MAJOR DEVELOPMENTS
Significant tax developments include:
q Effective January 1, 1998, a new customs law harmonized with EU regulations will be introduced.
q Effective January 1, 1996, consolidation of corporate income tax returns is allowed. However, stringent conditions have prevented their use in practice. Some relaxation of these conditions is expected for 1998.
q Modifications were made, some effective retrospectively, to the ownership of real estate law by foreigners (including indirectly).
q The import tax (3%) is not valid as of January 1, 1997.
INCOME TAXES ON CORPORATIONS
1. Rates
Legal entities are subject to 38% income tax on their net profit. Net profit is defined as gross profit less expenses. There also is a withholding tax on distributed profits at the rate of 20%. In the case of a foreign shareholder, tax treaties often reduce the rate and in some cases to as low as 0%. Polish companies can credit withholding tax paid on dividends received against their income tax liability. Interest and royalties received by a Polish company are not subject to Polish
withholding tax but are treated as ordinary income of the recipient company.
2. Local Income Taxes
There are no local income taxes in Poland. Local taxes (e.g., ownership of property, ownership of vehicles see item 25) are not applied to income.
3. Capital Gains Taxes
In general, capital gains are assessed as income.
4. Branch Profits Taxes
Under Polish law, foreign companies generally are not permitted to conduct for-profit activities through branch offices. As a result, branch profits tax issues are seldom encountered.
Foreign-owned branch offices, however, are allowed to perform representative functions, such as advertising, marketing, and research.
5. Foreign Tax Reliefs
Foreign-source income of Polish companies is combined with Polish income for the calculation of total tax due. An amount equal to the tax paid in each foreign country is credited against the tax assessed on worldwide income. However, the amount credited cannot exceed the pro rata amount of Polish tax assessed on the income earned in each foreign country. Under certain tax treaties, foreign-source income may be exempt.
6. Classification of Corporations
There are two types of corporations in Poland: a limited liability company (Sp. z o.o.) and a joint stock company (S.A.). Partnerships in Poland are not legal entities and are not liable to corporate income tax. Partnership income, for tax purposes, is added to the personal income of partners. Foreign investors are not able to conduct business in Poland using a Polish partnership.
7. Payment of Taxes
A corporation tax must be paid on a monthly basis. The amount due is the difference between the tax paid from the beginning of the tax year (normally to the previous month) and the tax due on income earned in that financial year to that particular month-end. The tax is due by the 20th of the following month. The estimated annual tax return is due three months after the end of the tax year. The balance of tax due, if any, must be paid at the same time. The final tax return is due within
ten days of the verification of financial statements, but no later than nine months after the tax year-end.
INCOME TAXES ON INDIVIDUALS
9. Rates
Individuals who reside in Poland for more than 183 days in a calendar year are taxed on their worldwide income. Individuals who reside in Poland less than 184 days are liable for personal tax only on Polish-source income. However, a special concession in Polish tax law allows some foreign employees to be taxed only on Polish-source income, regardless of their length of stay in Poland. Under the concession, foreign individuals employed by Polish companies established with foreign participation will be taxed only on income arising from their
Polish employment and on other income actually received in Poland.
The current tax rates from January 1, 1997, are:
Tax Base (Pln)
Tax (Pln) on Percentage
Over Not Over Lower Amount on Excess
0 20,868 0 20% less standard
exemption of 278.20 Pln
20,868&
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