Taxation and investment in Poland Reach, relevance and reliability 2021 Brochure / report title goes here | Section title goes here

Contents

1. Investment climate 4 4. Taxation of companies 16 1.1 Business environment 4 4.1 Overview 16 1.2 Currency 5 4.2 Taxation of non-residents 16 1.3 Banking and financing 5 4.3 17 1.4 Foreign investment 5 4.4 Deductions 17 1.5 incentives 5 4.5 Exchange differences 18 1.6 Exchange controls 5 4.6 Tax incentives 18 4.7 Controlled Foreign Corporation (CFC) 18 2. Setting up a business 6 4.8 Rate 19 2.1 Principal forms of business entities 6 4.9 Corporate reorganizations 19 2.2 Regulation of business 8 4.10 General Anti-avoidance Rules (GAAR) 19 2.3 Accounting, filing and auditing requirements 9 4.11 Special anti-avoidance rule (SAAR) 19 2.4 Practices limiting competition 9 4.12 Dedicated anti-optimization regulations 19 2.5 Practices unfairly using a contractual 4.13 The white list & split payment – CIT advantage 11 consequences 20 4.14 Counteraction of payment backlogs 20 3. Tax system 12 4.15 Taxation of limited partnerships 20 3.1 Principal 12 3.2 Basic legislation 12 5. Related party transactions 21 3.3 Administration 12 5.1 21 3.4 relief 14 3.5 Mandatory reporting of tax-planning schemes 6. Taxation of individuals 24 (Mandatory Disclosure Rules – MDR) 15 6.1 Residence 25 3.6 Hybrid structures 15 6.2 Taxable income 25 6.3 Deductions and reliefs 25 6.4 Personal rates 25 6.5 Statutory costs 26 6.6 Social insurance contributions 26 6.7 Inheritance and 27 6.8 Net worth/ 27

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7. Personal income tax charged on foreign 10. Value added tax 36 individuals 28 10.1 General 36 7.1 General tax rules 28 10.2 Taxable supply 36 7.2 Tax residency 29 10.3 Rate 36 7.3 Legal basis for the right to work in Poland 29 10.4 Registration 36 10.5 VAT grouping 37 8. Withholding taxes 31 10.6 Compliance 37 8.1 New rules regarding mechanism 10.7 Obligatory split payment mechanism 39 of collecting WHT 31 10.8 Application to non-residents 40 8.2 Beneficial owner clause 31 10.9 VAT treatment of vouchers 40 8.3 Dividends 32 10.10 White list of taxpayers 40 8.4 Interest 32 10.11 Online cash registers 41 8.5 Royalties and service fees 32 10.12 Quick fixes (changes regarding settlement 8.6 Certificates of residence 32 of cross-border transactions of goods) 41 10.13 SLIM VAT – package of changes 9. Assessment, payment and appeals 33 to the Polish VAT Act 42 9.1 Tax year 33 10.14 E-commerce package 42 9.2 Returns 33 9.3 Payment of tax 34 11. RET 44 9.4 Tax strategy 34 9.5 Appeals 34 12. Other Taxes 46 9.6 Tax audits 34 12.1 Capital tax 46 9.7 Penalties and interest 35 12.2 46 12.3 Tax on buildings subject to rent / lease 46 12.4 Exit tax 46 12.5 Stamp 47 12.6 Miscellaneous taxes 47 12.7. Jednolity Plik Kontrolny (Single Control File) 48

13. Office locations 50

14. Contacts 51

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1. Investment climate

1.1 Business environment Poland is a parliamentary democracy with Quick facts a bicameral legislature. Legislative power is Capital Warsaw vested in a bicameral Parliament, composed of the Sejm (lower house) and the Senate Population 38 434 000 (upper house); executive power is vested in Language Polish the President and the Council of Ministers, while judicial power is vested in courts Currency Polish zloty (PLN) and tribunals. Poland is a member of the European Union (EU), the European Economic Time GMT +1 Area (EEA), the World Organization and Membership EU, EEA, OECD, WTO the Organization for Economic Co-operation and Development (OECD). As an EU member state, Poland is required to comply with all EU directives and regulations. Poland’s main imports are machinery and transport equipment, manufactured goods (particularly The privatization of small- and medium-sized state- consumer electronics), chemicals and mineral fuels. The major trading partners include EU owned enterprises and a liberal law on establishing countries, China, Turkey as well as Russia new firms have encouraged development of the private and Ukraine. Poland has pursued a policy of economic liberalization. The privatization business sector. of small- and medium-sized state-owned enterprises and a liberal law on establishing new firms have encouraged development of the private business sector.

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1.2 Currency maintain their own bank account(s). Permits Also, investors that create or develop The national currency is the Polish zloty are required for certain types of business acquired IPs under performed R&D actives (PLN). Poland expects to become a member activities such as for example: mining and commercialize them, as of January 1st, of the European Monetary Union in or after operations, defense related industries, fuel or 2019 may benefit from the reduced CIT rate 2020 and possibly will adopt the euro as its energy operations, security services involving of 5% applied for the income generated from currency on that date. The date of accession individual property, casino business, airing such IPs (so called IP Box). to the Monetary Union is yet to be decided radio and television channels and aviation due to economic uncertainty. services. bonded warehouses are storage facilities for goods that are not subject to 1.3 Banking and financing 1.5 Tax incentives either customs duty or the rules that apply The banking system in Poland comprises Various activities, ranging from environmental to imported/ exported products during the the central bank called the National Bank of protection projects to development of storage period. A bonded warehouse can Poland (the central bank or NBP), as well as human resources, can be supported by be open to the general public or private commercial, retail, foreign and investment EU and national funds. Consequently, it is entities provided that certain requirements banks. Banking activities are supervised by possible for business operations in various are met. Duty-free zones are separate parts the Polish Financial Supervision Authority. sectors of the economy to receive EU and of the EU Customs Zones in which goods The NBP is the exclusive issuing institution / or national financing even from several are treated by the customs authorities as of the Polish zloty and it has the exclusive different programs or funds. The level of if they remained outside the zone. Both right to set and implement the monetary co-financing varies, depending on the type of Community and non- Community goods may policy. Commercial banks dominate the business activity, the level of permitted public enter the zones. Several duty-free zones have industry, holding around 95% of all the aid and size of entity applying for support. been established in Poland and are situated banking sector assets (with co-operative primarily on the main communication routes banks holding the rest). In addition to banks, Starting from September 2018 new (e.g. airports and border crossings). Duty- other important financial institutions are programme supporting entrepreneurs that free goods are only available to travelers insurance companies, pension funds, mutual carry out new investment projects (covering departing to non-EU countries. funds, venture capital funds and leasing both the manufacturing business as well companies. Foreign financial companies, as modern services for the business) was 1.6 Exchange controls primarily insurers, play an important role in implemented replacing Special Economic Polish foreign exchange rules are these sectors. Zones programme. All entrepreneurs harmonized with EU legal standards, and (domestic and foreign) can receive decision there are no limits on capital flows between 1.4 Foreign investment on support in a form of exemption from Poland, the EEA and OECD member Poland’s market size and membership in the income tax - similarly as in case of Special countries. There are no exchange controls OECD and the EU have made it attractive Economic Zones - but regardless of the on inward or outward investment. The to foreign investors. Business operations location of the investment project within the Polish zloty (PLN) is fully convertible and are regulated in particular by the Code of territory of Poland. may be used for settlement of international Commercial Companies, the Entrepreneurs’ transactions. Nevertheless, entities Law and the Act on the Rules of Participation As of October 2019, under updated transferring the zloty and foreign currencies of Foreign Entrepreneurs and Other Foreign “Supporting investment of significant to and from Poland must submit detailed Entities in the Business Transactions on the importance for the Polish economy in quarterly reports of their transactions for Territory of the Republic of Poland. These 2011 – 2030” (Polish Government Grant) statistical purposes. The NBP monitors flows, laws cover most forms of economic activity cash support will granted for investment in but the Council of Ministers sets thresholds and have enhanced the attractiveness of the production sector and creating new jobs in and reporting procedures. The Ministry of Polish market by reducing some of the legal service sector. The grant amount may be Finance supervises all foreign exchange obstacles facing foreign investors. Foreign increased if training is offered to employees. activities, and banks must submit information investors may be defined as corporations Grants are also available for companies about customer accounts at the Ministry’s with head offices registered abroad, investing in R&D infrastructure and / or request. business associations established by foreign carrying out R&D project or implementing individuals or companies operating under the results of R&D activities. R&D related the laws of a foreign country and individuals operational costs can be also eligible for R&D domiciled abroad. Except for a few minor tax deduction allowing to deduct additional restrictions, foreign investors enjoy the same 100% of costs from tax base. treatment as domestic entities and may apply for permits to engage in restricted activities if they are permanent residents originating from countries applying the reciprocity rule to Polish companies. All legal entities have to

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2. Setting up a business

2.1 Principal forms of business entities allowed by the law, but they are primarily Capital: The minimum capital required to The following types of companies operate used as special purpose vehicles, holding establish a limited liability company is PLN in Poland: a joint-stock company (spółka companies and as national operating 5,000 to be paid up before the registration. akcyjna – SA), a limited liability company companies controlled by international Contributions to a limited liability company (spółka z ograniczoną odpowiedzialnością – corporations. It has a separate legal may be made in cash or in kind. sp. z o.o.), a limited joint-stock partnership, a personality from its shareholders, which registered partnership, a limited partnership means that when acting through its Legal reserve: There are no legal reserve and a professional partnership. In addition, governing bodies, it can acquire rights and requirements for a limited liability company. new company type - a simple joint-stock incur liabilities on its own behalf. company (prosta spółka akcyjna – PSA) will Shares: Shares are registered and may be be incorporated to the Polish law on 1 March The sp. z o.o. has a capital, which is created common or preferred. The minimum share 2021. Creation of a European company (SE) is from shareholders’ contributions, but value is PLN 50. The shares do not constitute allowed in Poland. An individual can also carry shareholders of the sp. z o.o. are generally securities. on business as a sole proprietor. Limited not responsible for the liabilities of the liability companies, registered partnerships company. The management of the sp z o.o. Management: The main corporate bodies and limited partnerships (in the future also is less formal than that of the SA, so it is a of the sp. z o.o. are the shareholders’ meeting simple joint-stock company) may be formed somewhat more popular form of conducting and the management board. There are no and registered online by using templates business. residence requirements for the management of partnership/ company agreements or board members of the sp. z o. o., however traditionally. Formation a work permit may be required from a Founders: There are no restrictions on foreigner. The term of office for management Forms of entities the number, nationality or residence of board members is generally defined as one Limited liability company (sp. z o.o.) shareholders; however, a limited liability year, but can be easily modified or revoked The sp. z o.o. is the basic legal form of company may not be formed solely by altogether in the company’s articles of a company in Poland. Limited liability another single shareholder of a limited association. companies may be used for any purpose liability company (or its foreign equivalent).

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Supervision: The rights of control are vested Joint-stock company (SA) Management: The corporate bodies of a in each shareholder of the sp. z o.o. and may The SA also has a personality separate from joint-stock company are the shareholders’ be limited only when a supervisory board its shareholders, which means that when meeting, the management board and the or an audit committee is established. If the acting through its governing bodies, it can supervisory board. Management of the SA is share capital exceeds PLN 500,000 and there acquire rights and incur liabilities on its own vested in a management board. There are no are more than 25 shareholders, the company behalf. residence requirements for the management has to have a supervisory board composed board members of the SA, however, in case of at least three persons. The SA has a capital created by shareholder of foreigners a work permit may be required. contributions. As in the case of a limited However, in the financial sector, in particular Meetings and votes: An absolute majority is liability company, the shareholders of the in case of Polish registered banks, at least generally sufficient to pass most resolutions, SA are generally not responsible for the two members of the management board, but articles of association can regulate this company’s liabilities. Management is more including the chairman, must have working issue otherwise; a 2/3 or 3/4 majority is formal than in the case of the sp. z o.o. This knowledge of the Polish language. Members required for major changes. type of company is frequently used where of the management board may be appointed this form is required by law (e.g. banks, for a term of office of up to five years. Costs of incorporation: Legal costs for insurance companies) or where the company establishing a company (including notary is planning floatation on capital markets. Supervisory: The SA has to have a charges, and court costs) depend, supervisory board consisting of at least three inter alia, on the level of capital. Formation members (five in listed companies), each Founders: A joint-stock company must appointed for a term of up to five years. The Registration: A limited liability company be founded by at least one individual or supervisory board exercises permanent acquires legal personality as a result legal person who must sign the articles of supervision over all areas of the activities of of its registration in the National Court association. The SA may not be formed solely the SA. Register. However, it comes into existence by a single shareholder constituting a limited as a company in organization (and is able liability company or its foreign equivalent. Meetings and votes: An absolute majority is of contracting) at the time its articles of There are no residence or nationality generally sufficient to approve most actions, association are signed. requirements. but articles of association can regulate this issue otherwise; a 75% majority or other Online registration: A limited liability Capital: The minimum initial capital for a majority is required for major changes. company may be formed and registered joint-stock company is PLN 100,000. The online by using a template of the articles shares subscribed for in-kind contributions Costs of incorporation: Legal costs for of association. The main advantage of have to be paid in full not later than before establishing a company (including notary this solution is that the registration takes the end of one year of registration of charges, stamp duty and court costs) depend, significantly less time (usually a few days). the company. The shares subscribed for inter alia, on the level of capital. On the other hand, the founders have less cash contributions shall be paid prior to flexibility with regard to shaping the articles of registration of the company to the extent of Registration: The SA comes into existence association and all of the contributions have at least one fourth of their nominal value. as a company in organization when all of its to be made in cash. shares are subscribed for. As in case of sp. Legal reserve: The SA is required to set up z o.o., it obtains legal personality when it is Online activities: If the limited liability a legal reserve (supplementary capital) equal entered into the National Court Register. company has been registered online, certain to 8% of annual net profits, until the reserve activities of a limited liability company (like for reaches one-third of the share capital. instance amending the company’s articles of association) may be carried out online, which Shares: Shares may be registered or beared, saves time and costs. common or preferred. Nondividend shares are not permitted. The minimum share value is PLN 0.01. Shares constitute securities and may be issued to the public. From 1 March 2021, all shares in SA must be registered digitally and cannot be issued in the form of a paper document.

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Branch of a foreign company A foreign company may opt to set up a branch in Poland. Foreign investors from the EU, member states of EFTA parties to EEA agreement as well as other foreign companies from outside the EEA which may enjoy freedom of economic activity on the basis of agreements concluded with the EU or EU member states are authorized to conduct business activities under the same rules that apply to Polish enterprises. A branch is a part of a foreign company that does not have its own legal personality, but conducts business in Poland. A branch may only conduct activities within the scope of business activities of the foreign investor. A branch is allowed to generate income. It has to be registered in the National Court Register under the name of the investor and the name has to include the phrase “branch in Poland”.

Foreign investors also may establish to the merger has subsidiaries, distribution within ninety business days. However, the a representative office in Poland. A networks or permanent sales practices in Commission can decide to refer the merger representative office may only carry out Poland. Certain mergers and acquisitions at to the competition authority of the respective promotional and advertising activities. the level of the European Community are member state to determine whether the Representative offices may not generate subject to EU merger control. As a rule, the effect of the merger will primarily be in such income on their own behalf. A representative European Commission has exclusive powers member state. That decision counts as office is registered in the Register of to review such transactions. Under its Merger official notification of the government of the the Representative Offices of Foreign Control Regulation, the EU has jurisdiction member state. Entrepreneurs kept by the Ministry of over mergers where the combined aggregate Economy. worldwide turnover of all the undertakings Companies whose merger would not concerned exceeds EUR 5 billion and the normally fall within the jurisdiction of the 2.2 Regulation of business aggregate EU-wide turnover of each of at European Commission can request a least two of the undertakings exceeds EUR Commission review if they are otherwise Mergers and acquisitions 250 million, unless each of the undertakings obliged to notify three or more member The Act on Competition and Consumer concerned achieves more than two-thirds states. The Commission proceeds as a Protection empowers the Office for the of its aggregate EU-wide turnover in a single “one-stop shop” only if none of the relevant Protection of Competition and Consumers member state; and where the aggregate member states objects within 15 business (UOKiK) to block a merger that would lead global turnover of the companies concerned days. to creation or strengthening of a dominant exceeds EUR 2.5 billion for all businesses position on the market. The UOKiK also involved, aggregate global turnover in each imposes reporting requirements for of at least three member states exceeds acquisitions of existing entities. Parties to a EUR 100 million, aggregate turnover in proposed merger have to notify the UOKiK each of these three member states of at whether their combined turnover for the least two undertakings exceeds EUR 25 previous year exceeded either EUR 1 billion million and aggregate EU-wide turnover worldwide or EUR 50 million in Poland. There of each of at least two of the undertakings are exceptions, such as for example when exceeds EUR 100 million, unless each of the the transaction is within the same capital or undertakings concerned achieves more than financial group and when the concentration two-thirds of its aggregate EU-wide turnover results from bankruptcy proceedings or within one member state. The European taking over local business with an annual Commission has twenty five business days turnover not exceeding EUR 10 million. All after a merger is reported to approve the international companies have to notify the transaction or open a procedure. If it decides UOKiK of a proposed merger if any party to open a procedure, it has to issue a ruling

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2.3 Accounting, filing and auditing the following three conditions were met in Evaluation in the context of the requirements the preceding financial year: abovementioned provisions also covers The Polish accounting standards generally do behavior undertaken unilaterally by • Average annual employment (calculated not differ significantly from the international significant market participants, which may as a full-time equivalent) of at least 50 standards in respect of assets and liabilities potentially affect other participants (for persons; presentation and methods of valuation. All example forcing sales at understated prices companies listed on the regulated markets • Total net annual turnover and financial or refusal to cooperate). of any European Economic Area country income from the sale of goods and must prepare their consolidated financial services and financial transactions of at The abovementioned behaviors, if they statements in accordance with IFRS. All least PLN equivalent of EUR 5 million; violate the Act on competition and consumer accounting documentation, records and protection, expose not only the entrepreneur • Total balance sheet assets as at the end reports must be prepared in Polish language himself, but also persons managing the of the accounting year of at least PLN and Polish currency. Companies must apply company at the maximum penalty risk (in equivalent of EUR 2.5 million. the accounting principles specified in the the case of an entrepreneur) of 10% of Accounting Act to ensure the true and fair turnover generated in the year preceding the Together with the annual financial presentation of their economic and financial penalty imposition. In addition, cooperation statements, the management must prepare position, as well as their financial results. in tenders, if it exceeds the scope allowed by a report on the company’s activities, which the Act, may result in (obligatory) exclusion contains in particular of information on Activities (including business transactions) from subsequent public procurement major events that are material to the must be entered into the accounting records procedures. company’s activities, the company’s expected and disclosed in the financial statements development and major achievements in according to the nature of the business. From the point of view of compliance of the area of R&D, as well as the company’s the entrepreneur’s activities with the law, present financial condition and projections. The annual financial statements should be as well as to protect his financial interests, prepared no later than within 3 months from it is important to assess his business in the All companies must prepare annual financial the balance sheet date and approved by the context of the provisions of the Act. statements in XML file, sign it electronically shareholders at the Annual General Meeting and submit below documents to the National within 6 months. In addition, having regard to the authority Court Register within 15 days from the frequently used by the President of the Office approval: The scope of information disclosed in the of Competition and Consumer Protection to financial statements is determined in the • annual financial statement, conduct searches of entrepreneurs, the level annexes of the Accounting Act (depending of intervention of this tool in business activity • report on the company’s activities, on the type and size of the entity). In general, and high financial penalties for failure to accurate annual financial statements should • resolution of financial statement approval cooperate with representatives of the Office be prepared in electronic form and consist of and profit distribution/loss coverage, of Competition and Consumer Protection a balance sheet, a profit and loss account, as within their framework, both entrepreneurs • auditor’s report (if applicable) well as supplementary information including and its representatives and employees, introduction and explanations. Companies appropriate preparation of the organization 2.4 Practices limiting competition audited in a given year must also present a and its members in this respect may lead Any cooperation with other entrepreneurs, cash flow statement as well as a statement of to the reduction of risks resulting from both both competitors (including e.g. within changes in the company’s equity. However, the wrong action of the entrepreneur in the industry associations, created purchasing it is worth mentioning that both micro and search and the possible allegation of applying groups, cooperation in tenders), as well as small entities have the right to use some competition-restricting practices. suppliers (including those undertaken as simplifications for preparation of the financial part of ongoing cooperation) and recipients statements, therefore, they may opt limit the of products or services (e.g. the distribution scope of presented information. network created by the entrepreneur) is subject to evaluation in the context of the Financial statements of certain entities, provisions of the Act on competition and including joint-stock companies, IFRS financial consumer protection. For this evaluation, statements, banks, insurers, investments it is irrelevant whether this cooperation is and pension funds, must be audited. Other undertaken within existing formal structures companies must be audited if at least two of or informally.

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Agreements restricting competition in the tender can potentially be considered The dominant entity is, for example, an The Act on competition and consumer prohibited cooperation in the context of the entrepreneur who is the only one possessing protection authorizes the President of above-mentioned act. the right or resource necessary to conduct the Office of Competition and Consumer a specific activity on the market (e.g. has a Protection to evaluate cooperation Non-formal cooperation may also be telecommunications network, a patent or undertaken by entrepreneurs. It is prohibited considered illegal by the President of the proprietary property right). Those interested in the light of this law to cooperate with the Office of Competition and Consumer in gaining access to this kind of resource purpose or effect of elimination, restriction Protection, including information exchange, or right are on the one hand forced to or distortion in other way of the competition including one-sided information sharing – cooperate with such an entrepreneur (they on a relevant market, if the effects occur or where confidential (sensitive) information is are not able to buy from another supplier) on may occur on the territory of the Republic of disclosed by only one entrepreneur. the conditions imposed by him. Poland. Due to the violation of the statutory At the same time, it is not forbidden to have Potentially, the President of the Office of prohibition, anti-competitive cooperation a dominant position, but to abuse it, which Competition and Consumer Protection is of the entrepreneur may result in a penalty should be identified as an action that would entitled to evaluate not only the cooperation of up to 10% of the turnover realized in the not be possible under market competition. undertaken by entrepreneurs operating in year preceding the year in which the decision An abuse of a dominant position can be, for Poland, but also the one that is implemented was issued. The Act on competition and example, a refusal to sell or a sale/purchase outside its borders, causing (potentially) consumer protection also provides for liability at excessively high or excessively low prices. effects in Poland. for violation of its provisions of the persons Both the dominant position and its abuse The subject of interest of the President of managing the entrepreneur. The President may refer to entrepreneurs operating on the Office of Competition and Consumer of the Office of Competition and Consumer supply (where the dominant sells), and Protection covers all forms of cooperation Protection may impose penalties of up to demand (where it purchases) the market of entrepreneurs – undertaken both in the PLN 2 million on these persons. side. vertical relationship, e.g. when cooperating entrepreneurs are in the supplier-customer In addition, it should be noted in the context Entrepreneur’s behavior classified as an relationship, horizontal, in the case of which of possible cooperation in tenders that abuse of a dominant position is punishable market competitors cooperate with each recognition of this type of cooperation as by a penalty of up to 10% of turnover realized other, as well as mixed cooperation. violating statutory prohibitions might result in the year preceding the year of the decision. in exclusion of the entrepreneur from As far as vertical and mixed cooperation of subsequent procurement procedures within entrepreneurs is concerned, especially the three years of its adoption. The Act on competition President of the Office of Competition and Consumer Protection undertakes activities Abuse of dominant position and consumer protection whose subject is the assessment of operating In the light of the provisions of the authorizes the President of distribution systems, including those based abovementioned Act, it is also forbidden to on franchise agreements. These systems abuse the dominant market position of the the Office of Competition are often based in particular on agreements entrepreneur. The President of the Office of and Consumer Protection made within their framework in the range Competition and Consumer Protection also of applied prices (resale prices) and areas performs an assessment in this regard. to evaluate cooperation of operation (division of the market or undertaken by customers) of involved entrepreneurs. Domination position is understood by the Act as the position of an undertaking that entrepreneurs. In the case of horizontal cooperation, in enables it to prevent effective competition addition to the above-mentioned issues being maintained in a relevant market by related to prices used in the market or area giving it the power to act to an appreciable of activity, attention should also be paid extent independently of its competitors, to possible cooperation of competitors customers and consumers; it is assumed that (also potential) within the so-called tender an undertaking has dominant position where proceedings. The practice of the Office of its market share in a relevant market exceeds Competition and Consumer Protection 40 per cent. indicates that a situation where an entrepreneur deciding to participate in the tender decides to prepare a subcontract (partial) for another bidder or in agreement with a competitor decides not to participate

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Search by the President of the Office of Competition and Consumer Protection In the context of the aforementioned powers of the President of the Office of Competition and Consumer Protection to assess the activities and behavior of entrepreneurs, one should pay attention to the authority of the Office to undertake a search of entrepreneurs. As part of the search, the employees of the Office of Competition and Consumer Protection not only look for material evidence, but also receive explanations from both the entrepreneur and its employees, and search the IT systems and obtain evidence in electronic form.

Improper cooperation of the entrepreneur in the course of the search by the President of the Office of Competition and Consumer Protection is punishable with a fine of up to EUR 50 million. Persons representing the company and its employees are also threatened with the penalty. In this case, the The President of the Office of Competition Improper cooperation maximum penalty is equivalent to 50 times and Consumer Protection acting in public the average remuneration, i.e. at the level of interest is entitled to intervene in cases of the entrepreneur in over PLN 250,000. It should be emphasized of practices unfairly using a contractual the course of the search that for the abovementioned penalties, advantage taken by buyers of agricultural or it is irrelevant whether any irregularities food products or suppliers of these products, by the President of the ultimately influenced the course and if this use causes or may cause effects on Office of Competition and “success” of the search. the territory of the Republic of Poland. Therefore, potentially, in the case of purchase Consumer Protection is 2.5 Practices unfairly using / sale of agricultural or food products from punishable with a fine of a contractual advantage a weaker (economically) / smaller market If an entrepreneur, including a processing participant, the entrepreneur is exposed to up to EUR 50 million. plant or a retailer purchases agricultural the accusation of using prohibited practices. or food products or disposes them by contracting with a smaller (economically The Act does not provide the definition weaker) entrepreneur, potentially exposes of a practice unfairly using a contractual himself to a charge of using the contractual advantage, nor a closed catalog of such. As advantage and, as a consequence, a financial a result, the risk of a potential intervention penalty of up to 3% of turnover achieved in by the President of the Office of Competition the year preceding the year of imposition. and Consumer Protection in a situation where the contractor of a stronger supplier/ From the perspective of an entrepreneur recipient requests to exercise his rights, citing operating in the agriculture & food sector, the dishonesty of the contractor’s actions, and taking into account the severity of should be classified as high. penalties sanctioned by entrepreneurs, it is extremely important to assess, in the context Due to the use of practices unfairly using of the Act on Counteracting Unfair Use of contractual advantage, entrepreneurs face Contractual Advantage in Agricultural or Food a fine of up to 3% of turnover achieved by Product Trade, the conditions according to the entrepreneur in the year preceding the which that entrepreneur cooperates with its imposition of the penalty. smaller suppliers or customers.

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3. Tax system

3.1 Principal taxes The Tax Ordinance is the most general tax 3.3 Administration The main taxes in Poland are: legislation which defines: Tax authorities • Corporate Income Tax; • general taxation rules; As of 1 March 2017, the National Fiscal • Personal Income Tax; • tax liabilities of third parties; Administration (Krajowa Administracja Skarbowa or KAS) was introduced. The KAS • Tax on civil law transactions (transfer tax); • tax information; is a specialized government administration • Value Added Tax; • tax proceedings; engaged primarily with tasks related to obtaining revenues from taxes, duties, fees, • Stamp duty; • structure of the tax administration and and non-tax budget receivables. • Real Estate Tax; • fiscal confidentiality. As a result, the existing structures of the tax administration, customs service and • duty. Other relevant legislation includes the fiscal audit have been reformed by the Corporate Income Tax Act, Personal Income establishment of a completely new structure There is no or alternative Tax Act, Value Added Tax Act, Civil Law – the National Fiscal Administration (KAS), minimum tax. Transactions Tax Act (for capital duties and headed by the Head of the KAS supervised transfer tax), Local Taxes Act (i.a. real estate by Minster of Finance. The bodies of the KAS In general, foreign companies and individuals tax). include also: the Director of the National Tax pay the same taxes as Polish legal entities Information, directors of tax administration and individuals (except where a The parliament passes tax legislation with a chambers, heads of customs and fiscal provides otherwise). simple majority of votes. offices, and heads of tax offices.

3.2 Basic legislation As of 1 March 2017 taxes in Poland are All taxes in Poland are imposed by the administered by: government in Taxation Acts, which set the rules for imposing taxes, their rates and • Heads of tax offices: Supervise the duties, as well as taxpayer responsibilities. collection of taxes and enforce debts in The Minister of Finance may be authorized their territories; conduct tax control; issue by an Act to decree regulations. All legislation individual administrative decisions in tax is published in official publications (i.e. the cases. Journal of Laws and the Official Journal of the Republic of Poland).

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• Heads of customs and fiscal offices: Rulings The value of the fee due to the Chief of Carry out customs-fiscal control of tax Two types of tax rulings are available in Competent Authority amounts to 1% of the settlements; establish and determine Poland: general and individual. General transaction value (in a period to be covered levies and place goods under customs rulings aim to ensure that application of the by APA) and ranges between: procedures. by tax authorities is uniform; general • in the case unilateral agreements: • Directors of tax administration chambers: rulings may be applied by all taxpayers – related to domestic entities, the Supervise heads of tax offices and heads and are issued by the Minister of Finance. payment amounts to not less than PLN of customs and fiscal offices; as a rule, Individual rulings are issued upon a written 5,000 and not more than PLN 50,000, are empowered to review administrative request by the Director of the National Tax decisions of tax offices and specific Information. Application of an individual – related to foreign entities, the payment decisions of heads of customs and fiscal ruling may not be detrimental to the amounts to not less than PLN 20,000 offices. applicant. To obtain a ruling, the taxpayer has and not more than PLN 100,000. to submit a written request presenting the • Director of the National Tax Information: actual facts or planned events, the question • in the case of bilateral and multilateral Issues individual interpretations; and its own opinion on the issue. The ruling agreements, the payments amounts to harmonizes tax and customs information. remains valid until changed by tax authorities not less than PLN 50,000 and not more than PLN 200,000. • Head of the National Fiscal Administration: (possible only in specific situations; the Responsible for the supervision of the change comes into effect starting from the A taxpayer applying for APA is required to fiscal administration; carries out specific specified settlement period, e.g. next year for justify the selected transfer pricing method, tax procedures, i.a. related to general anti- CIT) or when the underlying provision of law prepare a description and explain the avoidance rule. is changed rendering the ruling irrelevant. Tax ruling, however, does not protect from application of the selected method, indicate • Minister of Finance: Responsible for the GAAR clause. the circumstances that could affect the Polish budget policy; issues general tax correctness of the pricing methodology, rulings (i.e. rulings issued to all taxpayers). Advance pricing agreements prepare documentation used as a basis Poland has had an advance pricing for setting the level of transactional prices, Taxpayers may appeal to the directors of tax agreement (APAs) regime in place since indicate the related parties included in a administration chambers against decisions of 2006, which allows taxpayers to verify the given transaction and propose the period for the heads of tax offices or specific decisions correctness of the pricing methodology which the APA should be binding. of heads of customs and fiscal offices. Please applied in domestic and foreign related note, that an appeal against the specific party transactions and ascertains the up- Moreover, the limitation of tax deductibility of decisions of a head of customs and fiscal front acceptance of the transfer pricing intercompany intangible charges, presented office (i.e. concluding the tax proceedings methodology by the tax administration. in details in section 4.4. Limitation of conducted by this authority) are generally Unilateral, bilateral and multilateral expenses related to intangible services, does considered by the authority issuing a decision agreements are possible. not apply to the costs of intangible services and not a director of tax administration during the period covered by APA decision chamber. An appeal against a final decision Before submitting an application for an APA, (which can start when APA application is of the second instance may be directed to the taxpayer may request the Ministry of filed), as well as the tax year in which the APA the Regional Administrative Court. Taxpayers Finance to advise whether an APA would be application is submitted. are also entitled to resort to the Supreme useful, determine the scope of information to Administrative Court to review decisions of be submitted, the procedure and probable the Regional Administrative Courts. date of conclusion of an APA, its expected conditions and duration. In certain situations, the newly created National Fiscal Administration is also The application has to be submitted by a responsible for investigating, preventing, Polish entity and the application fee (which detecting and prosecuting given crimes, depends on the value of the transaction) has i.e. document fraud, intellectual fraud, to be paid within 7 days of the date when the using document with false information and application is submitted. An APA is valid up to intellectual fraud, deceit, organized crime and 5 years, after which time can be renewed (in participation in an organized criminal group. a simplified procedure).

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3.4 Double taxation relief Treaty Network of Poland

Unilateral relief Albania Iran Qatar Different methods of double taxation avoidance are potentially available, Algeria Ireland Romania depending on the particular tax treaty Armenia Isle of Man Russia concluded with Poland (generally based on exemption / credit methods principles). Australia Israel Saudi Arabia Austria Italy Serbia Tax treaties Azerbaijan Japan Singapore Poland has entered into number of double taxation treaties (90). Many of those treaties Bangladesh Jersey Slovakia reduce the withholding tax rates applied Belarus Jordan Slovenia to dividend, interest and royalties paid by Polish companies to non-residents. If the EU Belgium Kazakhstan South Africa Parent-Subsidiary Directive / EU Interest and Bosnia-Herzegovina Kuwait South Korea Royalties Directive applies, as a rule no tax is withheld on dividends, interest and royalties, Bulgaria Kyrgyzstan Spain respectively. Canada Latvia Sri Lanka

Ratification of the MLI Convention Chile Lebanon Sweden On January 23, 2018 Poland submitted to the China Lithuania Switzerland OECD a document confirming the ratification of the Multilateral Instrument to Modify Tax Croatia Luxembourg Syria Treaties (MLI Convention) to implement BEPS Cyprus Macedonia Indonesia (Base Erosion and Profit Shifting) provisions aimed at counteracting aggressive tax Czech Republic Malaysia Taiwan planning on international scale. This started Denmark Malta Tajikistan the process of amendments to regulations of double tax treaties signed between Poland Egypt Mexico Thailand and certain countries. The MLI came fully into Estonia Moldova Tunisia force on January 1, 2019 affecting DTT from different jurisdictions gradually. Ethiopia Mongolia Turkey

Finland Montenegro Ukraine

France Morocco United Arab Emirates

Georgia Netherlands United Kingdom

Germany New Zealand United States

Greece Nigeria Uruguay

Guernsey Norway Uzbekistan

Hungary Pakistan Vietnam

Iceland Philippines Zambia

India Portugal Zimbabwe

Indonesia Qatar

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3.5 Mandatory reporting of tax- implementation of the arrangement), and in The key assumption of anti-hybrid measures planning schemes (Mandatory specific situations the auxiliary (understood is to counteract situations exploiting different Disclosure Rules – MDR) as person who supports the implementation tax treatment of the entity or transaction As of January 2019, Poland introduced of the arrangement) and the beneficiary occurring under various tax regimes. Based extensive Mandatory Reporting regulations (the person to whom the arrangement is on the regulations, taxpayers as a rule will not (MDR) assuming the obligation to report made available). Reporting is performed be entitled to deduct a payment, expense or to the Head of the National Treasury electronically. Failure to comply with loss from the tax base, if a payment results in: Administration (KAS) the so-called “Tax reporting obligations entails substantial fines (i) double deduction – double deduction schemes”. The assumption is that the (liability under the provisions of the Fiscal is perceived as a recognition of the same regulations constitute an implementation Penal Code). payment as tax deductible in more than of the Council Directive (EU) 2018/822 - one jurisdiction without corresponding nevertheless, in practice, the obligations 3.6 Hybrid structures dual inclusion of that payment in imposed are much more far reaching In May 2020 Poland has adopted regulations respective income (revenues) in those than those resulting from EU regulations. implementing EU ATAD 2 directive as regards jurisdictions, The Directive applies only to cross-border discrepancies in qualifications of hybrid schemes, while Polish obligation regards also structures. In this respect, new provisions (ii) deduction without inclusion – reporting of national schemes. Disclosure introduced into the Polish CIT Act aimed at deduction without inclusion is considered obligations work retroactively to some extent. counteracting hybrid mismatches. The most e.g. as recognizing a given payment as MDR covers activities (including the ones important change for the taxpayer is need to deductible without the corresponding that are only planned), in which at least one change the approach towards the charges inclusion of that payment in income participant is a taxpayer, which have or may from the related parties. Unlike before, (revenues) of the payment recipient. have an impact on tax liability, and which at the possibility to treat such charges as tax- the same time meet additional criteria – in deductible costs will also be affected by the practice rules of identification of activities manner in which the entities recognize charges. covered by MDR are not fully clear yet. Polish taxpayers have to verify how the related Mandatory disclosure obligation basically parties / contracting parties treat such charges. burdens the intermediary (understood as If no verification is performed, in practice the each person which develops, offers, makes taxpayer may lose the right to recognize the available, implements or manages the charge as the tax-deductible cost. 15 Taxation and investment in Poland 2021 | Reach, relevance and reliability

4. Taxation of companies

Main taxes applicable to companies operating in Poland

Corporate income tax 19% (standard rate) and 9% (preferential rate)

Withholding tax

Dividends 19% Interest 20% Royalties 20%

Branch profits tax -

Net worth tax -

Value added tax 23% (standard rate)

Transfer tax 0.5-2% (standard rates)

4.1 Overview In general, a calendar year is deemed to be 4.2 Taxation of non-residents Pursuant to the Polish tax law, companies a tax year. However, a taxpayer may change Non-residents are in principle subject to CIT having their registered seat or place of its tax year by notifying the appropriate tax in Poland only with respect to its taxable management in Poland are subject to office and indicating a different period as a income earned within the territory of Poland, corporate income tax (“CIT”) on their tax year. in particular within the following sources of worldwide income (tax residents). Income revenues:, i.a.: derived by residents from sources abroad As a result of its accession to the EU, Poland • any business activity, including via a is generally subject to CIT under the same has implemented the Parent Subsidiary , carried rules as income earned from Polish sources, Directive (PSD), merger directive and the on the territory of Poland. The profit/ unless a tax treaty provides otherwise. Interest Royalty Directive (IRD). income (taking into account related costs) attributable to the PE would be subject The amount of income (loss) is determined Provided that certain requirements are met, to 19% of the CIT in Poland with the on the basis of accounting books, with a group of companies may establish a “tax application of the general taxation rules, adjustments made according to tax law. capital group” which is treated as a single CIT as in the case of Polish-based taxpayers; taxpayer.

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• real estate located in Poland or income • incomes on securities, costs concerning usage of passenger cars gained on the sale of this real estate; and related expenses). • from the exchange of a virtual currency for • income earned on the sale of shares in the legal tender, goods, services or property Salaries and wages Polish company holding mainly real estate rights other than a virtual currency or In general, expenses incurred by the assets (which should be regarded as a sale from the settlement of other liabilities with company for employee salaries and wages of real estate and is taxed in Poland – the a virtual currency. are tax-deductible, provided the general so called real estate clause); conditions for tax deductions are met. Business gains • income earned on securities; All other revenues that are not included Limited deductibility of debt finance • payments from Polish tax residents; in the catalog of capital gains should be costs categorized as other operating revenues • income earned on unrealized gains. The CIT Act provides limited possibility to (business gains) and taxed separately. include debt finance costs, from related and 4.3 Taxable income non-related entities, in tax expenses; the limit Dividends Taxable income comprises all revenue has been set at the 30% of an indicator close Dividends received by a company being earned in a tax year (with some exceptions) to EBITDA. The limit concerns any kind of a Polish resident from another Polish decreased by tax-deductible expenses. debt finance costs (e.g. interest, commission, company or an EU/EEA company may be As from 2018, for the purpose of taxation, fees, bonuses, interest part of the lease exempted from taxation if certain holding company’s revenues are divided into two instalment). and participation requirements are satisfied sources of income, so called “baskets”: (e.g. the recipient has held at least 10% of The above limit does not apply to the debt • capital gains (please see the details below) the shares in the payer company for at least finance costs in a part not exceeding the and two years). The above rule may also apply to amount of PLN 3m in a fiscal year. It is dividends from a Swiss company provided • other incomes (which includes business/ generally possible to deduct debt finance that the requirement of holding 25% of trading incomes). costs that have not been deducted in the shares is met. given fiscal year, in the fiscal years to follow Therefore, an appropriate allocation of costs (as part of the defined limit). Dividends received from a non-EU/EEA/ Swiss to baskets is required. company are aggregated with other taxable Notional Interest Deduction income and are subject to the corporate The crucial consequence of such division is As of 2019 Poland introduced an incentive to income of 19%. Double taxation that losses generated within one source of leave capital for development in companies treaties provide possible methods of avoiding income cannot be compensated with profits by increasing the tax attractiveness of double taxation. from another source. For example, the tax own financing. To some extent there is a loss generated on operational activity cannot possibility to increase the costs of obtaining Potential tax related to dividends received be compensated by profits from capital gains revenues by the hypothetical equivalent of by a Polish company from an entity resident like dividends or revenues derived from IP debt financing costs - despite the fact that in a non-EU member state with which rights and vice versa. these costs were not actually incurred by Poland has concluded a tax treaty may be the taxpayer (so-called notional interest credited against the corporate income tax Capital gains deduction). liability under certain conditions, in particular Capital gains, taxed as a separate source of provided that the Polish company has held at income, include in particular: Limitation of expenses related to least a 75% stake in the payer company for at intangible services. • typical capital gains like: dividends, least two years before/after the distribution. The possibility to include in tax costs the income created as a result of mergers, expenditures on services purchased from de-mergers, etc. 4.4 Deductions related entities (directly or indirectly) is In general, expenses incurred by a taxpayer • in-kind contributions to companies; restricted for the following types: for the purpose of generating, preserving and • sale of receivables previously purchased protecting taxable revenues are deductible, • consulting services, market research, by the taxpayer; e.g. employee remuneration, cost of goods/ marketing services, management and services, net operating losses, paid interest controlling, data processing, insurances, • sale of shares in companies; (subject to limitation on deductibility of guarantees and sureties etc., • sale of share in partnerships to various debt finance costs), depreciation. Specified • any royalty fees or payments for using or property rights and securities, categories of expenses are not tax deductible being entitled to use intangible assets, like (e.g. penalties, accrued interest, so called • incomes derived from intellectual licences, know-how, trademarks, representation costs, dividends paid, etc.) or property rights, etc, are tax deductible only to some extent (e.g.

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• costs of transfer of the debtor’s default Depreciation/ Amortization There are limitations concerning tax risk for loans (other than those provided Fixed assets and intangible assets are deductibility of amortization applicable in by banks and cooperative savings and subject to tax depreciation/amortization some cases (passenger cars). credit unions). if the estimated useful life of the asset is longer than one year and they are related to 4.5 Exchange differences The indicated expenses may constitute tax the taxpayer’s taxable income. Fixed assets A taxpayer is entitled to choose the method deductible costs up to the amount equal and intangible assets with a value up to PLN of calculation of exchange rate differences to 5% of „tax” EBITDA. The above described 10.000 may be directly expensed. for CIT purposes. The available methods are limit shall only be applied to the amount the accounting method or the tax method. In of expenses over PLN 3.000.000 incurred As a rule, tax depreciation/amortization is general, exchange differences are treated as during one tax year. calculated on a straight-line basis. However, taxable revenues / tax deductible expenses. the reducing balance basis may be used for Limitation of cost deduction does not apply certain categories of assets. 4.6 Tax incentives at all in case the purchased intangible assets Polish provisions provide comprehensive tax (licences) are linked directly with purchase Basic (standard) depreciation rates (per incentives. For more details, please, see 1.5 / production of goods or providing of annum) for commonly leased assets are as Tax incentives. services by the taxpayer. It also does not follows: apply to the extent that the advance pricing 4.7 Controlled Foreign Corporation (CFC) arrangements (APA) includes the correctness Straight-line rate Under the Controlled Foreign Company (CFC) Asset of the price calculation of a given intangible per annum rules, Polish taxpayers are taxed currently at service. a rate of 19% on the income of their CFCs. An Land N/A entity is characterized as a CFC if any of the Losses following requirements is met: Buildings 2.5% Losses incurred by a taxpayer may be carried • a foreign entity has its seat / management forward and set off against income over the Technical equipment 4.5-25% in a so-called , or following 5 tax years from the year the loss and machinery is incurred, but only up to 50% of the loss • a foreign entity has its seat / management Vehicles (cars/buses/ suffered in a given tax year may be deducted 20% in a state with which Poland did not at a time. Losses cannot be carried back. trucks) conclude a double tax treaty / tax Computers (including information exchange agreement, or Besides that, the taxpayer has possibility to 30% related equipment) • a foreign entity fulfills jointly the following reduce the income obtained from this source criteria: a) at least 50% of its shares is at once in one of the next five consecutive controlled by a Polish taxpayer/company tax years by an amount not exceeding PLN Besides the above, there are some (either on its own or joint; b) at least 33% 5.000.000. The unsettled amount is settled specific options concerning standard tax of its revenues constitute passive income in the remaining years of this five-year period amortization rules, such as application of and c) the income tax actually paid by based on the basic rules (up to 50% of loss). increased or individual depreciation rates that can be used in some particular cases this entity is lower than the difference between corporate income tax in Poland In the case of a merger, only the tax losses and under certain conditions. Taxpayers and the income tax actually paid in the of the surviving company can be utilised; the are also allowed to decrease the basic country of its registered office. losses of the acquired company are forfeited. depreciation rates for all fixed assets (but not If the merger results in the establishment of a intangible assets) and increase them up to The base of taxation is the amount of the new company, the tax losses of the merging standard rates provided by the Polish CIT Act income of the foreign controlled entity that companies cannot be utilised. under certain conditions. needs to be calculated based on Polish tax rules. As of January 1, 2021, Poland has introduced Furthermore, in the first year of business a new provisions limiting the possibility of activity, taxpayers may also make a complete The tax base (taxable income) under the CFC utilizing tax losses by taxpayers who have depreciation deduction of defined fixed regime may be reduced by the amount of taken over the assets of other entities assets (excluding passenger cars) in the year dividends received by the Polish taxpayer constituting an enterprise or an organized when such assets were entered into the from a CFC and included in the Polish part thereof as a result of a merger, in-kind register of fixed and intangible assets. The taxpayer’s tax base, and by the amount of contribution or purchase financed by a cash total value of the depreciation deductions income from a sale of shares in a CFC by the contribution. Therefore the possibility for should not exceed EUR 50.000 in the tax Polish taxpayer and included in the Polish a given enterprise to use the tax losses of year. taxpayer’s base. another enterprise that is unable to settle them, is limited.

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The income obtained by the CFC is added 4.10 General Anti-avoidance Rules 4.12 Dedicated anti-optimization to the Polish taxpayer’s income and taxed in (GAAR) regulations Poland. The amount of tax may be decreased GAAR was introduced to the Polish tax by income tax paid by CFC for the same regime as of July 15, 2016 and is applicable Debt-push-down limitation period in such proportion as the income of to all tax benefits received after that date. This kind of transaction usually allows for CFC attributable to the taxpayer to the total The aim of the regulation is to counteract the transfer of acquisition debt to the level income of CFC (if Poland concluded a treaty aggressive tax planning which does not have of the acquired company. However, Polish with the state of the CFC’s ). business rationale. CIT provisions provide for a full exclusion The CFC rules are not applicable provided from the tax-deductible costs, all costs of the CFC carries out ‘relevant real economic Generally, GAAR shall apply to transaction(s)/ debt financing obtained to acquire shares activity’. There are some general guidelines action(s) if they meet all the following three in the company - proportionately to the that should be taken into account in terms conditions: potential reduction of the combined tax base of assessment whether this entities’ activity is which encompasses the profits generated • obtaining a tax benefit is a major or one of real and relevant. by continuation of the acquired company’s the main purposes of this action; economic activities. In consequence, the 4.8 Rate • they are contrary to the subject matter potential income from operational activity of The standard rate is 19%. Small and objective of the provision of the tax the acquired entity would not be decreased taxpayers and taxpayers in the first year of act; and by the cost (interest) related to the financing business activity may apply the 9% tax rate obtained for the acquisition of shares in this • they are performed in an artificial way. under certain conditions. entity.

If these conditions are met, the given 4.9 Corporate reorganizations Costs of using of intangible assets (eg. transaction(s)/action(s) do not result in In general, the Polish regulations trademark) obtaining the said tax benefit. follow EU law. As regards restructuring The Polish CIT Act also provides for a projects, provided certain conditions are limitation on deductibility of amortization GAAR restrictions should not be applicable met, particularly in terms of business write-offs on intangible assets, in case when if the interested entity obtains the so-called justification of the transaction, then it may a given entity was an owner of the intangible “protective ruling”. Such ruling may be be potentially treated as tax neutral in asset, then disposed it and finally acquired it issued in an individual case by the Minister some cases. However, bearing in mind that (or became its owner) again. In such a cases of Finance in response to the application recently regulations regarding taxation of tax deductibility of amortization write-offs submitted by an entity or group of entities restructurings have been tightened up and is limited to the threshold of the amount in relation to transaction(s)/ actions(s) such transactions are currently subject of of revenues due on the previous transfer planned, implemented or during the phase of special attention of the Polish tax authorities, of such intangible assets. Similarly, in case implementation. the ultimate consequences of transactions where the entity disposed of an intangible aimed at reorganization should be subject asset, but as a result of the agreements 4.11 Special anti-avoidance rule (SAAR) to case-by-case analysis. Furthermore, concluded, it uses that said asset (e.g. under The CIT Act also introduced several special according to the newly passed regulations, license agreement), fees and charges of any anti-abusive clauses (SAAR) preventing taxation of the operation of handing over the kind for such use shall not be tax deductible avoidance of taxation. There is a SAAR assets of the liquidated company equates the - in a part exceeding the revenue obtained applicable for dividends, royalties and interest sale transaction. from the prior disposal of such intangible payments. There is also SAAR applicable in asset. case of restructuring transactions (mergers/ demergers, etc). Generally SAARs apply in case certain conditions are met, inter alia, if activities in question are in contrary to the object or purpose of Polish tax provisions and the main or one of the main goals of making a transaction, as well as the manner of this activity, was artificial.

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4.13 The white list & split payment – CIT been established. Deadline rigidity depends “The white list” and split consequences on the status of both contracting parties; “The white list” and split payment are however, as a rule, the maximum payment payment are regulations regulations designed primarily for VAT date should not exceed 60 days. designed primarily for VAT reasons. However, both tools are essential from an income tax perspective. 4.15 Taxation of limited partnerships reasons. However, both As of January 1, 2021, limited partnerships tools are essential from an According to the Polish CIT Act, payments for (and certain general partnerships) are subject active VAT taxpayers in the case of provision to CIT. Consequently, in principle, the former income tax perspective. of goods or services, confirmed by an invoice taxation model applicable to these entities is for the amount over PLN 15.000, wired to changed from one-stage taxation of income account other than included on “the white from the activity of a limited partnership list” shall not be considered as tax deductible at the level of its partners into two-stage costs. taxation, i.e. once at the level of the limited partnership’s income, and secondly – at the Similarly, in the situation when the payment level of profit distribution to its partners. for the invoice marked as “split payment The amendment also provides a partial mechanism” is made without the mentioned exemption from taxation of revenues from mechanism shall not be included in tax participation in the profits of limited partners deductible expenses. of such companies (up to 50% of revenues, not more than PLN 60.000), however, it is 4.14 Counteraction of payment conditioned by the lack of an “optimization backlogs goal” underlying establishment of such a As of January 1, 2020, special regulations company. A similar taxation system apply on reducing the occurrence of payment to general partnerships when income tax backlogs were introduced into the Polish payers participating in the profits of the legal system. According to these provisions, general partnership are not disclosed. statutory deadlines for payments for goods or services between entrepreneurs have 20 Taxation and investment in Poland 2021 | Reach, relevance and reliability

5. Related party transactions

5.1 Transfer pricing documentation. Under new TP regulations • interest rates for some intra-group loans Polish transfer pricing rules generally follow taxpayers can choose one of the five OECD that could be considered arm’s length. the OECD guidelines. Thus, transactions methods (comparable uncontrolled price between related parties need to be method, cost plus method, resale minus Definition of related parties concluded at arm’s length. If related party method, profit split method or transactional Under the new regulations binding as of transactions are concluded on non-arm’s net margin method), but, in addition, the 2019, the redefinition of related parties was length terms and as a result, a taxpayer catalogue of transfer pricing methods was introduced and the following parties are reports taxable income lower than it would extended by other methods (including in considered related: otherwise have disclosed, tax authorities may particular valuations) that may be used, if any • entity, which significantly influences at adjust the taxable income of the taxpayer. of above mentioned five methods indicated least one other entity, directly in the regulations cannot be used. In addition, due to the Covid-19 pandemic, • entities that are both significantly the Anti Covid-19 Shield Acts were Under new regulations, methods for influenced by the same entity, implemented and the changes have been determining the market value of transactions • company without legal personality and its made to provide several simplifications and were regulated, stating that the most partners, facilitations for carrying out business during appropriate method should be used to the period when an epidemiological or determine the transfer price, taking into • foreign permanent establishments of the COVID-19 emergency is in force. Thus, the consideration conditions determined or Polish entities and permanent changes were applicable for transfer pricing imposed between related entities. • establishments of foreign entities in obligations for FY2019 but also may be valid Poland. for FY2020. Safe harbors Under the new regulations, transfer pricing Exercising significant influence includes (i) Transfer pricing methods safe harbors were introduced (subject to owning at least 25% of shares in capital or Polish entities have to verify conditions of specific conditions), including: profits, (ii) at least 25% of votes, (iii) factual transactions with their related parties with • mark-up on costs for low-value added ability to influence significant decisions, or (iv) methods defined in the Polish transfer services that could be considered arm’s personal relations. pricing regulations and are obliged to present length, such verification in the transfer pricing

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Exemption from transfer pricing this transaction for the tax year exceeds PLN along with an indication of the value of the documentation obligations 100,000 (ii) if the beneficial owner is located in designated arm’s length range, and (vii) Under the new regulations, the transfer a “tax haven” and the value of the transaction other additional information or explanations, pricing documentation will not have to cover for the tax year exceeds PLN 500,000. The including information on adjustments e.g. the following transactions: local documentation has to include additional in transfer pricing and selected types of elements, including, inter alia, a description transactions. Following the TP adjustment • concluded between Polish entities that of the expected economic benefits, including aspect, according to the Anti Covid-19 are not tax exempt and do not incur tax tax benefits. Shield Act, taxpayers making transfer losses, pricing adjustments are exempted from the • which permanently do not constitute Master file will have to be prepared by / for obligation to have a statement from a related taxable revenues or taxable costs the entities that operate within the groups of party confirming that a transfer pricing excluding: financial and capital related entities: adjustment was carried out in the same transactions, transactions related with amount as the taxpayer (the abolition of this • for which consolidated financial statement investments, fixed assets or intangibles, obligation is to apply only to adjustments are prepared, made in the period of an epidemic threat and • concluded within tax capital groups, • whose consolidated revenues for the state of emergency. • concluded between entities that are previous year exceeded the amount of related only by state or municipalities. PLN 200,000,000 or its equivalent. TP-R form is provided once a year within the deadline for submission of a statement The condition for exemption from the For proving Group transfer pricing confirming preparation of complete obligation to prepare local documentation documentation, the deadline has been documentation (i.e. by the end of the ninth for domestic transactions in form of not extended to 12 months since the end of the month after the end of the financial year). incurring a tax loss by the parties to the tax year. In addition, the Anti Covid-19 Shield Based on the Anti Covid-19 Shield Act, transaction has been relaxed. The condition Act (in respect of transfer pricing obligations the deadline for providing transfer pricing does not apply in the tax year beginning for FY2019, which simplifications may also be information (TPR-C and TPR-P forms) has after 31 December 2019, in which a state of applied to FY2020 respectively) provides a been extended (i) until 31st December epidemic emergency or a state of epidemic postponement of the deadline for preparing 2020 – in these cases where this deadline declared in connection with COVID-19 was a Master File by 3 additional months from the was to expire between 31st March 2020 and in force on the entire territory of Poland, if preliminary date. Master file documentation 30th September 2020, (ii) by 3 months - in a related entity not meeting this condition prepared in line with OECD approach and in these cases, where this deadline was to obtained in that year total revenues lower by English will be accepted. expire between 1st October 2020 and 31st at least 50% than total revenues obtained in January 2021. It is pertinent to note that the the analogous period directly preceding that The benchmarking obligation is applied to taxpayer’s exemption from the documentary year. all subjects that are obliged to compile a obligation for some domestic transactions Local file due to exceeding the thresholds, does not exempt from the obligation to Transfer pricing documentation irrespective of their revenue. include such transactions in the TP-R report. thresholds and documentation The detailed scope of data presented in the requirements Transfer pricing reporting TP-R form TP-R form, combined with the relatively easy Under the new regulations and Starting from 2019, certain entities are to analyse data by electronic form, allows documentation requirements, transfer obliged to electronically submit a TP-R for more precise typing of entities for the pricing documentation will have to cover: form including data regarding transactions purposes of transfer pricing audits - primarily concluded with related parties. through data on the taxpayer’s financial • financial and tangible transactions if they results. exceed the amount of PLN 10,000,000, Among the data that taxpayers are required • intangible and other transactions if they to report, apart from (i) general identification exceed the amount of PLN 2,000,000. information and (ii) financial information, including the values of financial ratios The threshold that applies to transactions measuring the financial position of the entity with subjects that reside, are established (i.e. Operating margin, Gross profit margin, (registered address) or have a management Return on Assets, Return on Equity), it is board in a tax haven has been set at PLN necessary to distinguish data on individual 100,000. What is more, starting from TP transactions concluded with related entities, obligations for FY2021, the obligation to i.e. the transaction: (iii) party, (iv) its type, (v) prepare local transfer pricing documentation value (in the case of financial transactions, also applies (i) to both cost and revenue both capital and interest will be indicated), transactions with a tax haven, if the value of (vi) the method of transfer price verification

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Statement of the Board on transfer should be submitted within 3 months of Other changes resulting from the pricing the end of the reporting financial year of a newest regulation Under the TP regulations in force since given group of entities. The deadline for the Obligation to draw up a tax strategy as part of 2019, the statutory representatives of the parent company to submit the CbC-R report, increased transparency Polish company are obliged to submit to the which is still 12 months from the end of the Polish competent authorities a statement reporting financial year, has not changed. The new obligation to prepare and make confirming preparation of complete public a tax strategy report for the tax year documentation as well as confirming that all Tax penalties applies to: taxpayer’s transactions are arm’s length. The Under the new regulations, new tax penalties • taxpayers whose revenues exceeded EUR rules forbid signing the statement by proxies. were are introduced based on the additional 50 million in the tax year, Under the Anti Covid-19 Shield Act (in respect tax liability provisions, including related to of transfer pricing obligations for FY2019, transfer pricing tax assessments: • tax capital groups. which simplifications may also be applied to (i) 10% penalty tax on overstated loss or FY2020 respectively): The report on the implementation of the tax understated income, strategy includes, among others, information (a) The statement on preparation of local (ii) 20% penalty tax on overstated loss on: transfer pricing documentation may or understated income if tax base be signed by a person authorised • transactions with related entities whose determined to impose additional tax to represent the Polish company (in value exceeds 5% of the balance sheet liability exceeds PLN 15,000,000 – with accordance with the representation in total of assets; respect to amount exceeding PLN the National Court Register) - while it is 15,000,000 threshold only, • restructuring activities planned or still not allowed to submit the statement undertaken by the taxpayer, which may by a proxy. (iii) 20% penalty tax on overstated loss or affect the amount of tax liabilities of the understated income if no transfer pricing (b) the deadline for submitting a statement taxpayer or related entities; documentation is provided, that transfer pricing documentation has • information concerning tax settlements of been prepared has been extended: (i) (iv) 30% penalty tax on overstated loss or the taxpayer in countries applying harmful until 31st December 2020 – in these understated income if both (ii) and (iii) ; cases where this deadline was to expire occur. between 31st March 2020 and 30th • the number of provided information on September 2020, (ii) by 3 months - in Additionally, if the taxpayer does not provide tax schemes (MDR) by tax type. these cases, where this deadline was to the tax authorities with the CBC Report expire between 1st October 2020 and or notification concerning CBC reporting A taxpayer is required to post a report on the 31st January 2021. a penalty of up to PLN 1,000,000 may be implementation of its tax strategy for the tax applied. year, prepared in Polish or its translation into Country-by-Country reporting Polish, on its website by the end of the ninth Taxpayers whose consolidated group In case of failure to submit by a taxpayer a month following the deadline for filing the revenues exceed the equivalent of EUR statement on the preparation of transfer annual tax return. 750,000,000 are obliged to provide tax pricing documentation or a TP-R report, authorities with the Country-by-Country delayed submission or submission reporting (“CBC Report”) covering information of untrue information in a statement on their taxable income, their tax paid, on the preparation of transfer pricing list of related entities and their country of documentation or in a TP-R report - fine residence, activities, number of employees amounting maximum up to 720 daily rates and assets. Polish taxpayers that are (maximum of PLN 26 880 000 (EUR 5,9m) members of MNE with foreign mother starting from 2021). company also have to share such information with the Polish tax authorities by submitting CBC – P notification. Taxpayers whose consolidated group revenues exceed the equivalent of EUR 750 mln are obliged to provide Based on the provisions of the tax information exchange with other countries tax authorities with the Country-by-Country reporting Act in force since April 30, 2019, the covering information on their taxable income, their deadline for submitting CBC – P notification was extended. Thus, with reference to tax paid, list of related entities and their country of the reporting financial year starting after residence, activities, number of employees and assets. December 31, 2018, the CBC – P notification

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6. Taxation of individuals

Main taxes applicable to individuals in Poland

Personal income tax - regular progressive rates (applicable e.g. to income from 17% and 32% (for income exceeding PLN 85,528) dependent services)

Personal income tax – flat rate (may be applied to self-employment if certain conditions 19% are met)

Dividends 19%

Interest 19%

Royalties progressive (17% and 32%)

Capital gains 19%

VAT 23% (standard rate)

Inheritance tax 3%-20%

Special expatriate regime 20% (only selected sources of income)

19% (typically) Exit tax 3% (only in specific cases e.g. lump sum taxation)

Solidarity charge 4% (for income exceeding PLN 1,000,000)

Social insurance contributions

Cap on salary subject Allocation of contribution cost Insurance type to contribution Employer Employee

Pension PLN 157,770 (for 2021) 9.76% of the remuneration 9.76% of the remuneration

Disability 6.5% of the remuneration 1.5% of the remuneration

Sickness No cap applies - 2.45% of the remuneration

0.67% – 3.33% of the remuneration (it Accident - depends on risk category)

Healthcare - 9% (7.75% tax deductible)

Other employer’s charges

Labour Fund / Solidarity Fund 2.45% of the remuneration

Employees’ Guaranteed Payments Fund 0.1% of the remuneration

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6.1 Residence 6.2 Taxable income 6.3 Deductions and reliefs Under the Personal Income Tax Law, Taxable income includes most cash and non- Taxpayers may deduct from taxable income individuals may be subject to limited or cash benefits. Income tax is levied on the donations to institutions pursuing public unlimited tax liability in Poland. following types of income of individuals: welfare goals up to the limit of 6% of taxable income (only in case of donations made to • income from dependent services; Tax treatment of resident individuals church organizations for charitable purposes, Polish tax residents are individuals having • income from independent services; the deduction has no limits). Certain a place of residence in Poland. A person expenses incurred for thermomodernization • income from business activities; is deemed to have a place of residence in for own housing purposes may be deducted Poland and therefore a Polish tax resident if • rental income; from taxable income (up to specified limits). he/she has centre of economic or personal Due to COVID-19 pandemic, donations • income from capital; interests (centre of vital interest) located in made to counteract COVID-19 may be Poland or spends more than 183 days in a • income from the sale of movable or also subject to deduction from tax base tax (calendar) year on the territory of Poland. immovable property; in accordance with the guidelines defined Polish tax residents are subject to personal in Personal Income Tax Law. Employee’s • income from activities carried out by a income tax on their worldwide income, social security contributions are fully income Controlled Foreign Company; however, worldwide taxation may be limited deductible. Healthcare contributions (9% of by the provisions of a tax treaty. • unrealized gains (for exit tax purposes); gross income decreased by social security) are deductible from tax up to 7.75% of • other income. Tax treatment of non-resident the assessment base. Expenses for the individuals rehabilitation or support of a disabled person Income from dependent services mainly If none of the above conditions are met, in are deductible up to a certain limit. Child tax consists of employment income, including accordance with the Personal Income Tax deduction – additional relief applicable for benefits in kind. Pension income is also Law the individual is considered a person parents bringing up the children reducing the included. who does not have a place of residence amount of tax due in Poland. in Poland and therefore is a Polish tax Income from entrepreneurial or professional nonresident. Individuals considered tax 6.4 Personal income tax rates activities is taxable either as business income nonresidents in Poland are subject to limited The personal income tax rates are or income from independent services. tax liability in Poland, i.e. only income derived progressive and range from 17% to 32%, Directors’ remuneration in the form of board from the Polish sources / earned on the although individuals carrying out business fees granted on the basis of a company’s territory of Poland is subject to taxation. activities may opt for special rules under resolution is treated as income from Individuals considered non-residents may which a 19% tax rate generally applies (with independent services. benefit from preferential taxation on certain certain limitations). types of income including board fees, A capital gain consists of taxable investment management contracts, other types of civil Investment income, such as dividends and income such as dividends, interest and law contracts and royalties. Such income interest is subject to tax at a flat rate of 19%, proceeds from sale of securities, income received by non-residents is subject to a 20% rather than the progressive rates. Capital from cryptocurrencies. flat rate (in comparison to the progressive gains, including proceeds from the sale of taxation of such income derived by tax shares (revenue from disposal less cost Unrealized gains which can fall under exit tax residents). incurred), are generally subject to a 19% rate. may result from move of a property out of Gains derived from the sale of real estate Poland or obtaining Polish tax nonresident Tax treatment of families (which is treated as a separate source of status. Individuals (married couples) satisfying the income) that has been held for more than conditions stipulated in the Personal Income five years from the end of the year when In particular, income such as per diems, Tax Law, may elect to file joint spousal tax it was purchased or built is exempt – if refund of business travel expenses, cost return. Similar preferential taxation regime sold before the end of the five-year period, of professional training if requested by the is available for single parents. The income of 19% tax is due on gain derived from such employer, is exempt from taxation (free of a minor child is added to that of a resident a disposal (with the possibility to apply tax tax) up to the limits set forth in the Personal parent. exemption if conditions indicated in Personal Income Tax Law. Income Tax Law are fulfilled).

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Polish source income derived by non- amount reducing tax liability is applicable if accidents. Health insurance contributions are residents from independent artistic, literary, an individual’s taxable income exceeds PLN also levied. scientific, educational and journalist activities, 127,000). copyrights and inventions, as well as from Poland has a three-pillar pension system in personal service contracts, specific task 6.5 Statutory costs place, under which both the employee and contracts, managerial contracts, or similar In Poland it is possible to lower the taxable the employer make contributions to the first contracts and from board member fees is base with tax deductible costs which are and second pillar. For details regarding social subject to a 20% rate. different depending on the type of the insurance rates and brackets, please refer to contract. In general in case of employees the attached table. Unrealized gains resulting from a change of monthly tax deductible costs amount to PLN tax residency by an individual or a transfer 250.00 (PLN 300.00 for employees working Employees can make voluntary payments of an asset outside the territory of Poland (if outside of their place of residence). If the to third-pillar funds, usually managed by as a result of the change or residency or a individual is performing work based on insurers or banks. Fiscal incentives in the transfer Poland would lose the right to levy management contract or appointment the third pillar have been created to encourage tax on income potentially derived from the monthly tax deductible costs are on the level employees and employers to set up sale of the asset) can be subject to exit tax. of PLN 250.00. However, in case of contract retirement plans. Contributions are paid on The rates amount to 19% (if the tax value of of mandate and contract of specific work, an after-tax basis. The benefits and income an asset is determined) or 3% (if the tax value the tax deductible costs amount to 20% from investments are tax-exempt. of an asset is not determined). The exit tax of the remuneration lowered by the social for individuals is applicable only if the total security contributions in some cases. It is also The mandatory health insurance contribution value of assets (transferred) exceed the PLN possible to apply the tax deductible costs on is paid by the employee at a rate of 9% of a 4 million in aggregate. the level of 50% of the remuneration lowered gross income less the employee’s portion of by the social security contributions in case the social insurance contribution. Individuals whose annual earnings from of receiving the remuneration for transfer of selected sources of income are in excess of copyrights. The annual maximum deduction An important change in pension system PLN 1 million are subject to solidarity charge is capped at PLN 85,528. in Poland has been implemented, which of 4% (on the excess income above PLN 1 assumes introduction of Employees Capital million). Income derived by individuals under 6.6 Social insurance contributions Plans (PPKs). Based on PPK regulations, 26 years old from public-service relationship, EU social insurance regulations have applied the employee is to pay generally between employment contract, home-based work, since the accession of Poland to the EU in 2% and 4% of wages, while employers are co-operative employment and contract of 2004. Based on the general rule resulting to pay between 1.5% and 4%. With certain mandate is exempt from taxation up to the from the EU legislation, contributions are exceptions PPKs have been gradually limit of PLN 85,528 per year. made to the social insurance system of the implemented by all employers starting from country where work is actually performed. 1 July 2019 (the last group of employers was Depending on total amount of taxable obliged to introduce PPKs starting from 1 income derived by the taxpayer in the course The Polish social insurance system January 2021). of the tax year amount reducing tax liability encompasses old-age pensions and may vary from PLN 1,360 to PLN 0 (no insurance against disability, illness and

The personal tax rates for 2021 are as follows:

Taxable base Tax

Up to PLN 85,528 17% of taxable base minus amount reducing tax liability (depending on income Over PLN 85,528 PLN 14,539.76 plus 32% of excess over PLN 85,528 level). It may vary from PLN 1,360 to PLN 0

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6.7 Inheritance and gift tax 6.8 Net worth/wealth tax In Poland it is possible In general, inheritance and gifts are not Poland levies a net wealth tax in the form of taxed if the inheritance occurs or gifts solidarity tax, to be paid by individuals whose to lower the taxable are exchanged among the closest family income exceeds PLN 1 000 000. The tax rate base with tax deductible members, i.e. spouses, descendants, equals 4% and relates to the excess of the ascendants, siblings, step children and step applicable threshold. costs which are different parents, provided that they comply with depending on the type of specific reporting obligations. the contract. Other than that, the tax payers are divided into 3 groups depending on the closeness to the person from whom inheritance or gift is received: Group 1: spouses, descendants, ascendants, siblings, step-children, stepparents, children- in-law, parents-in-law;

Group 2: descendants of siblings, siblings of parents, descendants and spouses of step-children, spouses of siblings, siblings of spouses, spouses of siblings of spouses, spouses of other descendants;

Group 3: other.

The applicable rates and brackets of inheritance and gift tax are as follows:

Surplus (in PLN) over amounts exempted* Tax liability (in PLN) over up to group 1 recipients

10,278 3%

10,278 20,556 308.30 plus 5 % of surplus over 10,278

20,556 822.20 and 7 % of surplus over 20,556 group 2 recipients

10,278 7 %

10,278 20,556 719.50 and 9% of surplus over 10,278

20,556 1,644.50 and 12% of surplus over 20,556 group 3 recipients

10,278 12%

10,278 20,556 1,233.40 and 16 % of surplus over 10,278

20,556 2,877.90 and 20 % of surplus over 20,556

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7. Personal income tax charged on foreign individuals

7.1 General tax rules

Main PIT compliance requirements applicable to foreign individuals in Poland

Registration for tax purposes, if PESEL is Needs to be performed in the relevant tax office before the date when first PIT advance is due not applicable

Tax free amount differs depending on total income derived by the taxpayer and is reduced Tax free amount along with the increase of individuals income (no tax free amount applies if the taxpayer derives taxable income in excess of PLN 127,000)

PIT progressive rates (applicable e.g. to employment income or income on 17% and 32% for the excess over PLN 85,528 dependent services)

PIT flat rate (applicable to board members, being Polish tax non-residents upon 20% fulfillment certain requirements)

PIT flat rate (applicable e.g. to interest, 19% capital gains)

Exit tax 19% (3% in specific cases)

Solidarity charge 4% of the excess income over PLN 1,000,000

Monthly tax compliance PIT advances for a given month to be paid by the 20th day of the following month

Annual tax return for a given year to be submitted by 30 April of the year following the given Annual tax compliance year (with some exceptions)

Both registration form as well as payment of PIT liabilities and submission of annual PIT return should be made to the tax office relevant depending on the residency status of the individual. For individuals considered Polish tax non-residents the tax office should be determined by Relevance of the tax authorities virtue of their place of stay at the territory of Poland or if they perform work in more than one voivodeship (and accordingly stay in various places) the applicable tax office is the 3rd Tax Office Warszawa Śródmieście. In case of Polish tax residents the relevance of the Tax Office is determined by virtue of place of residence at the territory of Poland.

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7.2 Tax residency Foreign employment contract and If one of the above conditions is not Foreign individuals arriving in Poland may secondment to Poland met, remuneration paid under a foreign become Polish tax residents if their center of Polish tax non-residents employment contract is subject to economic or personal interest (center of vital Foreign individuals who work in Poland based progressive PIT taxation in Poland as of interest) moves to Poland or if they spend in on the employment contracts concluded the first day of their stay in Poland. PIT Poland more than 183 days in a tax year. with non-Polish entities are personally advances on income derived under a foreign responsible for all PIT compliance activities employment contract should be paid on a Foreign individuals having the status of required by the Polish PIT law, i.e. neither monthly basis for the months, in which the Polish tax residents are subject to unlimited the foreign employer nor the host entity aforesaid income was received (except for tax liability in Poland, i.e. they are subject have any obligations in respect of taxation of income derived in December in which case to taxation in Poland on their worldwide their income (Polish entity may be, however, no tax advance is due and income is taxed income, while individuals considered non- obliged to file ORD-W1 form notifying the only in the annual tax return). PIT advance for residents for tax purposes in Poland have a authorities of the individual working for its a given month has to be paid by the 20th day limited tax liability status in Poland, i.e. they benefit and deriving income for such work of the following month at 17% PIT rate (32% are subject to taxation in Poland only with from a foreign company). In addition, the rate may be also applied) but at the moment respect to income earned in the territory of foreign company may be required to comply of filing of the annual tax returns foreign Poland (Polish source income). with the obligations resulting from the Act individuals are obliged to calculate their on posting of the employees to Poland in the total annual tax liability using progressive PIT It should be noted that the above provisions framework of performance of the services rates. As a rule the annual PIT return should should be applied taking into account (such as, e.g. the obligation to notify Polish be filed with the authorities by 30 April of provisions of Double Tax Treaties Poland is a Labour Inspectorate of the assignment of the the following year (only in the case when party to. These provisions should be applied employee to Poland). the taxation in Poland is dependent on the in particular in order to determine the tax excess of 183 days of physical stay in Poland residency status of the individual as well as to Please note that the taxable income for in a twelve-month period the filing deadline avoid double taxation of income derived by purposes of PIT in Poland includes all income may be set differently - in case of Polish the Polish tax resident from sources located obtained in connection with work in Poland, tax non-residents). Only income related to outside of Poland. including remuneration, bonuses of all kind work performed in Poland is reported for and benefits-in-kind. Thus, most benefits purposes of PIT in Poland. 7.3 Legal basis for the right to work provided by the employer or the host entity in Poland along with or in place of salary are taxable Polish tax residents as regular employment income. As a rule, In general, the same rules applicable to Polish Employment contract with a Polish income earned by foreign individuals in tax non-residents as mentioned in point a) entity Poland is subject to PIT starting from the first above should apply to foreigners who are Regardless of the tax residency status of day of their stay in Poland. Nevertheless, in Polish tax residents (with the reservation that foreign individuals, income received by them case all conditions stipulated in the relevant it is not possible to apply Treaty exemption under an employment contract concluded Double Tax Treaty are met simultaneously, towards income derived for work exercised with a Polish entity is always subject to PIT income derived by the Polish tax non- in Poland). As a consequence, foreign in Poland at progressive rates at 17% and resident may not be subject to PIT. The said individuals being Polish tax residents are 32%. The Polish employer is obliged to pay situation may take place provided that: personally responsible for all PIT compliance monthly PIT advances on the aforementioned activities required by the Polish PIT Law, i.e. • presence in Poland lasts in the aggregate income calculated at progressive PIT rates. neither the foreign employer nor the host less than 183 days during a particular tax Foreign individuals are obliged to calculate entity have any tax obligations in this respect. year or 12 consecutive months (depending their final annual tax liability for a given year The Polish entity, on the other hand, may be on the Double Tax Treaty), and as well as submit their annual PIT returns by obliged to file ORD-W form and the foreign 30 April of the following year. • the remuneration is paid by, or on behalf employer may be required to notify Polish of, an employer who is not a resident of National Labour Inspectorate and comply Poland (however, it should be noted that with the regulations on assignment of foreign an appropriate analysis of the economic individuals to Poland in the framework of employer concept should be performed to performance of services. Please note that assess if this condition is met), and taxable income for purposes of PIT in Poland includes all income obtained in connection • the remuneration is not borne by a with work in Poland, including remuneration, permanent establishment of the employer bonuses of all kind and benefits-in-kind. Thus, in Poland. most benefits provided by the employer or the host entity along with or in place of salary are taxable as regular employment income.

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PIT advances on income received under a Polish tax residents PIT advances on income foreign employment contract should be paid If a foreign individual being a member of on a monthly basis for the months in which the management board of a Polish entity received under a foreign the income in question was received (except became a Polish tax resident, income employment contract for December). PIT advance for a given received from the membership in the month should be paid by the 20th day of the management board based on the relevant should be paid on a following month. The monthly tax advances shareholders’ resolution would be subject to monthly basis for the are generally payable at a rate of 17% (32% progressive PIT taxation in Poland. In such rate may be also applied) of income received a case, the Polish entity would be obliged to months in which in a given month, while the year-end final pay monthly PIT advances on the aforesaid the income in question reconciliation is made at progressive PIT income calculated at the rate of 17% (upon rates. Foreign individuals are also obliged to the taxpayer’s choice, 32% PIT rate can was received (except for submit their annual PIT return by 30 April of also be applied) while the year-end final December). the following year. The worldwide income reconciliation is made at progressive PIT rates received by a foreign individual is reported of up to 32%. Foreign individuals in this case for purposes of PIT in Poland. would be also obliged to submit the annual PIT returns until 30 April of the following year. Board members Polish tax non-residents Income earned by foreign individuals, being Polish tax non-residents and appointed as members of the management board of a Polish entity based on the relevant shareholders’ resolution, may be subject to 20% flat rate taxation in Poland. All PIT compliance obligations related to this scheme are performed by a Polish entity of which the individual is a board member.

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8. Withholding taxes

payment is beneficial owner of the payment 8.2 Beneficial owner clause Type of income Rate is submitted to the tax office or ii) advanced In case beneficial owner clause applies Dividends 19% tax opinion issued by the tax authorities Poland introduced additional measures confirming that it is allowed to apply aimed at incorporating a comprehensive Interest 20% exemptions from WHT in certain cases. ‘background check’ of entities seeking to benefit from applicable tax exemptions / Royalties 20% In case the Company will not submit such a reduced WHT rates. A key aspect involves Fees 20% Statement or obtain the Advanced opinion, adequately demonstrating that the recipient the WHT should be withheld and the refund of the payments constitutes a beneficial Branch profits tax - procedure (that may take up to 6 months) owner (in the light of very detailed definition Above rates may be reduced / eliminated has to be taken, which in practice may of the beneficial owner provided in domestic under the PSD/IRD or respective DTT affect the cash flow of the Group/company CIT regulations). Consequently, detailed significantly (depending on the value of analysis of the recipient of payment status flows). (including business substance) is required, as 8.1 New rules regarding mechanism of it may affect the final possibility to apply for collecting WHT When determining whether a double tax the WHT exemption or the WHT refund. As of January 1, 2019, the mechanism of treaty rate or exemption can apply, the collecting WHT and its return allows - in tax remitter is obliged to assure due care relation to significant withdrawals (i.e. over in terms of fulfilling the requirements, in 2mPLN per year) – stricter verification of particular as regards beneficial ownership of the conditions for the use of preferential the payment. Appropriate due care will be taxation rules based on double taxation assessed taking into account the nature and treaties or exemptions resulting from the scale of the remitter’s business activity. EU directives. This includes e.g. i) statement signed by the management board confirming Please note that the new WHT collection that the Polish Company is in possession of rules have been temporarily and partially all required documents to apply exemption suspended (till June 30, 2021). or reduced WHT rate and the recipient of

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8.3 Dividends Dividends paid by Polish companies are subject to 19% withholding tax, unless a tax treaty providing for a lower rate or the PSD applies. The PSD applies in case certain conditions are met, inter alia, where the recipient company has held at least 10% of shares in the Polish payer company for at least two years. The same exemption generally applies to dividends and capital gains paid to the other Polish corporates. Dividends paid to a Polish resident individual are subject to 19% withholding tax.

8.4 Interest The withholding tax on interest paid to nonresident and resident individuals is 20%. The rate on payments to non-residents may be reduced or eliminated under a tax treaty or under IRD. IRD applies provided certain conditions are met, inter alia, where the recipient company holds at least 25% of shares in the Polish payer company and the recipient is a beneficial owner of the payment.

document is valid during the period of 12 8.5 Royalties and service fees A 20% withholding tax months since the date it was issued. If, during A 20% withholding tax is imposed on the 12-month period, the location of the is imposed on royalties royalties paid to non-residents and resident taxpayer’s seat for taxation purposes has individuals. Similarly as in case of interest, this paid to non-residents changed, the taxpayer is obliged to obtain a standard rate may be reduced or eliminated new certificate of residence. If the taxpayer and resident individuals. under a tax treaty or under IRD. fails to fulfil his responsibilities, he / she is Similarly as in case of responsible for non-collected tax or tax Fees paid to non-residents for certain collected in improper amount. According to interest, this standard intangible services (e.g. advisory services, the interim provisions of the amending act, market research, legal services, data rate may be reduced or if the taxpayer’s seat was documented by a processing) are also subject to 20% certificate of residence without a specified eliminated under a tax. As a general rule, under validity period, issued before January 2015, most of the tax treaties signed by Poland, treaty or under IRD. the taxpayer has to take into consideration such payments are classified as business this certificate of residence for the next 12 profits and, therefore, no withholding tax months as of the certificate issue date. would be due in case certain conditions are met. In general, taxpayer should provide the originals of tax certificates (i.e. hard copy 8.6 Certificates of residence issued by tax authorities of the residence Having of certificate confirming tax residence country). The possibility of using copies of tax of payment recipient is one of the most basic residence certificates is available only in case obligations to apply preferential treatment of intangible services, not exceeding amount resulting from treaty / domestic regulations. of PLN 10.000 per calendar year (for a single There are certain formal requirements entity), provided the information resulting provided as regards validity of tax certificates from the submitted copy of the residency obtained by the Polish entities. Starting from certificate does not raise reasonable doubt 2015, if the location of the taxpayer’s seat for as to compliance with the actual state. taxation purposes has been documented by a certificate of residence which does not specify the period of its validity, the

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9. Assessment, payment and appeals

9.1 Tax year is filed (if 30 April is a Saturday, Sunday or a Companies are required to file a tax return The tax year for companies and individuals public holiday, the deadline is moved to the disclosing the aggregate annual income as is the calendar year, although corporate working day immediately following that day). of the end of the tax year. The deadline for taxpayers may adopt any other 12-month No extensions are possible. filing the tax return and paying the tax liability period as their fiscal year and notify the is the end of 3rd month following the end of appropriate tax office accordingly. Married couples may file a joint tax return tax year. In case of entities (which FY equals if they have unlimited tax liability and if to a calendar year), the first CIT return filing Assessment they adopted a statutory matrimonial should be made till March 31, 2021. No A tax return for a tax year is subject to joint-ownership scheme for the entire tax extensions are possible. adjustment by tax authorities in principle for year. Joint tax returns also apply to single five years as from the end of the calendar parents with dependent child or children. year in which the payment of the tax liability Individuals subject to solidarity charge or exit is due. This general statute of limitations tax are required to file separate declarations period can be interrupted or suspended regarding these charges. Exit tax have under certain circumstances. The above rule an early filing requirement (by 7th day of applies also to collection of tax. the month following the month when the aggregate value of assets sold or transferred 9.2 Returns exceeded the amount of PLN 4 million). Individuals are required to file a tax return disclosing the aggregate annual income as of the end of the tax year (i.e. calendar year). The deadline for filing the tax return and paying the tax liability is 30 April of the year following the tax year for which the return

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9.3 Payment of tax 9.5 Appeals 9.6 Tax audits Companies are required to make monthly In general, tax proceedings ends with a Tax authorities may verify whether taxes are advance payments of corporate income tax decision, which may be challenged by an calculated and paid correctly. by the 20th day of the following month, and appeal filed within 14 days of the delivery of advance payment based on the cumulative the decision to the taxpayer. Following the After 1 March 2017 there are two main taxable income or tax loss for the tax year. appeal, the tax case is reconsidered by (i) the methods of the above-mentioned second-instance tax authority (higherrank verification: (i) tax control (kontrola A simplified tax calculation and monthly tax tax authority; in most cases by the Director podatkowa) governed by the Polish Tax advance payment system is permissible of Tax Administration Chamber), or (ii) by the Ordinance and (ii) customs-fiscal control in some cases. The taxpayers are allowed same authority in case of a decision issued (kontrola celno-skarbowa) governed by the to make advance monthly tax payments by a Head of Customs and Fiscal Office National Fiscal Administration Act. If the amounting to 1/12 of tax due as disclosed in concluding the tax proceedings initiated taxpayer does not correct its tax settlements the tax return filed in the year preceding the after customs-fiscal control. After the appeal, after the control, the tax authorities initiate tax year. Should this tax return disclosed a the tax authority may uphold or repeal the tax proceedings concluded by the tax tax loss, the monthly advance payments may the first-instance decision or discontinue decision. be calculated as 1/12 of the tax due revealed the proceedings. In particular, the second- in the tax return filed in the year prior to that instance tax authority may amend the Additionally, in practice, tax authorities year. Therefore, simplified advance payments challenged decision in full or in part, or return may also demand explanations without for the 2021 calendar tax year may be the case for reconsideration to the first- commencing a formal tax control / tax calculated based on the tax due for 2019 or instance tax authority. inspection. In general, the frequency and – if there was no tax due in the year 2019 – duration of inspections of Polish entities / based on the tax return for the year 2018. The second-instance decision is final and entrepreneurs (in particular, tax controls) may not be challenged by an administrative carried out by government agencies are 9.4 Tax strategy appeal, although proceedings before an limited. Consequently, Polish enterprises and Starting from January 1, 2021 a general administrative court are possible. entrepreneurs cannot be subject to more obligation to prepare and publish a report than one inspection at the same time and on the implementation of the tax strategy A complaint to a regional administrative court such an inspection cannot exceed a limit of will cover: (i) taxpayers whose revenues (WSA) may be filed against such a decision 12 to 48 working days (the exact number of exceeded EUR 50 million in the tax year, as within 30 days of its delivery to the taxpayer. days depends on the size of the controlled well as (ii) tax capital groups and its member If the verdict of the regional administrative entity). Nevertheless, there is a number of companies. court is negative, the taxpayer – within 30 statutory exceptions in this respect and this days of the delivery of this verdict with its limit does not apply to customs-fiscal control. The scope of the report is comprehensive written justification – may file a complaint and covers an open catalog of information. against the verdict with the Supreme The tax control should be initiated no In addition, although it does not result Administrative Court (NSA). earlier than after the lapse of 7 days and directly from the new regulations, the no later than before the lapse of 30 days above obligation may indirectly indicate the In certain cases, when provisions of law do from the service of the notification of the necessity to prepare such a corporate tax not provide for any means of administrative intention to initiate the tax control. If tax strategy in advance, as well as to structure appeal against a decision of tax authorities control is not initiated within 30 days from and formalize processes and procedures (e.g. in case of individual tax interpretations), the said notification, the effective initiation for managing and ensuring the correct a complaint is submitted directly to the of inspection requires another notification. performance of obligations under tax regional administrative court within 30 days However, in some cases tax authorities regulations. Taxpayers will have 12 months of delivery of the decision without previous may initiate a tax control at the taxpayer’s from the date of submitting the annual CIT administrative appeal. premises without any advance notice. On return to publish the report. Those who fail the other hand the customs-fiscal control is to fulfil the above obligations shall pay an The Polish tax law also provides for initiated without any prior notification. administrative fine of up to PLN 250.000. In extraordinary measures against final tax practice, noncompliance may also result in decisions: declaration of invalidity of the In principle, tax authorities may control tax potential Penal Fiscal Code liability. decision, annulment or change of the final settlements of a taxpayer within five years tax decision, as well as resumption of the of the end of the calendar year in which proceedings. the tax payment date expired (e.g. the tax settlements with payment due date in the 2017 calendar tax year may be controlled until 31 December 2022). Please note that in case of the tax settlements that arise due to the serving of the decision fixing such

34 Taxation and investment in Poland 2021 | Reach, relevance and reliability

obligation, the limitation period lapses 3 years from the end of the calendar year in which the tax liability arose.

The tax control ends with a control protocol. If a controlled entity does not agree with the conclusions formulated in the control protocol, it can present its reservations and explanations within 14 days of the receipt of the control protocol. Generally, if the authorities identify an infringement of the tax law, they may no later than within six months of the end of the control initiate formal tax proceedings that are concluded by a decision.

A customs-fiscal control ends with a result of the control. If a controlled taxpayer does not correct its settlements according to the findings of the result of the control, the customs-fiscal control converts into tax proceedings that is concluded by a decision.

If the controlled entity does not agree with the decision, it can file an appeal against it within 14 days of the date of receipt of • Possibility to correct excise duty resulting arrears an aggravated interest rate (150% of the decision. Director of tax administration from post-transaction rebate. the usual rate) may be applicable. chamber considers appeals against decision issued in tax proceedings subsequent to tax • Correctness of settlements concerning Additionally, if the tax authorities identify an control, while appeal against decision issued the use of a trademark. infringement of the tax law (which is either after customs-tax control is considered by an offence or a minor offence under the the same authority that issued a decision. 9.7 Penalties and interest Polish Penal Fiscal Code), they may try to hold Late payments result in interest charges the taxpayer (in the case of individuals) or Please note, that as a rule during the tax at the annual rate being a sum of 200% the company’s representatives (in the case control, customs-fiscal control, and tax of the Lombard rate (stopa lombardowa, of companies) liable for the infringement. proceedings the taxpayer’s right to correct announced by the National Bank of Poland) The maximum amount of the fine that may tax settlements that are being controlled is plus 2% (the rate calculated in this way by imposed under the Penal Fiscal Code in suspended. The exception in customsfiscal cannot be lower than 8%) on the amount 2020 is approx. PLN 24 960 000 PLN (can control is 14-days period (i) from the day of any tax arrears (in January 2020 annual be aggravated up to 37 440 000 PLN) while the control is initiated, and (ii) from the day penalty interest is 8%). A taxpayer may be the imprisonment may be adjudicated up to the result of the control is served. Please eligible for a preferential penalty interest 5 years (can be aggravated up to 10 years). note that it is also possible to correct the tax rate (50% of the standard penalty interest Additionally, under the rules on liability of settlement (i) after the notification concerning rate) if it adjust its tax settlements no later collective entities for acts prohibited under tax control is served, but before the tax than 6 months after the tax return filing penalty, penal fiscal proceedings can lead control is formally initiated, and (ii) after the deadline and pays the outstanding tax liability to initiation of judicial proceedings against tax control was concluded, but before the tax in full within seven days of the adjustment the collective entity (e.g. company), which proceedings were initiated. date. Please note, that the reduced default may result in a financial penalty imposed interest rate shall not apply to the tax return on the taxpayer. A penalty may be imposed According to recent statements from the correction (i) filed after serving a notification in the amount of PLN 1 000 PLN to PLN 5 Ministry of Finance, the focus of the tax of the intention to initiate tax control, and 000 000, not exceeding, however, 3% of authorities is on transactions between in the cases where the notification shall not the revenue earned in the financial year in related parties (transfer pricing issues), VAT apply – after the completion of tax control, (ii) which the prohibited act forming the grounds frauds, and tax restructuring. Moreover, after initiation of customs-fiscal control, and for liability of the collective subject was traditionally, tax audits usually cover: (iii) made as a result of informal inspection committed. acts of tax authorities. Also under certain • Validity of the VAT refund. conditions, with respect to VAT and excise

35 Taxation and investment in Poland 2021 | Reach, relevance and reliability

10. Value added tax

10.1 General A zero-rate applies to the intra-Community Additionally, the new rules provide Value Added Tax on goods and services is supply of goods, of goods, some introduction of an entirely new instrument - a broad-based tax levied on the supply of international transportation and related Binding Rates Information (in Polish “Wiążąca goods and services in Poland. services. Usually, in order to apply the zero Informacja Stawkowa” – “WIS”), which enables VAT rate, additional conditions need to be taxpayers to confirm proper VAT rate for Polish VAT regulations are based on EU fulfilled. goods and services. As of 1st January 2021 directives. issuance of WIS is not be possible in case Some financial, medical and cultural services of pending tax proceedings, control or a 10.2 Taxable supply are exempt, which means that the taxpayer is decision or ruling in this respect. Moreover, VAT is imposed on the supply of goods unable to recover the input VAT incurred on due to the recent legislative amendments, and the provision of services in Poland for purchases connected with such transactions. WIS shall be valid only for 5 years from the consideration, the import of goods into As of 1st July 2020 a new VAT rates matrix date of its issuance. Poland, of goods, Intra-Community (VAT rates tables) including reduced rates acquisition of goods and Intra-Community for goods and services came into force in 10.4 Registration supply of goods, unless the transaction is Poland. In case of some products like food, A Polish entity is required to register for exempt. hygiene products it leads to significant VAT purposes once its annual turnover on change of VAT rates. The changes in VAT transactions subject to VAT exceeds PLN 10.3 Rate rates apply also for the supplies of e-books 200,000. Foreign entrepreneurs have to The standard rate of VAT is 23%, and it and e-magazines (the VAT rate for e-books register for VAT purposes in Poland before is charged on most goods and services. is reduced from 23% to 5% and in case of they start any VAT-able activity in Poland A reduced rate of 8% or 5% is used for e-magazines the change is from 23% to 8%)1. (except for limited and expressly listed cases). supplies, such as certain foods, medicines, Based on the Polish Fiscal Penal Code if an hotel and catering services, certain transport entity obliged to register for VAT purposes services, municipal services, etc. fails to fulfil this obligation, it is liable to

1 Provisions regarding reduced VAT rates for e-books and e-magazines applied from 1 November 2019. 36 Taxation and investment in Poland 2021 | Reach, relevance and reliability

pecuniary penalty for a fiscal offence at an • total net value of the goods sold or EU VAT package amount determined separately in each case services rendered, broken down by In January 2010, Polish VAT provisions were (multiples of the lowest monthly salary). individual VAT rates and tax exemptions*; amended to accommodate the VAT package introduced into EU legislation. In general, the • VAT amount on total net sales value, 10.5 VAT grouping Polish provisions reflect the VAT Directive broken down by individual VAT rates*; No VAT grouping schemes are provided for in this respect and services are subject to by the Polish VAT provisions. However, Polish • total amount due with the VAT amount VAT in the country where the recipient of legislator plans to implement new regulations due. the services is established (with certain in this respect, which are currently the exceptions, for example concerning the subject of consultation with European Please note that if the total invoice amount services related to immovable property). Commission. does not exceed PLN 450 or EUR 100 (if the invoice is issued in EUR), so called simplified VAT registration/deregistration 10.6 Compliance invoices may be used. Simplified invoices may In case when the registration documents not include elements of the invoice that are were submitted by the proxy, the proxy is Invoicing marked with “*” in the above list provided held jointly responsible for all tax arrears of Transactions between VAT taxpayers have to that the invoice includes information the represented entity which have occurred be documented with invoices. The Polish VAT necessary to determine the value of VAT in within the 6-month period following the law defines precisely the information that relation to particular VAT rates. registration of that entity as an active should be included in invoices. In general, an VAT-taxpayer. The amount of this joint invoice should contain at least the following Moreover, in case of specific transactions (e.g. responsibility cannot exceed PLN 500,000. data: covered by reverse-charge mechanism or This responsibility would not be applicable split payment mechanism) some additional in case the arrears did not result from • name and surname or business name of data is required. unreliable tax settlements aimed at achieving the seller and its address; tax benefits. • name and surname or business name of Invoices issued based on fiscal receipts the purchaser and its address*; Starting from 1st January 2020 new The tax authorities may cross out the regulations regarding invoice issuance (on taxpayer from the VAT taxpayers register • a number based on which a taxpayer is the basis of receipts) entered into force in without prior notification if i.a. the taxpayer identified for VAT purposes; Poland. From 1st January 2020, in order to does not exist or despite documented • a number based on which the purchaser issue an invoice to VAT taxpayers based on attempts it is not possible to contact the of goods or services is identified for VAT cash register receipt it is required to include taxpayer or its proxy. purposes, under which he received goods the purchaser’s VAT ID number (i.e. the NIP or services number in case of Polish purchasers) on the Moreover, the tax authorities may cross out cash register receipt. the taxpayer from the VAT taxpayer register • sequential number of the invoice that when the taxpayer i.a.: identifies the invoice; The said rule only applies to the B2B • did not submit VAT returns for the • date of issue; transactions (i.e. transactions between VAT quarter/3 subsequent months - unless taxpayers). In the case of B2C transactions • date of supply of goods or services or the when summoned the taxpayer will prove (i.e. between VAT taxpayer and consumer date of receipt of the prepayment in case that it conducts business activity and being not VAT taxpayer) the rules concerning this date is determined and differs from submits all of the outstanding returns; the issuance of invoice have been not the date of issue; changed. It means, it is possible to issue an • submits NIL VAT returns for the 2 • name (kind) of goods or services; invoice to a consumer based on the cash subsequent quarters/6 subsequent register receipt according to the existing months – unless the taxpayer explains to • unit of measure and quantity of the goods rules, i.e. without VAT taxpayer identification the tax authorities that NIL returns are sold or scope of the services rendered*; number on the receipt (invoice for consumer, triggered by the specifics of conducted • unit price of the goods or services without not for VAT taxpayers). business activity; VAT (net unit price)*; • issued empty invoices - unless this The new rules introduced also sanction • value of the potential rebates, including resulted from mistake or was made amounting to 100% of VAT indicated on the those related to earlier payment, if they without the taxpayer’s knowledge; invoice for violation of the abovementioned were not included in the net unit price; rules both for a seller issuing such an invoice, • could have assumed that is involved • value of the goods or services sold without as well as an acquirer which reports such an in unreliable tax settlements aimed at VAT (net value)*; invoice in its VAT register / deducts input VAT achieving tax benefits. based on it. • VAT rate*;

37 Taxation and investment in Poland 2021 | Reach, relevance and reliability

Filing The new regulations on JPK_V7 provide The abovementioned Polish VAT provisions Starting from 1 October 2020, the VAT for penalties amounting to 500 PLN for on reporting of self-charge transactions are returns and previous SAF-T file (JPK_VAT) has incorrectness identified in file submitted. subject to preliminary ruling before Court been replaced by new SAF-T file, i.e. JPK_V7, Penalties are to be imposed for each error, of Justice of the European Union (case no. which is an electronic document consisting which makes it impossible to verify the C-895/19). Depending on the outcome of of VAT register and VAT return. All Polish VAT correctness of transaction (the fine applies, if CJEU verdict, way of settling self-charge taxpayers are obliged to submit JPK_V7 on the error is not corrected within 14 days from transaction may change. a monthly (JPK_V7M) or quarterly (JPK_V7K) the tax authorities notification). basis. Quarterly JPK_V7K can be filed by Payment/refunds so called ‘small taxpayers’, except i.a. for JPK files The tax due to the tax authorities is the period of first 12 months following the According to the VAT regulations, the calculated as output VAT less input VAT on registration or in cases when the value of the taxpayers are obliged to provide other JPK purchase amounts invoiced. goods to which joint responsibility applies files on the tax authorities’ request. The (e.g. supply of certain types of steel products) specification of JPK files determines the As a rule, the surplus of output VAT over exceeds certain thresholds. following types of data: input VAT has to be paid within 25 days of the end of the month in which the VAT • Accounting books, Additionally, registered VAT EU taxpayers obligation arose (for small taxpayers who performing intra-Community acquisitions • Bank account statements, submit quarterly VAT returns, the VAT due of goods into Poland and intra-Community must be paid within 25 days of the end of the • Warehouse records, supplies of goods and services from Poland quarter in which the VAT obligation arose). If are also required to submit EC Listings • VAT invoices, input VAT exceeds output VAT, a VAT refund returns on a monthly basis (quarterly EC is generally available. • Revenue and expense ledger, Listings reporting is not available). As of 1st January 2018 all taxpayers should submit • Record of revenue. The standard term of obtaining VAT refund is their EC listings via electronic communication 60 days from the date of submitting the tax means. VAT neutrality on intra-Community return (or its correction). However, the refund Acquisition (ICA) and other reverse term may be prolonged by the tax authorities JPK_V7 charge transactions if they have any doubts with respect to The new JPK_V7 files comparing to the The right to recover input VAT on ICA arises making refund. previous JPK_VAT extend the information upon taxpoint occurrence, provided the provided for tax authorities. New regulations taxpayer: Penalties introduced codes for identification of groups In general, if the obligations binding upon • reports output VAT in the correct of certain goods and services sold by the Polish VAT taxpayers are not fulfilled, the tax reporting period not later than within taxpayer (so called GTU codes). These codes authorities may impose penalties as provided 3 months as of the end of the month in are aimed at identification of those goods for in the provisions of the Polish Fiscal Penal which taxpoint on ICA arose and / services that are exposed to frauds i.a. Code. Additionally, if any VAT liability arises, alcoholic drinks, engine gasoline, diesel, • receives the invoice documenting ICA taxpayers are obliged to pay the outstanding tobacco products, electronic devices, parts within 3 months as of the end of the VAT amount due along with the attendant of vehicles or services of non-material month in which taxpoint on ICA arose. penalty interest. nature such as consulting, accounting, legal, management, marketing etc. Similar requirement of reporting output VAT in the correct reporting period not later There are also specific codes identifying than within 3 months as of the end of the certain transactions. They refer e.g. to month in which taxpoint arose has been chain transactions, triangular transactions implemented in relation to other self-charge or call-off-stocks. Moreover, the codes are transactions, such as reverse-charge on applicable i.a. to transfer of single purpose import of services as well as deemed ICA of vouchers (SPV’s), transactions subject to goods. split payment mechanism, with related parties and some customs procedures. Furthermore, Under the new JPK_V7 structure, taxpayers are obliged to put some additional information on document types in the sale or purchase registers.

38 Taxation and investment in Poland 2021 | Reach, relevance and reliability

VAT sanction 10.7 Obligatory split payment Based on the these regulations, transactions VAT sanction in the amount of 30% of the mechanism worth less than 15 000 PLN will be settled arrear can be applied in case it is identified in Starting from 1 November 2019, the based on general rules. However, the course of the audit or tax proceedings that regulations regarding introduction of purchaser is entitled to voluntarily apply split the taxpayer: obligatory split payment mechanism entered payment mechanism to them. into force in Poland. • understated the amount of VAT liability; It also means the liquidation of local reverse • overstated the amount of VAT refund; In general, with use of the split payment charge mechanism that applied for the mechanism the payment for the acquired supplies of chosen goods and services • overstated the amount of excess input goods / services is divided into two (e.g. some electronic devices, construction VAT to be carried forward; portions: net amount and VAT – each part services, etc.) as well as liquidation of • reported VAT refund whereas the taxpayer is transferred to separate account of the obligation to file domestic trade summaries was in a payable position. supplier. (VAT-27).

The above sanction does not apply in case The obligatory split payment mechanism The duty to apply split payment mechanism of minor mistakes made by the taxpayer and encompasses payments arising from the also covers foreign seated entities, registered too late/too early reporting of transactions, invoices documenting transactions between for VAT purposes in Poland. In practice, such as well as in case when prior to opening the taxpayers (B2B): change means that foreign entities would VAT audit the taxpayer corrected its VAT have to set-up and keep bank account in • one-off value of which, regardless of returns and settled the arrears along with the domestic financial institution, to which a VAT number of payments arising from them, penalty interests. Moreover, under certain account will be assigned. Documented costs exceeds 15 000 PLN or its equivalent in circumstances the 30% VAT sanction may be of setting up and running a bank account foreign currency, and reduced to 20% or 15%. shall be reimbursed on request for foreign • which concern goods or services listed entities for a quarterly, semi-annual or annual The tax authorities may also impose VAT in new Appendix no. 15 to the VAT Act. period until the 25th day of the month sanction in the amount of 100% of input VAT In general, that appendix covers goods following the period in which the application resulting from the invoices issued by a non- and services that are exposed to frauds. is submitted. If a taxpayer had not performed existing entity or in case of so called ‘empty In addition the mechanism is relevant for a payment through split payment mechanism invoices’. It should be noted the VAT sanction sale of i.a. coal and other coal products, when it was mandatory, the new regulations is applicable starting from VAT settlements parts and accessories to vehicles as well as provide for sanction (additional tax obligation) for 2017. machines and electronic devices, together amounting to 30% of tax on the invoice for with their parts and accessories to them. which the payment is due.

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Additionally, an invoice documenting supply As of 1 January 2021 some changes transposed into the new VAT Act and of goods or provision of services subject regarding mandatory split payment introduces a separation of vouchers into to mandatory split payment mechanism mechanism came into force. They include: single-purpose voucher (SPV) and multiple shall include annotation “split payment purpose voucher (MPV) for the determination • exclusion of the obligation to use the mechanism” (in Polish “mechanizm podzielonej of the date on which a VAT liability arises. The split payment mechanism in case of płatności”). Lack of such annotation shall bring new regulations cover vouchers issued after receivables deduction, e.g. netting; about an additional sanction for seller - a tax 31 December 2018. According to the wording obligation amounting to 30% of tax on the • possibility of making transfer from VAT of the changes, SPV are those vouchers invoice. account for customs agency in the amount for which the place of supply or service corresponding to the VAT amount due to performance along with amount of VAT due The regulations also introduce definition the import of goods or customs duties; (on those goods and services to which the of new criminal offence into Polish Fiscal voucher related) are known at the moment • possibility for the release of funds from Penal Code (KKS), in the form of not fulfilling of issuance. On the contrary, the MPV are the VAT account also for entities which are an obligation to perform a payment under those vouchers for which the place of supply not active VAT taxpayers. split payment mechanism by a taxpayer. For or service performance along with the VAT committing the above offence the legislator amount are not known at the moment of 10.8 Application to non-residents envisaged, apart from the consequences issuance. Entities without the status of a Polish resident on VAT, a fine of up to 720 daily rates (i.e. seated outside Poland), performing (respectively, in the case of minor acts, a fine 10.10 White list of taxpayers transactions that are taxable in Poland in for fiscal offence). Starting from 1 September 2019 so called accordance with the Polish VAT regulations “White List” of taxpayers (i.e. register of (e.g. intra-Community acquisition of goods The VAT Act provides also, as regards split taxpayers and their bank accounts available in the territory of Poland) are obliged to payment mechanism, possibility for the in database posted at publically available register for VAT purposes in Poland and, taxpayers of: website) applied in Poland. as a consequence, to fulfil the obligations • making collective payments for more imposed under the Polish VAT law on As regards transactions exceeding 15 000 than one invoice issued by one supplier registered VAT taxpayers. PLN, payments made to the different bank or service provider within a period not account than those disclosed in the White exceeding one month, It should be noted, however, that the List trigger a risk of joint and several liability obligatory reverse-charge mechanism • using funds collected in the VAT account of the purchaser (i.e. by entire assets) for (settlement of tax by the purchaser) was for payments regarding other tax liabilities the VAT not paid by the seller resulting from introduced on 1 April 2011 in respect of (with certain exemptions for i.a. real estate invoice (to which the payment relates). In supplies of goods and services by foreign tax) and social contributions made to the addition, if an invoice for over 15 000 PLN taxpayers that do not have their fixed Social Security Office. is paid into the bank account other that establishments for VAT purposes. Please stated on the abovementioned list, the note that starting from 1 April 2013 the The new VAT Act introduced joint and several relevant expenditures are not be allowed to reverse-charge mechanism is not applicable liability of the buyer for the tax arrears of be regarded as tax deductible costs on the (with certain exceptions) to the supply of the supplier in case of transactions involving grounds of CIT and PIT regulations. goods if a foreign taxpayer without fixed all goods listed in the Annex No. 15 to the establishment in Poland being a supplier VAT Act, which, at the same time, are not The above-mentioned sanctions both in the is registered for VAT purposes in Poland. subject to the obligation to settle using the scope of joint and several liability, as well In such a case the foreign supplier (not the split payment mechanism. Moreover, the as the recognition of tax costs entered into purchaser) is obliged to charge VAT on these regulations provide for the abolition of the force starting from 1 January 2020. supplies in Poland. guarantee deposit institution. However, according to the provisions which 10.9 VAT treatment of vouchers As of 1 January 2020 changes included the came into force as of 1 July 2020, taxpayers As of 1 January 2019 the regulations income tax provisions. When the payment are able to avoid the joint and several liability regarding VAT treatment of vouchers in for a given transaction is not made using and limiting the deduction of tax costs, if they accordance with Council Directive (EU) split payment mechanism despite the fact inform the head of the tax office relevant for 2016/1065 of 27 June 2016 (Vouchers that such transaction falls into obligatory split the vendor within 7 days2 from transferring of Directive) applied in Poland. The Vouchers payment, the buyer is not entitled to treat the funds into the bank account other than Directive aims to unify the VAT treatment such purchase as deductible cost for income stated on the White List. of vouchers in all EU Member States. The taxes purposes. wording of the Vouchers Directive was

2 Until the end of the pandemic caused by COVID-19, the deadline has been extended from 7 to 14 days 40 Taxation and investment in Poland 2021 | Reach, relevance and reliability

10.11 Online cash registers Starting from 1 January 2020 some taxpayers are obliged to purchase a new type of cash register “online cash register”, which enables for constant and direct transfer of data about registered transactions to the tax authorities.

The online cash register enables on-going and automatic transfer of data registered on the cash registers to new Central Repository of Cash Registers (dedicated IT system, managed by the Head of the National Tax Administration, where the said data is collected). In this way, the tax authorities have access to data included on fiscal documents (e.g. receipts, invoices, daily reports) and non- fiscal printouts (e.g. WZ documents) issued by a given cash register on an ongoing basis.

In general, online cash registers should replace old ones in an “evolutionary” way (in longer time – not from one specific date). However, some entities are obliged to 10.12 Quick fixes (changes regarding At the same time, application of the replace currently used cash registers earlier. settlement of cross-border above-mentioned simplifications in case As regards cash registers with electronic transactions of goods) of transactions performed with selected copying it will be possible to purchase them As of 2020 new regulations regarding Member States was not possible also in until 31 December 2022 and after that date settlement of cross-border transactions other situations, due to lack of corresponding all confirmations for this type of cash register of goods (so called “Quick fixes”) applied in regulations in particular Member States. will expire. The exchange or purchase of a Poland. The changes result from provisions new cash register will require the purchase of of Council Implementing Regulation (EU) The new regulations in the abovementioned an online cash register. 2018/1912 of 4 December 2018 and Council scope may influence changes in duties Directive (EU) 2018/1910 of 4 December related to VAT registration of supplier Duty to introduce earlier online cash registers 2018, as well the respective bill implementing / acquirer in relation to performed affects entities performing i.a.: the amendments to the Polish VAT Act which transactions. Applying simplification may came into force as of 1 July 2020. imply lack of obligation to register for VAT • repairs of motor vehicles, petrol, diesel in the country of call-off stock location for and gas destined for combustion engines The said provisions are a consequence of supplier. The lack of necessity to register for (from 1st January 2020), harmonization of selected rules regarding VAT purposes might be in situations where • services related to provision of food, settlement of cross-border transactions of the goods are stored by the supplier, for a performer only by stationary gastronomic goods within EU. given period, in another EU country (in the facilities, sales of coal, briquettes and case of shipment from Poland to another EU similar solid fuels manufactured from The changes in that area may be generally country), or stored in Poland (in the case of coal, lignite, coke and semi-coke of cole, divided into three groups. purchasing goods to Poland from another EU destined for provision of heating (from 1st country). January 2021), Call-off stocks Up till the end of the 2019 in Poland it was In addition, the period for which the goods • following services: hairdressing, cosmetic/ allowed to apply simplification for call-off may be stored in call-off stock are uniform beauty treatments, cosmetology, stocks solely for goods designated for within the EU (now it is 12 months, which in construction, in the scope of medical care the purposes of production activities and cases of Polish regulations means that this (provided by doctors and dentists), legal, performance of services. After the change period has been shortened from current 24 allowing an entry to facilities aiming at of regulations accordingly to Quick Fixes months). The regulations introduced also the improving of physical condition such as provisions, this possibility has been extended possibility to change the entity for which call- gyms/fitness centers (from 1st July 2021), also to trade/commercial activity. off stock is held. • sales of goods in the TAX FREE system (from 1st January 2022).

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Apart from rules resulting from the EU 10.13 SLIM VAT – package of changes to Other simplifications regulations, the Polish legislator introduced the Polish VAT Act • extension of deadline for input VAT additional documenting requirements. As of 1 January 2021 amendments to the deduction without the need of correction The taxpayer or taxpayer operating the Polish VAT Act, commonly known as the of the VAT return (from 2 to 3 months for warehouse to which the goods are being SLIM VAT (abbreviation for “Simple, Local and taxpayers filling monthly returns), entered under a call-off stock procedure Modern VAT”) entered into force. The bill in shall submit by electronic means of this regard provides for the following changes • statutory regulation of principles that communication, within 14 days from the date for taxpayers: are currently used in practice regarding of first entry of the goods into the warehouse increasing corrections (generally under this procedure, a notification on the Simplification on VAT corrections settlement in the moment when the operation of the warehouse used in the call- According to the new rules, supplier is circumstances causing the correction off stock procedure in accordance with the entitled to make the correction of output occurred), electronic document template. VAT in the settlement period, in which he • extension of the deadline for shipment issued a corrective invoice provided that (i) of goods after receiving the advanced Chain transactions he possesses documentation confirming payment in export transactions (from 2 to The settlement of chain transactions is that he agreed the conditions for reduction 6 months), dependent on the status of the buyer and of taxable basis with the purchaser, (ii) the the country that issued the VAT number used conditions for taxable basis reduction were • increasing the threshold allowing to in the transaction. There is an assumption met and (iii) the correction invoice reflects consider donated goods as gifts of low that transport should be assigned to supply these accordingly. value (from PLN 10 to PLN 20), made for the benefit of intermediary. • right to deduct VAT on accommodation As a consequence, the first supplier is On the other hand the purchaser is obliged services for resale (re-invoicing). entitled to apply 0% VAT rate to his supply. to report local sale correction invoice in the Nevertheless, the abovementioned rule is not reporting period in which the conditions for 10.14 E-commerce package applicable if an intermediary provides their decrease of taxable basis were met. The EU e-commerce package aims at supplier with VAT number of the state where facilitating cross-border trade, combating transport of goods begins. One common exchange rate fraud related to e-commerce and ensuring Taxpayers have a choice to calculate the fair competition for EU entrepreneurs. Documenting of ICS (confirmation of amounts in foreign currency into PLN for Member States, including Poland, are possibility to apply 0% VAT rate) the purposes of VAT according to the rules required to implement the provisions of The new regulations introduced applicable under income tax provisions on respective directives the package consist of standardization of the rules of documenting condition of applying such a solution at least into their legal order by 1 July 2021. Polish intra-Community supplies of goods (ICS) in during following 12 months’ period. However, government is working on implementation order to apply 0% VAT rate. In this regard, this option is not applicable for transactions and has already published a draft of the the following documentation sets shall be where VAT is settled by the purchaser i.a. relevant law, however legislation works are deemed as sufficient to apply the 0% VAT intra-Community acquisitions. not completed yet. rate: TAX FREE • two documents related to transport (e.g. Uniform registration threshold The new regulations provide that since 1 signed CMR, bill of loading, invoice for air Currently, taxpayers performing distance January 2022 TAX FREE in Poland will become transport, invoice for transport of goods) sales of goods to non-taxable entities (usually the refund system settled electronically. issued by two parties independent of each consumers) from other EU Member States Sellers using this system will be able to use other and independent of the acquirer have to register for VAT purposes and taxed customs’ electronically services platform for and of the vendor or; their sales in the country of consumption carrying out relevant records and issuing after exceeding the threshold specified in a • one transport document together with documents. From the above-mentioned given country. In this regard a single turnover another evidence (e.g. insurance policy, date the sellers will also be obliged to threshold for all Member States will be prove of payment, warehouse document, use electronic cash registers. Proposed established for distance sales, up to which it official document confirming arrival of provisions include also slight changes in will be possible to settle VAT in the supplier’s the goods issued by public authority, e.g. requirements for entities that refund VAT to country and at the rate applicable therein. notary). the travellers. This threshold will be 10 000 euro. After it is exceeded, the supply of goods will be subject In addition – the documentation set should to VAT in the country of consumption. be supplemented with a written statement of an acquirer if the goods are transported by a taxpayer directly or on his behalf.

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VAT-OSS However, it will be possible to avoid registration in many member states because of a special procedure – VAT-OSS. It will offer, similarly as in the case of VAT-MOSS (mini One Stop Shop), the opportunity to submit one VAT return containing data on sales made to consumers from different Member States. The taxpayers will submit such return only to the tax authorities of its country of identification, i.e. the country in which it will be registered for this purpose.

Changes for digital platforms The planned amendments foresees a legal fiction which in fact leads the transfer of responsibility for the VAT liability for certain B2C supplies to taxpayers facilitating the supply of goods through the use of an electronic interface such as a marketplace, platform, portal or similar means. New regulations provides that such taxpayer shall be deemed to have received and supplied the goods himself (the so-called deemed supplier). This means that the single supply from the supplier (the so-called underlying supplier) selling goods via an electronic interface to the final consumer (B2C supply) is split into two supplies:

• a supply from the underlying supplier to the electronic interface (deemed B2B supply), and

• a supply from the electronic interface to the customer (deemed B2C supply).

The EU e-commerce package aims at facilitating cross-border trade, combating fraud related to e-commerce and ensuring fair competition for EU entrepreneurs.

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11. RE T

Real Estate Tax in Poland is generally levied • for structures – the initial (gross) tax value Since RET frequently becomes a vital source by the local tax authorities (Presidents of of the object, which is not decreased with of local commune’s income, the above issues Cities, Mayors, Commune Heads) on owners its depreciation for CIT purposes. lead to an immense amount of disputes with of real estate (land, buildings and structures) tax authorities, resulting in lengthy litigations at rates imposed by the local authorities. While the taxation of lands typically causes and considerable number of court cases relatively little doubts, the determination of related to RET. As a consequence however, Notably, RET in Poland often constitutes an correct tax base for buildings and structures courts draw conclusions which often seem important part of local commune’s budget may often prove complicated due to specific contradictory and which lead to changes in (total yearly tax revenues associated with RET way it is determined, as well as rather vague approach to taxation of certain objects. amount to approx. 5 billion EUR). Thus while legal regulations and ambiguous or lack of in many countries in Central Europe real practice of tax authorities with respect to As an example, back in 2017 Poland’s estate taxes remain of marginal importance, particular tax issues. Constitutional Tribunal concluded that any Polish RET may turn out to be a substantial building object which meets all legal criteria cost of running a business (especially in In particular, taxpayers’ fixed assets are for a building should not be classified as a industries related to manufacturing, mining not always subject to RET as a whole and structure (which has a different tax base or owning shopping centres and offices). one fixed asset may only partially qualify determination method). While some tax As such, potential RET liabilities need to be as a building or a structure. Furthermore, authorities and administrative courts have considered prior to planning an investment. the actual usable area of a building may accepted the above approach, others be different from the area specified in e.g. continue to issue verdicts allowing certain Also importantly, RET is due regardless of projects delivered by architects – this results objects (which possess the characteristics of entrepreneur’s financial condition (it is not from the fact that not every space within a a building) to be treated as structures and an income tax) – the amount of tax due building should be treated as usable area. therefore to levy a (usually) higher tax on generally depends on: Finally, the legal definitions of a building and these objects. - particularly - of a structure are very unclear • for lands – the area and classification and make it sometimes difficult to qualify indicated in the Register of Lands and particular objects to one of these groups Buildings; appropriately. • for buildings – the so-called “usable area” which should generally be measured on inner side of walls and on each floor of the building;

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Real estate tax is also very vulnerable to changes in legislation which – theoretically – are not related to the tax law. This is because the current regulations with respect to RET take other legal acts related to e.g. construction law as references and thus even a minor change in these acts may influence the scope of objects subject to taxation. This was the case with wind power plants, which were taxed (in 2017 only) based on the value of the whole object (instead of the value of foundation and tower only) due to an introduction of a new non-tax law related to wind farms, until the said regulation was changed. Moreover as the major changes to the construction law were made in September 2020, it can be assumed that they will affect the taxation of some objects with RET.

As current vague regulations require constant attention from taxpayers in order to settle RET properly, lawmakers consider introducing reforms with respect to the present taxation system, especially with respect to the legal definitions of a building and of a structure. The details as to whether and when these changes may be introduced are not known at the moment however.

Real estate tax is also very vulnerable to changes in legislation which – theoretically – are not related to the tax law. This is because the current regulations with respect to RET take other legal acts related to e.g. construction law as references and thus even a minor change in these acts may influence the scope of objects subject to taxation.

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12. Other Taxes

12.1 Capital tax 12.2 Transfer tax 12.4 Exit tax A tax on civil law transactions (TCLT) is levied Sale and exchange of goods, property and Exit tax pertains to situations that cause on certain contracts (and amendments to property rights may be subject to TCLT (Tax Poland to lose its right to tax the values such contracts if they result in an increase on Civil Law Transaction - as described in specified in the Polish CIT Act, generated in the base of TCLT), such as e.g. sales, point 12.1 above). No other transfer taxes are before the transfer of assets /change of loan and donation contracts, mortgages, levied in Poland. residence. The loss of Poland’s right to tax establishment of usufruct, and partnership may result, in particular, from the stipulations or company deeds. The act provides for a 12.3 Tax on buildings subject to rent / of agreements to avoid double taxation. number of exemptions and exclusions. lease Events that give rise to tax obligations in The fixed assets (buildings) which are rented reference to the planned regulations are: A very common exclusion relates to or leased are taxed under specific, dedicated • transfer of an asset outside Polish transactions where at least one of the parties tax regime. There are some exceptions, territory, as a result of which Poland loses is subject to or exempt from VAT (this rule, but in general taxation involves buildings (in whole or in part) the right to tax income however, is not general and there are certain which are the property or joint ownership from the sale of that asset, or transactions which may be subject to TCLT of the taxpayer, has been given in whole anyway) with respect to this transaction. or in part for use under a rental, lease or • change of tax residence by a taxpayer other agreement of a similar nature and are subject to unlimited tax liability, which Exemptions include, among others, selected located in the territory of Poland. The base of means that contracts with financial institutions seated taxation is the initial value of the taxable fixed abroad or with direct shareholders. assets minus PLN 10.000.000 (around EUR Poland loses the right (in whole or in part) to 2.325.000) per taxpayer. The rate is 0,035%. tax the income from the possible disposal of The rate of tax varies depending on the This tax is settled with CIT. the taxpayer’s property. type of contract. An increase in a company’s share capital is subject to a 0.5% rate, the It should be noted that taxation is acquisition of shares is subject to a 1% rate independent of whether the asset is actually and loans are subject to a 0,5% rate (except disposed of or not by the taxpayer. This for shareholder loans). means that the tax may occur even if the taxpayer does not achieve any real benefits from the asset.

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Income subject to CIT / PIT taxation in Poland subject to excise duty is mainly based on the SENT system is applicable to the transport constitutes an excess of the market value of legislation of the European Union. of so called “sensitive goods” i.e.: motor the transferred asset over its “tax value”. The fuels and their derivatives, fuel additives, deadline for submitting the declaration and In particular, most of excise goods can be lubricating oils, propane, butane, LPG gas, payment of tax is the 7th day of the month manufactured solely in tax warehouses, vegetable fats (e.g. peanut oil, cocnut oil, following the month in which the event and as a rule excise duty is due when the palm oil, soybean oil, sunflower oil, olive oil), causing taxation occurred. In the case of CIT goods are moved outside the warehouse methanol of synthetic origin, completely taxpayers, a single rate of 19% will apply, (unless e.g. they are moved under an excise and partly denatured ethyl alcohol, de-icing regardless of the value of transferred assets. duty suspension procedure). Generally, fluids containing ethyl alcohol, solvents excise duty is levied on the manufacturer, and diluters, dried tobacco but also certain 12.5 Stamp duty importer, entity performing intra-Community medicinal products, and medical devices. Stamp duty is imposed on certain activities acquisition of excise goods, as well as any undertaken by the public administration, other entities explicitly specified by the law. As a rule, carriage of goods provided in SENT such as issuing certificates, permissions, provisions exceeding total gross weight of powers of attorney, and other documents There is a wide array of exemptions available 500 kilograms or volume of 500 liters needs issued by the central and local authorities. for certain uses of excise goods (e.g. use of to be obligatory notified and monitored in The amount of stamp duty is prescribed in ethyl alcohol to produce goods not subject the SENT. However, there are also some the regulations for each particular activity of to human consumption, exemption of exceptions from this rule. the public administration. The fixed fee varies electricity, coal, gas used in mineralogical, approximately from EUR 1 to EUR 3.000. The metallurgical, chemical reduction and All participants of the road and railway amount can be higher for fees calculated on electrolytic processes). carriage of sensitive goods (i.e. subjects the basis of the value of certain investments. dispatching and receiving goods, as well Please note however, that some of the goods as the carrier and the driver) are obliged 12.6 Miscellaneous taxes subject to excise duty in Poland may be to perform certain duties arising from the covered by the specific excise regulations SENT provisions. In general, each transport Local taxes (electricity, natural gas, coal, certain lubricant of the goods covered by the regulation is A number of taxes are imposed by oils and preparations, etc.) that may not be monitored and notified in an electronic way. municipalities, such as road vehicle tax, entirely harmonized with EU regulations. The relevant notifications (containing specific agricultural tax and forestry tax. For example in case of movement of excise information about particular goods) need to goods subject to exemption from excise duty be submitted, supplemented and updated Customs duties due to their intended use and some energy via the Electronic Tax and Customs Services The common EU customs is applied in products taxed with zero excise rate, there is Platform (PUESC). Each entity required to trade between Poland and non-EU countries necessity to monitor movement of goods in report the transport in the SENT, shall be while there are no customs duties applicable EMCS using electronic document of deliver – appropriately registered on PUESC platform. to the trade within Poland and EU countries. e-DD (till the end of January 2022 e-DD may There are several regimes of customs duties, be replaced by paper document of delivery). Apart from domestic transactions, i.e. the conventional duty rates, autonomous transactions such as intra-Community supply rates, preferential rates (established e.g. System for monitoring of road and or acquisition of goods, import, export, as within the framework of the Generalized railway transport of goods and trading well as transit through the territory of Poland System of Preferences) or on the basis of in heating fuels. are also subject to the SENT. Breach of the bilateral agreements concluded by the EU The system for monitoring of road and SENT obligations may result in imposition of with certain countries. As in all other EU railway transport of goods (so called the severe sanctions, such as financial penalty in countries, import is subject to VAT and excise “SENT”) is currently in force in Poland. The amount up to 46% of the gross value of the duties as well. On the other hand, there catalogue of goods that are subject to the goods being transported (no less than 20k are no export duties nor VAT applicable to SENT is specified in Art. 3 sec. 2 of the Act PLN or 10k PLN – in some cases). exported goods. on the monitoring system for road and railway transport and trading in heating fuels and in Since 1st September 2020 the SENT system Excise duties the Regulation of the Minister of Finance is also applicable with regard to the trading Excise duty is levied on excise goods (i.e. issued pursuant to Art. 3 sec. 11 of this Act. in heating fuels. As a result of these change energy products, lubricating oils, lubricating entities who want to use or trade in heating preparations, electricity, alcoholic beverages, The SENT allows for monitoring and control fuels should submit special registration form tobacco products, dried tobacco, liquid for of the road and railway carriage of certain to the tax office and report each purchase/ electronic cigarettes and innovative products goods and it is aimed at counteracting sale transaction in the SENT. specified in Schedule 1 to Excise Duty Act) frauds and irregularities resulting in gaps in and passenger cars. Taxation of goods Excise Duty and VAT areas. In general, the

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12.7. Jednolity Plik Kontrolny (Single Structure 4 - Accounting books Control File) The JPK_KR structure contains information on: Background 1. All entries in the general accounting and Since July 1st, 2018, all Polish taxpayers are subledgers. obligated to submit JPK (Single Control File) files to the tax authorities, based on OECD’s 2. The trial balance, based on the taxpayers’ SAF-T (Standard Audit File- Tax) guidelines, chart of accounts which have been adopted by many other European countries as well. This method Structure 5 - VAT invoices obligates taxpayers to file all or part of The JPK_FA structure concerns only ledgers and accounting information invoices (as defined in the Polish Act on electronically in a standardized XML format Goods and Services). In this structure, using electronic communication. it is necessary to present data on all the documents that formally meet the Structures of Jednolity Plik Kontrolny requirements to consider them as an invoice. As of January 1st, 2021 there are seven JPK structures: Structure 6 - and expense ledger Structure 1 – V7M or V7K The JPK_PKPiR file is an electronic reflection JPK_V7 is a file containing data on sales and of the tax revenue and expense ledger. purchases, based on VAT evidence for a However, filing it on the demand of the tax given period. Data necessary to generate authorities is required only in the event a JPK_V7 file is extracted directly from where the taxpayer chooses to keep the financial accounting systems. Contrary to ledger in electronic form. other structures submitted on demand, tax authorities require JPK_V7 to be submitted Structure 7 - Record of Revenue on a monthly basis (by the 25th day of the The JPK_EWP file should contain information month after the reported tax period). The from the record of revenue. The obligation VAT register structure reflects the same fields to submit this file on demand concerns only shown in the VAT-7 return, meaning that it taxpayers’ that pay tax on registered income contains information regarding transactions without deductible costs. included in the VAT register.

Structure 2 - Bank statements The JPK_WB structure contains information Since July 1st, 2018, all Polish taxpayers are obligated to on bank statements balances along with detailed records from taxpayer’s bank submit JPK (Single Control File) files to the tax authorities, accounts. based on OECD’s SAF-T (Standard Audit File- Tax)

Structure 3 - Warehouses guidelines, which have been adopted by many other JPK_MAG is a file concerning the movement European countries as well. This method obligates of goods in the companies’ warehouses. It includes documents concerning admission taxpayers to file all or part of tax ledgers and accounting and release of goods as well as transfer of information electronically in a standardized XML format goods between warehouses. In the event that an enterprise has several or more using electronic communication. warehouses, a separate JPK_MAG file is prepared for each warehouse. The obligation to present this data on the tax authorities’ demand concerns all enterprises whose inventory data is evidenced electronically, using computer software.

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13. Office locations

Main office

Office in Warsaw Al. Jana Pawła II 22 00-133 Warszawa Poland Tel: +48 22 511 08 11 Fax: +48 22 511 08 13

Regional offices

Office in Gdańsk Office in Poznań al. Grunwaldzka 472E ul. Grunwaldzka 34b 80-309 Gdańsk 60-786 Poznań Poland Poland Tel: +48 58 761 67 86 Tel: +48 61 882 42 00 Fax: +48 61 882 42 01

Office in Katowice Office in Rzeszów ul. Żelazna 2 Karowa Office 40-851 Katowice ul. Warszawska 18 Poland 35-205 Rzeszów Tel: +48 32 508 03 00 Tel.: + 48 17 220 96 00 Fax: + 48 32 508 03 01 Fax: + 48 17 220 91 01

Office in Kraków Office in Szczecin ul. Przybyszewskiego 56 ul. ks. Kard. Wyszyńskiego 1 30-128 Kraków 70-200 Szczecin Poland Poland Tel: +48 12 394 43 00 Tel: +48 91 881 16 50 Fax: +48 12 394 43 01 Fax: +48 91 881 16 51

Office in Łódź Office in Wrocław al. Kilińskiego 66 ul. ks. Piotra Skargi 1 90-118 Łódź 50-082 Wrocław Poland Poland Tel: +48 42 290 61 00 Tel: +48 71 335 45 00 Fax: +48 22 511 08 13 Fax: +48 71 335 45 05

50 Taxation and investment in Poland 2021 | Reach, relevance and reliability 14. Contacts

Łukasz Madej Partner in Charge Office in Poznań, Łodz, Gdansk and Szczecin [email protected]

Paweł Banasik Marek Konieczny Bartłomiej Suszko Partner Partner Partner Real Estate Tax Office in Wroclaw Office in Wrocław Office in Warsaw [email protected] [email protected] [email protected]

Seweryn Dąbrowski Agnieszka Mitoraj Joanna Świerzyńska Partner Partner Partner Corporate Income Tax Office in Poznań Global Employer Services Office in Poznań [email protected] Office in Warsaw [email protected] [email protected]

Iva Georgijew Robert Nowak Adam Wacławczyk Partner Partner Partner Transfer Pricing Corporate Income Tax Office in Katowice, Cracow Office in Warsaw Office in Warsaw and Rzeszów [email protected] [email protected] [email protected]

Krzysztof Gil Rafał Sadowski Tomasz Walczak Partner Partner Partner Office in Katowice Transfer Pricing Business Process Solutions [email protected] Office in Warsaw Office in Poznań [email protected] [email protected]

Marek Gizicki Tomasz Siek Jakub Żak Partner Partner Partner Litigation Value Added Tax (Public Fianancial Services Office in Warsaw sector) Institutions [email protected] Office in Warsaw Office in Warsaw [email protected] [email protected]

Ewa Grzejszczyk Michał Siekierzyński Piotr Żarski Partner Partner Partner Mergers & Acquisitions Real Estate Real Estate Office in Warsaw Office in Warsaw Mergers & Acquisitions [email protected] [email protected] Office in Warsaw [email protected]

Michał Kłosiński Joanna Stawowska Partner Partner Value Added Tax Tax Management and Excise Team Consulting / Value Added Office in Warsaw Tax and Excise Team [email protected] Office in Warsaw [email protected]

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52 Taxation and investment in Poland 2021 | Reach, relevance and reliability

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