovable property,
income from tenancy and lease,
income from investments and property rights (investment income),
income from the sale of immovable property, property rights and movables,
Taxpayer is considered to be a Polish resident in a given year for income tax purposes if at least one of the following conditions is met:
his centre of vital interests is in Poland or
he stays in the territory of Poland for more than 183 days.
Partners are taxed individually on their share of the profits.
several types of socialdistributions, indemnities received in respect of property and personal insurance, scholarships, game and lottery winnings (in some cases up to a certain limit).
Business income is defined as income from non-agricultural business activities. In principle, income from agricultural activities is not subject to tax under the PITA.
Business income is calculated as the difference between receipts and deductible costs. Expenses incurred in order to generate taxable income, or to retain or assure sources of taxable income are in general deductible, unless the law provides otherwise.
Income from employment is categorized as income from dependent services, together with pensions and income from membership in cooperatives.
Employment income is taxable on a cash basis, i.e. it becomes taxable at the moment the payment is received or put at the taxpayer's disposal.
It is aggregated with income from other sources and is subject to income tax at the general progressive rates.
Benefits in kind (valued on the basis of market prices of comparable goods or services) are subject to tax in the same way as salary payments obtained in cash.
Pensions are treated as income from dependent services and are taxable at the moment of payment or when they are put at the taxpayer's disposal. The general progressive rates apply.
Pensions derived from certain voluntary private pension plans, however, are exempt (contributions to these plans are not deductible for income tax purposes).
Employees' social security contributions are deductible for tax purposes. Contributions paid by the employer on behalf of an employee are not taxable in the hands of the employee.
Contributions to voluntary private pensions plans which are paid by employees, are not deductible for individual income tax purposes.
Income from royalties is taxable under the general rules at the progressive rates. In certain cases, 50% of earned income is deductible as an expense.
Losses from one source of income may not be set off against profits from another source of income. Losses may be carried forward for 5 years; up to 50% of the loss may be set off in each year. However, the loss carry-forward rule does not apply to losses from the sale of real estate.
In general, spouses are taxed separately on their income. However, spouses in a community property marriage, who are resident taxpayers, may select to file a joint tax return, provided that they were married during the entire tax year (also if one of the spouses died during the tax year) and do not earn income subject to a flat income tax rate (except for rental income).
Tax is assessed in the name of both spouses and is equal to twice the amount of tax computed with respect to half of the spouses' aggregate income.
up to 43.405 19% minus 572,54
43.405 – 85.528 7.674,41 plus 30% of amount exceeding 43.405
over 85.528 20.311,31 plus 40% of amount exceeding 85.528
Corporate Income Tax
Corporate income is taxed at the company level and the distributed profits are taxed again by way of withholding when distributed to the shareholders. For resident corporate shareholders, the tax so withheld is credited against their corporate income tax liability.If the withholding tax cannot be fully credited, the credit may be carried forward indefinitely.
Taxpayers: joint-stock companies, limited liability companies, state enterprises and cooperatives, units without legal personality, tax capital groups.
In general, partnerships are not taxable persons. Partners are taxed individually on their share of the profits, either under CITA provisions (corporate partners) or under PITA provisions (individual partners).
income received by taxpayers from governments of foreign countries, international organizations or international financial institutions, including the funds of EU and NATO programmes for research and technical developments, deriving from non-returnable foreign aid funds granted on the basis of a unilateral declaration or agreements concluded with these countries, organizations or institutions by the Council of Ministers of the Republic of Poland, the competent minister or government agencies (Art. 17.1.23 CITA),
income derived by charitable organizations and used for their charitable purposes (Art. 17.1. 6c) CITA) and
income derived by cooperatives and companies whose statutory activity is a scientific, technical research or educational activity.
Costs incurred for the purpose of generating income or retaining or protecting sources of income constitute deductible costs, unless otherwise provided by law.
Interest accrued and paid is deductible (if incurred for the purpose of generating income), while interest accrued but not actually paid is not deductible.
Under certain conditions, donations made to public organizations registered in Poland or another EEA country (EU Member States, Iceland, Liechtenstein and Norway) as well as donations for religious purposes are deductible from taxable income up to a maximum of 10% of the income.
expenses incurred on purchasing or producing fixed assets or intangibles (deductible through depreciation and amortization deductions),
expenses incurred on purchasing land or perpetual usufruct rights to land (they can be deductible upon sale; see, however, for taxation of capital gains),
repayments of loans,
tax fines, penalties and indemnities,
interest on additional capital contributions, on dividends and other corporate distributions, and
representation expenses including costs of restaurant services, purchase of foodstuffs and drinks, including alcohols.
Losses may be carried forward and set off against income over a period of 5 years. Up to 50% of the loss may be set off in each year. Loss carry-back is not allowed.
Generally, dividends and other income from profit sharing of a resident company received from another resident company are subject to a 19% withholding tax. The dividend income can be exempt from withholding tax where the dividend recipient holds at least 15% of shares in the dividend payer's share capital for a minimum of 2 years (10% from 2009 onward).
Corporate income tax is assessed in the form of self-assessment by the taxpayer. Taxpayers must calculate the amount of tax due, pay monthly advances, file an annual tax return and pay the final tax.
The tax authorities have the right to verify the amount of calculated tax and may issue a decision correcting the amount of tax declared. A tax control and an assessment procedure take place before the decision is issued by the tax authorities.