1 Basic framework

1.1 Is there a single tax regime or is the regime multi-level (eg, federal, state, city)?

Poland is a unified country, so there is a single, centralised tax system. Taxes are therefore determined by the national Parliament. This also follows from the Polish Constitution, which explicitly states that tax law may be enacted only on the basis of (state) law (Article 217 of the Constitution of the Republic of Poland of 2 April 1997 (Journal of Laws of 1997, No 78, item 483, as amended)).

Local taxes are also levied in Poland, with the revenues feeding the budgets of municipalities. However, in these cases too, the tax regulations are set at the central level and the municipalities have little impact on their collection – for example, sometimes they set tax rates (to the extent permitted by law) or certain categories of exemptions.

1.2 What taxes (and rates) apply to corporate entities which are tax resident in your jurisdiction?

In Poland, legal persons and organisational units are corporate income taxpayers. Their taxation is comprehensively regulated by the Corporate Income Tax (CIT) Act of 15 February 1992 (Journal of Laws of 2020, item 1406, as amended).

According to Article 19(1) of the CIT Act, the basic tax rate is 19% of the tax base. However, taxpayers whose income earned in a tax year does not exceed the equivalent of €2 million in Polish zloty are subject to a 9% tax rate (Article 19(1a) of the CIT Act).

In addition, dividends and other income, as well as revenues from shares in the profits of legal persons, are taxed at a rate of 19% of the revenue received (Article 22(1) of the CIT Act). However, in many situations, as a result of the EU Participation Directive, dividend payments between CIT taxpayers are exempt from tax (Article 22(4) of the CIT Act).

Poland has also implemented preferential rules for the taxation of profits from qualified IP rights (‘IP box'), which are taxed at a rate of 5% (Article 24d(1) of the CIT Act).

1.3 Is taxation based on revenue, profits, specific trade income, deemed profits or some other tax base?

As a rule, the subject of CIT is income, understood as the surplus of revenues over tax-deductible costs (Article 7(1) of the CIT Act). The taxable base is the income reduced by legally admissible deductions (eg, dividends donated by a taxpayer to charity or for vocational training purposes) (Article 18(1) of the CIT Act) or deductions resulting from allowances (eg, the research and development allowance (Article 18d of the CIT Act) or the possibility to reduce income by uncollected trade receivables overdue by more than 90 days (Article 18f of the CIT Act)).

In certain exceptional situations, a flat-rate income tax is levied on income (without the right to deduct tax-deductible costs). This applies, among other things, to:

  • the payment of dividends and other income from the profits of legal persons (Article 22(1) of the CIT Act); and
  • withholding tax charged on royalties paid to non-residents (Article 21(1) of the CIT Act).

1.4 Is there a different treatment based on the nature of the taxable income (eg, gains on assets as opposed to trading income or dividend income)?

Yes, the CIT Act differentiates the taxation of certain types of income from the general rules. Among others, the following types of income are taxed differently:

  • Dividends and other income from the profits of legal persons are taxed in a lump-sum manner at a rate of 19% of income (Article 22(1) of the CIT Act);
  • Royalties and licence fees paid to non-residents are subject to a flat-rate income tax (withholding tax) of 20% or 10% of the revenue paid to non-residents (Article 21(1) of the CIT Act);
  • Gains on the disposal of investment assets are subject to a special tax regime and are taxed separately at a special flat rate, unless specifically exempt; and
  • Income earned from the transfer of virtual currencies against consideration is taxable at a rate of 19% of the income earned, considered as the difference gained in a given tax year between the total revenues from the exchange of virtual currency for legal tender, goods, services or property rights other than the virtual currency, or from the payment of other liabilities with the virtual currency, and documented expenses incurred directly for the acquisition of the virtual currency and costs relating to the transfer of the virtual currency (Article 22d(1-2) of the CIT Act).

There is no additional capital gains tax in Poland, so the 19% flat-rate tax may be considered as the final tax.

1.5 Is the regime a worldwide or territorial regime, or a mixture?

A mixed regime applies, depending on the residency of the taxpayer.

If taxpayers have their seat or management office within the territory of Poland, they will be subject to tax on their total worldwide income, without taking into consideration where this was accrued (Article 3(1) of the CIT Act).

In contrast, if taxpayers do not have their seat or management office within the territory of Poland, they will be subject to tax only on income which they earn within the territory of Poland (Article 3(2) of the CIT Act) – in particular, income from:

  • any activity pursued in the territory of Poland, including by a foreign establishment located in that territory;
  • immovable property located in the territory of Poland or rights to such immovable property, including as a result of the transfer thereof in whole or in part, or the transfer of any rights to such immovable property;
  • securities and derivatives admitted to public trading in the territory of Poland within the framework of a regulated exchange market;
  • the transfer of ownership of shares in a company, all rights and duties in a partnership or participation titles in an investment fund, a collective investment institution or another legal person, and rights of a similar nature or on account of the receivables resulting from the holding of those shares, and all rights and duties, participation titles or rights where immovable property located in the territory of Poland or rights to such immovable property constitute, indirectly or directly, at least 50% of the value of the assets of such a company, partnership, investment fund, collective investment institution or legal person;
  • the transfer of ownership of shares, all rights and duties, participation titles or rights of a similar nature in a real property company;
  • regulated amounts due, including those put at the disposal of, or paid or deducted by, natural persons, legal persons or organisational units without legal personality that have their place of residence, seat or management office in the territory of Poland, irrespective of the place of conclusion or performance of the contract; and
  • unrealised profits (so-called ‘exit tax' profits) (Article 3(3) of the CIT Act).

1.6 Can losses be utilised and/or carried forward for tax purposes, and must these all be intra-jurisdiction (ie, foreign losses cannot be utilised domestically and vice versa)?

According to Article 7(2) of the CIT Act, where the tax-deductible costs exceed the total revenues, the difference will be considered as the loss from the source of revenues. A taxpayer is entitled to reduce income earned in the five subsequent tax years by the losses previously incurred.

The following types of income may be reduced by the taxpayer by the loss from the source of revenues incurred in a tax year:

  • income obtained from the same source of income as the loss in the following consecutive five tax years – although the amount of this reduction in any of those years may not exceed 50% of the amount of such loss; and
  • income obtained from the same source of income as the loss in one of the following consecutive five tax years by an amount not exceeding PLN 5 million, with the amount not deducted being subject to settlement in the remainder of this five-year period – although the amount of this reduction in any of those years may not exceed 50% of the amount of such loss.

However, this provision does not apply to losses from the disposal of virtual currencies for consideration (Article 7(6) of the CIT Act).

On 28 November 2011 the Polish Supreme Administrative Court (Case II FSK 929/11) ruled that a company is entitled to settle within the Polish tax system a loss generated by a permanent establishment operating in another EU member state which cannot be settled in that state. At the same time, it may be assumed that the possibility of accounting for losses is not limited solely to domestic losses; but as a rule, foreign losses must relate to the activity of the company taxed in Poland (although the loss may be taken into account on global income). However, this issue has not been clearly interpreted in the case law.

1.7 Is there a concept of beneficial ownership of taxable income or is it only the named or legal owner of the income that is taxed?

As a general rule, corporate income taxpayers are the companies or corporate entities themselves. However, the identity of the beneficial owner may result in the imposition of additional restrictions on the taxpayer – for example:

  • with respect to transfer pricing in situations where the beneficial owner of the counterparty is a person with its registered office or domicile in a tax haven; or
  • with respect to withholding tax, where paying agents are required to identify the beneficial owner of royalties paid.

Dividends paid by a company to its shareholders are subject to a lump-sum tax, collected by the company acting as a taxpayer upon payment.This tax is usually attributed to the formal shareholder.

However, the Polish tax authorities have indicated that in some situations (eg, share custody), a fiduciary trust agreement is tax neutral with respect to the payment of dividends and their transfer to the trustor, as a result of which the tax should be allocated to the trustor.

1.8 Do the rates change depending on the income or balance-sheet size of the taxpayer?

Polish CIT rates depend not on the balance-sheet amount of the taxpayer, but on the amount of its revenues.

According to Article 19(1) of the CIT Act, the basic tax rate is 19% of the tax base. However, taxpayers whose revenues earned in a tax year do not exceed the equivalent of €2 million in Polish zloty are subject to a 9% tax rate (Article 19(1a) of the CIT Act).

In addition, dividends and other income, as well as revenues from shares in the profits of legal persons, are taxed at a rate of 19% of the income received (Article 22(1) of the CIT Act); while in many situations, as a result of the EU Participation Directive, dividend payments between CIT taxpayers are exempt from tax (Article 22(4) of the CIT Act).

1.9 Are entities other than companies subject to corporate taxes (eg, partnerships or trusts)?

CIT in Poland applies to income earned by legal persons and companies in organisation, and to organisational units without legal personality, with the exception of enterprises in the form of inheritance and partnerships, subject to Articles 1(1) and (3) of the CIT Act.

Moreover, the provisions of the CIT Act also apply to:

  • limited partnerships and limited joint stock partnerships with their seats or management offices within the territory of Poland;
  • registered partnerships with their seats or management offices in the territory of Poland, if the partners of a given registered partnership are not exclusively natural persons, and if the partnership does not submit to the head of the revenue office competent for the seat of the registered partnership and the head of the revenue office competent for each taxpayer that earns income from that partnership:
    • before the start of the financial year, information in the prescribed standard form regarding the legal person income taxpayers that hold, directly or through subjects that are not income taxpayers, the right to a share in the profits of the partnership, as referred to in Article 5, paragraph 1 or Article 8, paragraph 1 of the Act of 26 July 1991 on Natural Persons' Income Tax (Journal of Laws of 2020 item 1426, as amended); or
    • an update of the above information within 14 days of a change in the composition of the taxpayers; and
  • partnerships with their seats or management offices in another state, if they are treated as legal persons under the tax law of that other state and are liable to tax on the total amount of their income in that state, irrespective of where such income is earned (Article 1(3) of the CIT Act).

Finally, the Polish CIT regime also recognises the concept of ‘tax accumulation' – a situation in which two or more entities are considered to be a single taxpayer, called a ‘tax capital group'. A tax capital group must consist of at least two commercial law companies (ie, limited liability companies or joint stock companies) (Article 1a(1) of the CIT Act). In order to form a tax capital group, these companies must fulfil a number of conditions relating to issues such as the structure of their links, average revenues and so on (Article 1a(2) of the CIT Act).

2 Special regimes

2.1 What special regimes exist (eg, for fund entities, enterprise zones, free trade zones, investment in particular sectors such as oil and gas or other natural resources, shipping, insurance, securitisation, real estate or intellectual property)?

In Poland, taxpayers that operate in special economic zones may take advantage of tax exemptions. Entities operating in the financial sector (particularly banks) and the insurance sector are currently subject to an additional tax amounting to 0.0366% of the tax base, understood as the excess of the taxpayer's total assets over PLN 4 billion.

In Poland, there is an additional preferential system for the taxation of income from qualified IP rights (eg, from the commercialisation of patents and trademarks, and from the sale or licensing of software) – the so-called ‘IP box'. Entities that earn income from the commercialisation of qualified IP rights created as a result of research and development are taxed at a preferential rate of 5%.

As of 1 January 2021, Poland also has an alternative form of income tax payment – the so-called lump sum – which is levied on the income of capital companies (popularly known as ‘Estonian corporate income tax' (CIT)). Under this regime, taxpayers that meet certain stringent investment conditions pay CIT only on the amount of profits to be distributed among the shareholders and not on their entire income, which is an interesting tax preference.

2.2 Is relief available for corporate reorganisations or intra-group transfers of companies and other assets? Please include details of any participation regime.

Under Polish tax law, no specific relief is available that would apply directly to restructurings in capital groups.

However, certain regulations provide that, in the event of a merger, division or transformation of companies, or where non-monetary contributions are made in the form of an enterprise or an organised part thereof, the assets thus obtained will not be categorised as income, which results in lower taxation.

First, in the case of a merger or division of companies, the income of a shareholder of the target or divided company constituting the issue value of the shares allocated by the acquiring or newly established company is not regarded as taxable income (Article 12, section 4, point 12 of the CIT Act). However, the issue value of shares of the acquiring or newly established company assigned to the shareholder of the company being divided, determined as at the date of the division, is considered as income if the assets taken over as a result of the division – or, in the case of division by separation, the assets taken over as a result of the division or the assets remaining in the company – do not constitute an organised part of the enterprise (Article 12, section 1, point 8 of the CIT Act).

In the event of the merger or division of companies, as a rule, the value of the assets of the target or the divided company received by the acquiring or newly incorporated company as at the date of the merger or division is deemed to constitute income (Article 12, section 1, point 8 of the CIT Act). Additionally, in a company that is subject to division or spin-off, the market value of the assets transferred to the acquiring or newly established company as at the date of the division or spin-off is deemed to be income on its account if the assets taken over as a result of the division – or, in the case of a spin-off, the assets taken over as a result of the spin-off or the assets remaining in the company – do not constitute an organised part of the enterprise (Article 12, section 1, point 9 of the CIT Act).

However, the regulations also provide for an exemption from taxation in this respect. The value of the assets of the acquired or divided company received by the acquiring company corresponding to the issue value of the shares allocated to shareholders of the merged companies or of the divided company is not regarded as income (Article 12, section 4, point 3e of the CIT Act). This also applies to the value of the assets of the target or the divided company corresponding to the acquiring company's percentage share in the share capital of the target or the divided company, as determined on the last day preceding the date of merger or division, received by the acquiring company holding a share of at least 10% in the share capital of the target or the divided company (Article 12, section 4, point 3f of the CIT Act).

With regard to the transfer of assets between companies by way of a non-monetary contribution to a company or a cooperative, as a rule, the taxable income is the value of the contribution as specified in the articles of association of the company or, in the absence thereof, the value of the contribution as specified in another document of a similar nature. However, if this value is lower than the market value of the contribution, or if the value of the contribution is not specified in the articles of association or another document of a similar nature, the income is the market value of such contribution, determined as at the date on which the ownership of the object of the non-monetary contribution was transferred (Article 12, section 1, point 7 of the CIT Act).

However, this determined value of the non-cash contribution will not be recognised as income if the object of the non-cash contribution to:

  • a capital company is commercialised intellectual property contributed by the commercialising entity; or
  • a company or a cooperative is an enterprise or its organised part (Article 12, section 4, point 25 of the CIT Act).

In relation to the exclusions described above, the legislature decided to implement a so-called ‘specific anti-avoidance rule', as the exclusions do not apply where the main purpose or one of the main purposes of the merger or division of companies, the exchange of shares or a contribution in kind is to avoid or evade tax (Article 12, section 13 of the CIT Act). Furthermore, if a merger or division of companies, exchange of shares or contribution in kind is not carried out for justified economic reasons, it is presumed for the purposes of applying the aforementioned Article 12, section 13 of the CIT Act that its main or one of its main purposes is tax avoidance or evasion (Article 12, section 13 of the CIT Act).

2.3 Can a taxpayer elect for alternative taxation regimes (eg, different ways to calculate the taxable base, such as revenue-based versus profits based or cash basis versus accounts basis)?

No, there is no such possibility. In Poland, the tax base is always the income obtained by a legal person (ie, income less the costs of obtaining it) in a given tax year, with the possibility to make certain deductions.

However, the tax rates may differ for other legal entities. The basic corporate tax rate in Poland is currently 19% (Article 19, section 1, point 1 of the CIT Act).

The legislature has introduced an additional reduced corporate income tax rate of 9% of the tax base for income other than capital gains. This rate is intended for small taxpayers whose income earned in the tax year does not exceed the equivalent of €2 million in Polish zloty (Article 19, section 1, point 2 of the CIT Act).

However, the situation is different for entities that do not have their headquarters or management in the territory of Poland.

The CIT Act also provides for other tax rates separate from the general rate of 19% (in Articles 21, 22, 24a, 24b, 24d and 24f).

2.4 What are the rules for taxing corporates with different functional or reporting currency from that of the jurisdiction in which they are resident?

Functional currency and reporting currency are accounting concepts that relate to the preparation of financial statements. Presentation currency is the currency used to present the financial statements.

Under the Accounting Act, accounting books should be kept in the Polish language and in the Polish currency. However, in accordance with the regulations in force in economic trade, businesses may make settlements in foreign currencies and open accounts in convertible currencies. That said, foreign currencies should be valued and the resulting exchange differences recognised appropriately for tax purposes.

2.5 How are intangibles taxed?

According to Article 16b, section 1 of the CIT Act, ‘intangibles' include the following:

  • a housing cooperative ownership right to residential premises;
  • a housing cooperative right to commercial premises;
  • the right to a single-family house in a housing cooperative;
  • copyright or neighbouring property rights;
  • licences;
  • the rights defined in the Industrial Property Law Act of 30 June 2000; and
  • the value of acquired information relating to industrial, commercial, scientific or organisational knowledge (know-how).

Intangibles are depreciable if:

  • they are:
    • purchased from another entity;
    • fit for economic use on the date of their acceptance for use for a predicted period of at least 12 months; and
    • used by the taxpayer to fulfil needs relating to its economic activities; or
  • they are provided by another entity to the taxpayer for use under a licence (or sub-licence) agreement, a letting or lease contract, or a contract specified in Article 17A, paragraph 1 of the CIT Act.

According to Article 15, section 6 of the CIT Act, write-offs for wear and tear of tangible and intangible assets (depreciation write-offs) made in accordance with Articles 16(a) to (m), taking into account Article 16 of the CIT Act, constitute deductible expenses.

The tax depreciation rates are not strictly specified in the CIT Act. Thus, a taxpayer can decide on the amount of such rates – allthough this freedom is limited to a certain extent. Tax regulations impose minimum periods for depreciation of these components (Article 16(m), point 1 of the CIT Act).

2.6 Are corporate-level deductions available for contributions to pensions?

According to Polish law, corporate-level deductions are available for contributions to pensions, but only in relation to employee pension schemes.

Tax-deductible expenses also include expenses incurred by an employer to provide for the proper implementation of an employee pension scheme, as defined by the regulations on employee pension schemes (Article 15, section 1d of the CIT Act).

Most of the costs incurred by the employer in connection with the implementation of a pension scheme should be specified in the company agreement.

The basic contribution is a demonstrable cost to the employer, provided that it is paid into a pension scheme that meets all the conditions of the occupational pension scheme. Basic contributions paid under occupational pension schemes qualify as tax-deductible expenses under Article 15.1(d) of the CIT Act as indirect expenses, deductible on the date they are incurred – that is, the date on which they are booked.

2.7 Are taxpayers from different sectors (eg, banking) subject to different or additional taxes or surtaxes?

Yes. Legislation on the taxation of the assets of certain financial institutions was introduced in Poland on 15 January 2016 and came into force on 1 February 2016.

That law introduced a wealth tax, under which the assets of financial institutions such as the following are subject to taxation:

  • domestic banks;
  • branches of foreign banks;
  • branches of credit institutions;
  • cooperative banks;
  • domestic insurance companies;
  • domestic reinsurance companies;
  • branches and main branches of foreign insurers and reinsurers; and
  • loan institutions.

2.8 Are there other surtaxes (eg, solidarity surtax, education tax, corporate net wealth tax, remittance tax)?

Yes. In the Polish legal system, there is an obligation to pay other surtaxes. In addition to typical income tax, entrepreneurs are obliged to pay other taxes, such as:

  • real estate tax;
  • a tax on civil law transactions;
  • value added tax; and
  • other taxes, such as the sugar levy or retail sales tax.

They are also obliged to pay a number of taxes relating to the employment of employees.

There is further an obligation to pay a solidarity donation to the Solidarity Fund; this is paid by natural persons with an income exceeding PLN 1 million.

At present, only one wealth tax is imposed in Poland, whereby the assets of certain financial institutions are subject to taxation. There is also no education tax or remittance tax.

2.9 Are there any deemed deductions against corporate tax for equity?

Yes. As from 1 January 2019, the CIT Act provides for the possibility of classifying as tax-deductible expenses a hypothetical interest on equity – that is, supplementary capital made up of profits and contributions to the taxpayer (Article 15cb of the CIT Act).

The term ‘hypothetical interest' means the interest that the company would potentially pay if, instead of financing its operations with its own profits or additional payments from a shareholder, it resorted to external financing.

3 Investment in capital assets

3.1 How is investment in capital assets treated – does tax treatment follow the accounts (eg, depreciation) or are there specific rules about the write-off for tax purposes of investment in capital assets?

It is possible to recognise the depreciation of assets as a tax-deductible expense. Depreciation write-offs are made on the initial value of fixed assets and intangible assets.

As stated in Article 16(g) of the Corporate Income Tax (CIT) Act, in the case of assets that have been acquired for consideration, the initial value is the purchase price. The initial value of self-manufactured fixed assets is the cost of production. Write-offs are made after a given asset has been entered in the register of fixed assets and intangible assets. The asset must be entered in the records no later than the month in which it is transferred for use.

Depreciation is treated using the so-called ‘straight-line method', as provided for in Article 16(j) of the CIT Act. The straight-line method involves making depreciation write-offs evenly throughout the depreciation period. The declining balance method allows for more of the initial value of an asset to be depreciated at the beginning of its use, in exchange for a reduced amount of depreciation expense in subsequent years. For some assets, special depreciation rules may apply.

3.2 Are there research and development credits or other tax incentives for investment?

Article 18(d) of the CIT Act entitles a taxpayer that earns income other than through capital gains to deduct from the tax base the costs incurred in conducting research and development (R&D) activity that generates such income, hereinafter referred to as the ‘qualified costs'.

Examples of qualified costs include:

  • the purchase of materials and raw materials directly connected with the R&D activity pursued;
  • the purchase of specialist equipment not constituting tangible assets and used directly in the R&D activity – in particular, dishes and laboratory tools; and
  • the costs of obtaining and maintaining a patent, a utility model right or an industrial design right.

The amount of qualified costs may not exceed:

  • 150% where the taxpayer has the status of an R&D centre under the Act on Certain Forms of Supporting Innovative Activity; or
  • 100% for other taxpayers.

The deduction must be made in the statement for the tax year in which the qualified costs are incurred. Where the taxpayer incurs a loss in that tax year or where the amount of its income is less than the amount of deductions to which it is entitled, deductions may be made, in full or in part, respectively, in the statements for the six consecutive tax years directly following that in which the taxpayer enjoyed the deduction or gained the right to enjoy the deduction.

3.3 Are inventories subject to special tax or valuation rules?

The value of inventory shortages may be included as a tax-deductible cost, as these are not excluded from tax-deductible expenses under Article 16 of the CIT Act. As indicated by the courts, only losses to current assets incurred in the course of the taxpayer's normal, rational activities, with particular consideration given to the exercise of due diligence in the course of business, may be considered as tax-deductible expenses.

By contrast, the disclosure of surplus stock means that the taxpayer possesses a greater amount of goods than its stock records would indicate. Consequently, the goods constituting the surplus will be deemed to have been received by the applicant free of charge. Under Article 12(1)(2) of the CIT Act, the value of this gain constitutes taxable income.

3.4 Are derivatives subject to any specific tax rules?

There are no specific regulations on derivatives. Income from derivatives is considered capital gains income (Section 7b(1)(6)(b) of the CIT Act); therefore, it is taxed at a rate of 19%. The date on which income is earned through the exercise of rights arising from derivatives is deemed to be the time at which such rights are exercised (Section 12(3f) of the CIT Act).

Under the Polish regulations, costs connected with the acquisition of derivatives are not regarded as tax-deductible expenses until exercise of, or resignation from, the rights arising from such instruments, or until their disposal against payment (Article 15(1)(8b) of the CIT Act).

4 Cross-border treatment

4.1 On what basis are non-resident corporate entities subject to tax in your jurisdiction?

The Corporate Income Tax (CIT) Act recognises as non-resident taxpayers corporate entities that do not have their seat or management office within the territory of Poland. These taxpayers are subject to tax only on income which is earned within the territory of Poland (Article 3(2) of the CIT Act).

Income earned from the following sources will be regarded as income earned within the territory of Poland:

  • any activity pursued in the territory of Poland, including by a foreign establishment located in that territory;
  • immovable property located in the territory of Poland or rights to such immovable property, including as a result of the transfer thereof in whole or in part, or the transfer of any rights to such immovable property;
  • securities and derivatives admitted to public trading in the territory of Poland within the framework of a regulated exchange market;
  • the transfer of ownership of shares in a company, all rights and duties in a partnership or participation titles in an investment fund, a collective investment institution or another legal person, and rights of a similar nature or on account of the receivables resulting from the holding of those shares, and all rights and duties, participation titles or rights where immovable property located in the territory of Poland or rights to such immovable property constitute, indirectly or directly, at least 50% of the value of the assets of such a company, partnership, investment fund, collective investment institution or legal person;
  • the transfer of ownership of shares, all rights and duties, participation titles or rights of a similar nature in a real property company;
  • regulated amounts due, including those put at the disposal of, or paid or deducted by, natural persons, legal persons or organisational units without legal personality that have their place of residence, seat or management office in the territory of Poland, irrespective of the place of conclusion or performance of the contract; and
  • unrealised profits (so-called ‘exit tax' profits) (Article 3(3) of the CIT Act).

4.2 What withholding or excise taxes apply to payments by corporate taxpayers to non-residents?

Polish law also provides for the imposition of withholding tax on certain payments made to non-residents. Article 21(1) of the CIT Act states that income tax will be charged at a rate of 20% on income received within the territory of Poland from the following:

  • interest; copyright or neighbouring rights, rights to invention designs, trademarks or decorative patterns, including income from the sale of such rights; fees for access to a secret recipe or production process; the use or right to use an industrial, commercial or scientific device or a means of transport; and information connected with experience acquired in an industrial, commercial or scientific field (know-how);
  • payments for the provision of services consisting of shows, entertainment or sports activities performed by legal persons with their seats abroad, organised through natural persons or legal persons that conduct their activities based on artistic, entertainment and sports events within the territory of Poland; and
  • performances in the fields of advice, accounting, market research, legal services, advertising, management and control, data processing, employee recruitment or personnel services, guarantees or suretyships, and performances of a similar nature.

Meanwhile, income tax will be charged at a rate of 10% on income received within the territory of Poland from the following:

  • payments due for the transportation abroad of loads and passengers accepted for carriage in Polish harbours by foreign sea trading enterprises, except for transit loads and passengers; and
  • income earned within the territory of Poland by foreign air transport enterprises, excluding income earned from scheduled air passenger transport whereby the passenger is required to have an air ticket.

These rules will apply only if no double or multilateral tax treaty is applicable.

Like residents, non-residents are also obliged to pay a lump-sum tax on dividends and other shares in the profits of legal persons at the rate of 19% of the income obtained (Article 22(1) of the CIT Act).

4.3 Do double or multilateral tax treaties override domestic tax treatments?

Yes, according to Article 21(2) of the CIT Act, withholding tax as mentioned in question 4.2 will apply subject to the provisions of any double tax prevention agreements to which Poland is a party.

However, the application of a preferential tax rate or a tax exemption resulting from a double tax treaty will depend on the taxpayer having a certificate of residence confirming the tax residency of the recipient of the payment (Article 26(1) of the CIT Act).

In theory, the Polish regulations provide for certain limitations in this respect if the amounts that are subject to withholding tax paid to a single contractor in the course of time exceed PLN 2 million. In this situation, the taxpayer must withhold the tax in full (as if no double tax treaty applied); the taxpayer may then apply for a refund of the overpaid tax, depending on who bears the economic burden of such tax (Article 26b(2) of the CIT Act). However, from time to time, the application of these provisions has been temporarily suspended by the minister of finance. The most recent suspension was from 30 December 2020 until 1 July 2021.

4.4 In the absence of treaties, is there unilateral relief or credits for foreign taxes?

Yes, Polish law provides that income earned by a Polish taxpayer from foreign sources may be deducted from Polish CIT. However, the deduction cannot exceed the amount of tax assessed before the deduction and proportionally corresponding to the income earned in the foreign state.

4.5 Do inbound corporate entities obtain a step-up in asset basis for tax purposes?

No, there are no such rules in Poland.

4.6 Are there exit taxes (for disposed-of assets or companies changing residence)?

Yes, there is an exit tax in Poland, formally known as the tax on unearned gains. According to Articles 24(f)(1) and (2) of the CIT Act, the tax on unrealised gains amounts to 19% of the tax base and covers:

  • the transfer of an asset outside the territory of Poland, as a result of which Poland fully or partially loses the right to tax income from the disposal of that asset, while the transferred asset remains the property of the same entity; or
  • a change in tax residence by a taxpayer that is subject to taxation in Poland on all of its income (unlimited tax obligation), as a result of which Poland fully or partially loses the right to tax income from the disposal of an asset component that is the property of that taxpayer, in connection with the transfer of its registered office or management board to another state.

Unrealised gains are considered as the excess of the market value of the asset, as determined at the date of its transfer or the date before the change in tax residence, over its tax value.

5 Anti-avoidance

5.1 Are there anti-avoidance rules applicable to corporate taxpayers – if so, are these case law (jurisprudence) or statutory, or both?

Yes, Poland has both a general anti-avoidance clause (GAAR) and a number of specific clauses dealing with particular cases of tax avoidance (specific anti-avoidance rules).

According to the GAAR, an action will result in the achievement of a tax advantage if, contrary to the object or purpose of the tax act or its provision in the given circumstances:

  • the achievement of this advantage was the main or one of the main purposes of its performance; and
  • the manner of its performance was artificial (tax avoidance) (Article 119(a)(1) of the Tax Ordinance Act of 29 August 1997 (Journal of Laws of 2020 item 1325, as amended)).

In this situation, the tax consequences of an act will be determined based on such state of affairs as might have existed had the relevant act been performed (Article 119(a)(2) of the Tax Ordinance Act). However, if the circumstances indicate that the achievement of a tax advantage was the sole purpose for performing the transaction, the tax consequences will be determined based on the state of affairs that would have existed had the transaction not been performed (Article 119(a)(5) of the Tax Ordinance Act).

Polish law also provides for a number of specific clauses which relate to the following, among other things:

  • the possibility to recharacterise or omit the tax consequences of transactions concluded between related parties (Article 11(4) of the Corporate Income Tax (CIT) Act);
  • forfeiture of the right not to tax income connected with a merger or division of companies, exchange of shares or contribution in kind which was not carried out for justified economic reasons (Article 12(13) of the CIT Act); or
  • the exclusion of a tax exemption for dividends or related to the payment of royalties to related parties, if the main purpose or one of the main purposes of the transaction or other act, or multiple transactions or other acts, was artificial (Article 22c(1) of the CIT Act).

5.2 What are the main ‘general purpose' anti-avoidance rules or regimes, based on either statute or cases?

In Poland, anti-avoidance rules are based on statutory law – in particular:

  • the Tax Ordinance Act, which contains regulations on the general anti-avoidance clause;
  • the CIT Act, which provides for a number of specific anti-avoidance rules concerning dividends, mergers and divisions of companies or transactions between related entities, among other things; and
  • the Value Added Tax Act, which contains an abuse of rights clause, similar in its effect to the application of the general clause.

5.3 What are the major anti-avoidance tax rules (eg, controlled foreign companies, transfer pricing (including thin capitalisation), anti-hybrid rules, limitations on losses or interest deductions)?

Several regulations may be considered as anti-avoidance rules – in particular, those relating to the following:

  • transfer pricing, which require taxpayers entering into transactions with related parties to determine the terms of such transactions on an arm's-length basis (Articles 11(a) and following of the CIT Act);
  • foreign controlled companies (Article 24(a) of the CIT Act);
  • restrictions on classifying the costs of debt financing as tax-deductible expenses (thin capitalisation) (Article 15(c) of the CIT Act);
  • limitations on classifying expenses for the purchase of intangible services from related entities as tax-deductible expenses (Article 15(e) of the CIT Act);
  • limitations on classifying cash payments as tax-deductible expenses (Article 15(d) of the CIT Act);
  • anti-hybrid rules (Articles 16(n) and following of the CIT Act); and
  • measures limiting contractual benefits.

5.4 Is a ruling process available for specific corporate tax issues or desired domestic or cross-border tax treatments?

Yes, a so-called ‘individual interpretation' can be obtained from the competent authority (ie, the director of the National Fiscal Information) which, at the request of an interested party, will issue a binding interpretation of the application of tax law to its particular case (Article 14b(1) of the Tax Ordinance Act).

A request for an individual interpretation may relate to an existing factual state or future events (Article 14b(2) of the Tax Ordinance Act).

Individual tax interpretations are an extremely popular way to mitigate tax risks and Polish taxpayers frequently request them, in particular due to their low cost (the official fee for an interpretation is only PLN 40).

However, the subject of an application for an individual interpretation cannot relate to provisions of tax law that aim to prevent tax avoidance – in particular, by:

  • abusing the tax law provisions; or
  • conducting actual business activities or undertaking activities in an artificial manner or without economic justification.

In this regard, however, it is possible to apply to the competent authority (ie, the director of the National Fiscal Administration) for a binding protective opinion confirming that the circumstances described by the taxpayer in the application are not aimed at tax avoidance (Article 119(x)(1) of the Tax Ordinance Act). The director of the National Fiscal Administration will issue a binding opinion to this effect if the circumstances presented in the application indicate that Article 119(a)(1) does not apply to the tax benefit indicated in the application resulting from the activity (Article 119(y)(1) of the Tax Ordinance Act).

However, such precautionary opinions are a new institution in the Polish tax regime and the high cost of obtaining them (the official fee can be as high as PLN 20,000) means that they have not proved popular thus far.

5.5 Is there a transfer pricing regime?

Yes, there are very extensive transfer pricing regulations in Poland.

Under Polish law, related parties must determine transfer prices on terms that unrelated parties would determine between themselves (Article 11(c)(1) of the CIT Act).

However, if as a result of existing connections conditions are set or imposed that differ from those that would be set by unrelated parties and, as a result, the taxpayer reports a lower income (or higher loss) than would be expected if those connections did not exist, the tax authorities will determine the taxpayer's income (loss) without taking into account the conditions resulting from those connections (Article 11c(2) of the CIT Act).

In addition, where the tax authorities conclude that in comparable circumstances, unrelated parties guided by economic rationality would not have entered into a given controlled transaction, or would have entered into a different transaction or have performed a different act from the relevant transaction, they will determine the income (loss) of the taxpayer without taking into account the controlled transaction and, where justified, will determine the income (loss) of the taxpayer from the transaction appropriate to the controlled transaction (Article 11(c)(4) of the CIT Act). In making this decision, they will take into account:

  • the terms and conditions that the related parties have agreed between themselves; and
  • whether the terms and conditions agreed between the related parties make it impossible to determine the transfer price at a level to which unrelated parties would agree on the basis of economic rationality, taking into account the options realistically available at the time of the transaction.

Entities that conduct transactions with related parties must prepare transfer pricing documentation at the local or group level. The transfer pricing documentation in Poland has a very detailed scope (local documentation also includes an obligatory comparability analysis) and is thoroughly verified.

The documentation at the local level must demonstrate that transfer prices were determined on terms that unrelated parties would determine between themselves (Article 11(k)(1) of the CIT Act). It must be prepared for transactions with related parties of a homogeneous nature whose value, minus value added tax, exceeds the following documentation thresholds in the financial year:

  • PLN 10 million in the case of a commodity transaction;
  • PLN 10 million in the case of a financial transaction;
  • PLN 2 million in the case of a service transaction; or
  • PLN 2 million in the case of any other type of transaction (Article 11k(2) of the CIT Act).

Local documentation is also prepared in case of transactions controlled by an entity that has its place of residence, registered office or management in a territory or country that applies harmful tax competition. In this case the documentation threshold is PLN 100,000, regardless of the type of transaction (Article 11(k)(3) of the CIT Act).

On the other hand, related parties that are consolidated using the full or proportional method, and that are obliged to prepare local transfer pricing documentation, must also prepare group transfer pricing documentation by the end of the twelfth month following the end of the financial year if they belong to a group of related parties:

  • for which consolidated financial statements are prepared; and
  • whose consolidated revenues exceeded PLN 200 million or its equivalent in the preceding financial year (Article 11(p)(1) of the CIT Act).

5.6 Are there statutory limitation periods?

Yes, Polish tax law provides for limitation periods. With respect to tax liabilities that arise by operation of law (which is how most taxes arise in Poland), a tax liability becomes time barred after five years, counting from the end of the calendar year in which the deadline for payment of the tax expired (Article 70(1) of the Tax Ordinance Act).

Importantly, however, the statute of limitations is suspended in a number of situations, including in case of the commencement of proceedings in respect of a tax offence or misdemeanour of which the taxpayer has been notified, if the suspicion of the offence or misdemeanour is connected with non-performance of the obligation (Article 70(6)(1) of the Tax Ordinance Act).

6 Compliance

6.1 What are the deadlines for filing company tax returns and paying the relevant tax?

Corporate income tax (CIT) is payable annually and the tax return must be submitted by the end of the third month of the following fiscal year. By that date, the taxpayer is also obliged to pay the due tax or the difference between the due tax on the income shown in the return and the sum of due advance payments for the period from the beginning of the year (Article 27(1) of the CIT Act).

However, during the year the taxpayer is obliged to pay monthly advance payments of income tax in an amount equal to the difference between the tax due on income earned since the beginning of the tax year and the sum of advance payments due for previous months (Article 25(1) of the CIT Act). In this case, the taxpayer need not file separate declarations (making a transfer will suffice). Advance payments are due by the 20th of the following month (Article 27(1a) of the CIT Act).

Taxpayers in their first year of starting business activity, with reservation to item 1(c), and small taxpayers may pay quarterly advance payments in the amount of the difference between the tax due on income generated from the beginning of the tax year and the sum of advance payments due for previous quarters. A ‘quarter' is understood as a quarter of a calendar year (Article 27(1b) of the CIT Act).

6.2 What penalties exist for non-compliance, at corporate and executive level?

Taxpayers that pay CIT after the due date or in an insufficient amount must pay additional tax plus interest on tax arrears, the amount of which depends on the applicable rate, which currently amounts to 8%.

In some situations, such as non-market prices in transactions between related parties or ‘artificial' processes of merger and division of companies, the taxpayer may also be subject to an additional tax liability, which may range from 10% to 120% of the sum of the tax benefits achieved by the taxpayer.

In addition, in case of irregularities relating to tax settlements (eg, persistent failure to pay tax on time, underestimation of the tax base, or unreliable or defective keeping of tax books), the natural persons responsible for tax settlements – and in particular, members of the management boards of companies – may be held criminally liable.

The penalties in this regard include restrictions on freedom (eg, community service) and even imprisonment, in addition to severe fines.

6.3 Is there a regime for reporting information at an international or other supranational level (eg, country-by-country reporting)?

Yes, as a member of the Organisation for Economic Co-operation and Development and the G20, Poland was obliged to implement a country-by-country reporting mechanism. These regulations are already in force in Poland.

As a result of the introduction of country-by-country reporting, large international capital groups must provide the tax authorities with information on the following, among other things:

  • the size of their operations (assets, share capital, number of employees);
  • the amount of realised revenues, realised profits or losses, paid and due losses, and tax paid and due; and
  • the places in which they conduct their business activities and the subject of such activities.

Additionally, Poland has implemented regulations that oblige taxpayers or their promoters (eg, tax offices) to report domestic and international tax schemes (tax arrangements) according to the EU Directive on Cross-Border Tax Arrangements.

7 Consolidation

7.1 Is tax consolidation permitted, on either a tax liability or payment basis, or both?

According to Article 1(a)(14) of the Corporate Income Tax (CIT) Act, companies that form a tax capital group are jointly and severally liable for the group's income tax liabilities due for the period of the agreement. The dominant company represents the tax capital group with respect to its obligations under the CIT Act and the Tax Ordinance Act.

The requirements to form a tax capital group are set out in Article 1(a) (2) of the CIT Act. They include the following, among others:

  • The group may consist only of capital companies;
  • The average share capital attributable to each company must be not less than PLN 500,000; and
  • The agreement must be entered into by the parent company and its subsidiaries in the form of a notarial deed for a period of at least three fiscal years, and must be registered by the head of the tax office.

8 Indirect taxes

8.1 What indirect taxes (eg, goods or service tax, consumption tax, broadcasting tax, value added tax, excise tax) could a corporate taxpayer be exposed to?

Corporate entities in Poland are subject to several corporate taxes, of which the most important are:

  • the tax on goods and services (value added tax (VAT));
  • excise tax;
  • gaming tax; and
  • the tax on civil law transactions (which applies mainly to transactions not covered by VAT).

8.2 Are transfer or other taxes due in relation to the transfer of interests in corporate entities?

There is no separate tax in Poland that covers the disposal of assets (eg, conveyancing). These transactions are subject to corporate income tax and the income deriving therefrom is taxed in the same way as income from operations.

9 Trends and predictions

9.1 How would you describe the current tax landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The actions of the Polish legislature in relation to corporate income tax (CIT) are full of contradictions and evoke mixed feelings.

On the one hand, the legislature has been trying to reduce the tax burden for companies. For example, in recent years it replaced the 19% CIT rate with a reduced rate for small taxpayers (ie, those with income below the equivalent of €2 million) amounting to 15%, which was subsequently reduced to 9%.

The legislature also seems to be giving preference to companies that invest in the development of new technologies and in the IT industry. The solutions that have been introduced – which include a reduced 5% tax rate on qualified IP rights (including software) and a research and development allowance – have made Poland an attractive tax location for entrepreneurs in the technology and IT sectors.

As of 1 January 2021, Poland also has an alternative form of income tax payment – the lump sum on income of capital companies (popularly known as ‘Estonian CIT') – under which taxpayers that meet certain stringent investment conditions pay CIT only on the amount of profits to be distributed among shareholders and not on their entire income, which is an interesting tax preference.

On the other hand, however, the legislature is constantly imposing new obligations on taxpayers, which complicates tax settlements; and, in the name of safeguarding tax revenued, it frequently takes action – sometimes without due consideration – that drastically increase the tax burdens for some entrepreneurs which are not in fact seeking to avoid tax.

A glaring example of such measures is the CIT taxation of limited partnerships and certain general partnerships from 1 January 2021 (which previously were treated as tax transparent). An obligations to report tax reconciliations (not only cross-border, but also domestic) and an obligation for the largest taxpayers to publish their tax strategies have also been introduced.

Polish tax law changes frequently and some changes come into force overnight (sometimes significant changes in tax law are enacted at the end of November which come into force on 1 January of the following year).

As a result, there is no real certainty and it is difficult to predict what the future will bring.

10 Tips and traps

10.1 What are your top tips for navigating the tax regime and what potential sticking points would you highlight?

No answer submitted for this question.

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