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Doing business in Poland – CIT aspects

Katarzyna Kozakowska
Senior Manager, Tax Advisor, MDDP

Overview and CIT rates

Taxpayers with offices or management boards in Poland are subject to CIT in Poland on their worldwide income. Non-resident companies are subject to CIT only on income from Polish sources (i.e. earned in Poland), unless a double tax treaty (DTT) provides otherwise.

CIT rate CIT rate for small taxpayers and taxpayers starting their activity does not apply to capital gain – in the tax year of starting their activity
19% 9%
CIT rate CIT rate on shifted income
19% 19%
CIT rate Flat rate CIT regime’s tax rate
19% 20%
CIT rate CIT on commercial real estate
19% 0.035%
CIT rate Withholding tax:
CIT rate Dividends
19% 19%
CIT rate Interest
19% 20%
CIT rate licence fees
19% 20%
CIT rate intangible services
19% 20%

A small taxpayer is a taxpayer in whose case the value of revenue from sales (including the amount of output VAT) did not exceed in the preceding tax year an amount being the equivalent of EUR 2 million.

The CIT Taxable base is the sum of income from capital gains and income from other sources of revenues (e.g. operational income). The taxable income is calculated as a difference between revenues and the costs incurred in earning it; if the difference is negative, the taxpayer declares a tax loss. In certain cases, revenue may be the taxable base.

CIT taxpayers have to calculate income from capital gains separately from operational income. Therefore, if the taxpayer earns income from only one of these sources, and in the second source incurs a tax loss – income from one source is taxed without deducting the loss incurred on the second source of revenue.

Tax loss may be deducted from profit earned from particular source of revenue during five subsequent tax years ("loss carry-forward system"); the deduction in a single year cannot exceed 50 per cent of the value of the loss; alternatively the tax losses of up to PLN 5 million can be set off against profits of one year, however, not deducted amount may be carried forward to the remaining five years, but it may not exceed 50% of the loss per year.

Profit distribution

Dividends disbursed by corporations with offices in Poland are subject to withholding tax at the 19-per cent rate, (the tax is collected by the company making the disbursement).

Tax treaties stipulate a lower withholding rate for dividends (5%, 10% and 15%) if certain conditions are met.

There is possibility of exempting dividends from WHT, when entity receiving income (revenue) from dividends, as well as other revenues qualified as dividends, is a company which is subject to taxation on the entire of its income in the Republic of Poland or in a European Union member state other than the Republic of Poland, or the Swiss Confederation or in another state of the European Economic Area, regardless of where it is earned provided that some conditions are met..

For payments above PLN 2 million to related entities generally "pay-and-refund mechanism" should be applied.

In the Polish tax regulations anti-abuse rules were implemented which should be taken into consideration when exemptions or reduced rates are applied.

Tax-deductible costs and depreciation

Tax-deductible costs are costs incurred to earn or maintain or secure a source of revenue that are not excluded by law from the tax-deductible cost category. Taxpayers must document the costs incurred. Tax costs also include expenditures for discontinued investments. The legislation contains a list of more than 60 items that are not regarded as costs for tax purposes. These include, inter alia, accrued but unpaid interest, business entertainment costs, administrative penalties. Expenditures for the purchase of fixed assets and intangible assets do not constitute costs either, but depreciation write-downs made in accordance with applicable laws.


As a rule, depreciation write-downs are based on the cost of acquisition or manufacturing of the depreciated asset. Depreciation does not apply to the land and right of perpetual usufruct of land.

Depreciation rates and periods for tax purposes may differ from depreciation for accounting purposes.

Examples of depreciation rates and methods for selected assets:

Type of fixed asset
Linear method Depreciation period
Annual depreciation rate (%)
Reducing balance method Depreciation period
Annual depreciation rate (%)
Type of fixed asset Car – PLN 50,000
Linear method 60 months
20% (PLN 10,000)
Reducing balance method n/a
Type of fixed asset Truck – PLN 100,000
Linear method 60 months
20% (PLN 20,000)
Reducing balance method 30 months
40% (PLN 40,000 in the first year)
Type of fixed asset Computer – PLN 5,000
Linear method 3 years
30% (PLN 1,500)
Reducing balance method 18 months
60% (PLN 3,000 in the first year)
Type of fixed asset Construction equipment – PLN 1,000,000
Linear method 60 months
20% (PLN 200,000)
Reducing balance method 30 months
40% (PLN 400,000 in the first year)
Type of fixed asset Office building – PLN 10,000,000
Linear method 40 years
2.5% (PLN 250,000)
Reducing balance method n/a


Income from leases is subject to CIT in accordance with general principles. Tax laws set out in detail two types of leases: operating leases and financial leases. Lease settlement for tax purposes may be different than for accounting purposes.

Major differences between operating leases and financial leases:

Lease payments
Operating leases Lease payments, in their entirety, are a cost for the beneficiary and revenue for the financing party.
Financial leases Lease payments are a cost for the beneficiary and revenue for the financing party only in the interest portion.
Operating leases The financing party effects depreciation.
Financial leases The beneficiary effects depreciation.
Operating leases At least 40 per cent of the statutory depreciation period (or at least 5 years for real properties).
Financial leases Fixed term – no minimum or maximum.

The costs of debt financing – thin capitalization restrictionsCosts of debt financing (both resulting from intra-group and external financing) is excluded from tax-deductible costs in part in which the surplus of costs of debt financing over interest- type revenues exceeds PLN 3 million or 30% of the tax EBITDA in the tax year.

Tax exemptions and credits

Legislation provides for a number of CIT exemptions, both subjective and objective. For instance, investment funds, pension funds, public service organisations, church organisations and special economic zone companies are exempt from tax upon meeting appropriate requirements. Furthermore, CIT does not apply to agricultural business, with the exception of income from special departments of agricultural production.

Polish Investment Zone/Special Economic Zone

The Polish Investment Zone allows for exemption from taxation of income generated by a new investment, understood, i.e., as the establishment of a new plant or an increase in the capacity of an existing one. The exemption is based on a Decision on Support that can be obtained by operating in any part of the country.

The amount of tax exemption depends on the location of the investment and size of enterprise. The relief can be 10-50% for large companies, 20-60% for medium companies and 30-70% for micro and small enterprises.

The decision will not be given to an entrepreneur operating, among others whole sale and retail trade, facilities and works and the operation of gaming centers.

Research & Development (R&D) CIT Relief

The R&D tax relief entitles to deduct up to 200% of costs incurred on research and development activities from the tax base (not withstanding their prior deduction as an ordinary cost under the general rules), if the taxpay- er earned income other than income classified to capital gains source.

The provisions contain a closed list of such expenditures, which should also qualify as tax – deductible costs under the general tax rules.

So called "Estonian CIT" regime / Lump sum CIT

Lump-sum tax on corporate income, or the so-called Estonian CIT regime, is a form of taxation in force as of 2021. It allows CIT taxpayers to defer payment of income tax (CIT) for 4 or more years, until the distribution of profits (dividends).

"Estonian" CIT is available to limited liability companies, joint-stock companies, simple joint-stock companies, limited partnerships or limited joint-stock partnerships in which the shareholders, stockholders or partners are exclusively natural persons.

Companies can benefit from lump sum CIT if certain conditions are met (e.g. the company’s shareholders, stockholders or co-partners should be natural persons only, the company should not hold shares in other entities, the company’s passive income should not exceed its operating income).

The method of taxation is chosen for a period of 4 years (after the end of this period, provided that the conditions are met, the taxation with lump sum CIT can be continued).

CIT on shifted income

This 19% tax was introduced to eliminate the possibility of obtaining tax benefits through tax schemes aimed at transferring income to tax jurisdictions with effective low tax rate.

The shifted income is defined as costs incurred directly or indirectly for the benefit of an entity related to a Polish taxpayer, which is subject to tax according to the rate lower than 14,25%, provided that such a foreign taxpayer receives its revenues mainly from passive income / intangible services paid by related parties. Detailed rules apply here.

Polish Holding Company (PHC)

The benefit of the PHC model is tax exemption on dividends received from subsidiaries (100% exemption), and tax exemption on the sale of shares (stocks) of a subsidiary to an unrelated party (100% exemption).

A holding company and subsidiary have to fulfil the conditions resulting from the CIT Act cumulatively for a continuous period of two years.

Family Foundation

Family foundation is a new concept in Polish law. It is introduced in Poland to minimise the risk of unsuccessful succession and to ensure the continuation of business operations of an enterprise.

The family foundation is a separate legal entity that was established to accumulate property, manage it in the interest of the beneficiaries and to provide benefits to the beneficiaries.

A family foundation will generally be exempt from CIT. 15% CIT is due only on amounts distributed to beneficiaries. There is no personal taxation for close family members. For other beneficiaries there is 15% PIT.

Monthly CIT advanced, annual returns

CIT monthly advance payments must be paid by the 20th of every month. Annual tax return CIT-8 is generally filed by the end of the third month after the end of each fiscal year. The tax resulting from this return must also be paid by the above deadline.

The article was prepared by tax experts from the Polish tax advisory company MDDP.

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