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    41,736    3,895.40    32
    41,736        10,573.16    44

Directors?fees are taxed at a flat rate of 20%.
    Subject to treaty relief, a 20% flat tax rate applies to the following types of payments to individuals:
q    Dividends;
q    Royalties;
q    Interest on loans; however, interest earned on savings accounts in Polish banks that is paid to individuals is not taxable.
Tax relief is available for the purchase of land and the construction of apartments or houses.
10.    Local Income Taxes
There are no local income taxes.
11.    Capital Gains Tax
In general, capital gains are assessed as income. In some cases a flat rate 10% tax applies to the proceeds from the sale of real property.
Several rollover reliefs are available.
12. Foreign Tax Reliefs
Double tax relief if available both under double tax treaties and unilateral provisions of Polish domestic tax law. Double tax treaties in many cases provide an exemption from Polish taxation for foreign-source income. If no treaty applies, Polish tax law grants a credit for foreign taxes paid, up to the total amount of the taxpayerPolish income tax liability.
13.    Tax Period
All individuals are taxed on the basis of the calendar year. The final tax return must be submitted and any final balance due must be paid by April 30 of the following year.
14.    Other Matters
Partnership income or loss is included in an individual taxable
income.
INCOME TAXES ON NONRESIDENTS
15.    Liability to Tax
Nonresidents are subject to Polish personal income tax on their
Polish-source income. Individuals who stay in Poland fewer than 184 days in a tax year and individuals, regardless of the length of their stay, who came to Poland to take employment with a company with foreign shareholders, or a branch of a foreign entity, including a foreign bank, are liable to tax only on their Polish-source income irrespective of where paid and on other income actually remitted to Poland. Under certain circumstances, members of a board of directors in this category
are taxed at the flat rate of 20%. Permanent residents of Poland are taxable on their worldwide income.
16.    Rates
Income tax rates do not differ for nonresidents. However, a 20% Polish withholding tax applies on dividends, interest, and royalties paid abroad by a Polish company (unless treaty relief if available, see item
17.    Withholding Tax Rates
The following table summarizes Polish withholding tax rates applied under double tax treaties:

        Dividends

    To Parent        Others    Interest    Royalties

  Nontreaty Countries    20%    20%    20%    20%
  Treaty Countries:
    Albania    5    10    10    5
    Australia    15    15    10    10
    Austria    10    10    0    0
    Belarus    10    15    10    0
    Belgium    10    10    10    10
    Bulgaria    10    10    10    5
    Canada    15    15    15    10
    China    10    10    10    10
    Croatia    5    15    10    10
    Cyprus    10    10    10    5
    Czech Republic    5    10    10    5
    Denmark    5    15    0    10
    Estonia    5    15    10    10
    Finland    5    15    0    10
    France    5    15    0    10
    Germany     5    15    0    0
    Greece    20    20    10    10
    Hungary    10    10    10    10
    India    15    15    15    20
    Indonesia    10    15    10    15
    Ireland    0    15    10    10
    Israel    5    10    5     5, 10
    Italy    10    10    10    10
    Japan    10    10    10    0, 10
    Kazakstan     10    15    10    10
    Korea, Republic of    5    10    10    10
    Kuwait (1)    5    5    5    15
    Latvia    5    15    10    10
    Lithuania    5    15    10    10
    LuxeMBOurg    5    15    10    10
    Malaysia    0    0    15    15
    Malta    5    15    10    10
    Moldova    5    15    10    10
    Morocco (1)    7    15    10    10
    The Netherlands    0    15    0    10
    Norway     5    15    0    10
    Pakistan    15    15    20    15, 20
    Philippines (1)    10    15    10    15


        Dividends

    To Parent        Others    Interest    Royalties

    Romania    5    15    10    10
    Russia    10    10    10    10
    Singapore    10     10     10    10
    Slovakia    5    10    10    5
    South Africa    5    15    10    10
    Spain    5    15    0    10
    Sri Lanka    15    15    0, 10    0, 10
    Sweden    5    15    0    10
    Switzerland    5    15    10    0
    Thailand    20    20    10    5, 15
    Tunisia    5    10    12    12
    Turkey (1)    10    15    10    10
    Ukraine    5    15    10    10
    United Arab Emirates    5    5    5    5    
    United Kingdom    5    15    0    10
    United States    5    15    0    10
    Uruguay (1)    15    15    15    10, 15
    Uzbekistan    5    15    10    10
    Vietnam    10    15    10    10, 15
    Yugoslavia    5    15    10    10
    Zimbabwe    10    15    10    10

__________
Notes:
(1)    Treaties that have been signed or agreed upon but have not yet entered into force. The treaty with Kuwait has been agreed upon but not signed; the remainder are signed but not yet ratified (along with protocols to the existing Finnish and Danish treaties).
19.    Tax Treaties
See item 17. Poland is currently negotiating treaties for the avoidance of double taxation with:
    Bangladesh signed, but not in force    Lebanon    Slovenia
    Colombia    Namibia    Syria
    Costa Rica    Nigeria     Venezuela
    Egypt signed, but not in force    Portugal signed, but not in force     OTHER SIGNIFICANT TAXES
21.    Sales (Value-Added) Taxes
VAT was introduced in Poland on July 5, 1993. The legislation is based on the EC Sixth Directive, and the tax works in a broadly similar way.
There are, however, some differences from EU practice in the fields of exemptions and international services.
    The standard rate is 22%. Reduced rates exist: 17% for electric power supply, natural gas supply, heat supply, and coal; 7% for processed foodstuffs, most building materials, newspapers, children goods, and some pharmaceuticals; 0% for other pharmaceuticals, exports, some international services, new houses, and most farm equipment.
Exempt supplies include the normal Sixth Directive categories (health, insurance, finance), as well as cultural and entertainment services, basic foodstuffs, and agricultural and forestry services. As in the EU, input tax recovery is restricted for firms making exempt supplies.
    The area of international services is particularly troublesome for multinational businesses. Services physically performed in Poland are considered taxable regardless of whether the supplier or recipient are Polish or foreign entities. Charges from Polish service suppliers to foreign companies may often, therefore, carry irrecoverable VAT
(zero-rating exists only for a narrow range of professional services).
Likewise, Polish companies purchasing services supplied in Poland by foreign companies may suffer an irrecoverable reverse charge. However, in principle, foreign companies now are entitled to register for Polish VAT, and Polish companies may receive input credit for VAT paid on invoices issued from registered fo

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