Income taxes in Poland: Overview

In Poland there are two types of income tax, abbreviated to PIT and CIT. These abbreviations are derived from the English names: Personal Income Tax and Corporate Income Tax, and officially appear in the abbreviated forms only in the names of tax forms. On the other hand, tax legislation refers to:

- personal income tax; and

- corporate income tax;

The first is paid by individuals. The name of the second tax could suggest that it is paid by legal persons. But the catalogue of taxable persons in CIT is much broader, but this issue we will discuss slightly later.

Income tax in its present form has existed since the early 1990s. In 1989, the Corporate Income Tax Act was adopted, which sought to unify and simplify a complicated and inefficient system of income tax on enterprises. The Act was modified in 1992. However, a breakthrough in the tax system reform came on 1 January 1992, when general personal income tax was introduced, which replaced the agricultural tax (in part related to 'special branches of agricultural production', which we will briefly discuss later on), remuneration tax, surtax and wage tax.

Basic concepts related to income taxes

Before we go into more details related to various types of income tax, we will explain some basic concepts concerning the tax.

The object of income taxes (and therefore the object of taxation) is income. Income represents the excess of revenue over expenditure.

So the common understanding is that income equals profit, or what we are left with once we deduct own expenses. On the whole, the concept is understood in the same way in tax regulations, although there are numerous provisions that often complicate the determination of income.


Mr. Smith buys a flat for 200,000 PLN. After 3 years he sells the flat for 300,000 PLN. This means that Mr. Smith earned 100,000 PLN income on the transaction (if we assume, for simplification reasons, that he has not incurred any transaction-related expenses). Income derived from sales of real property is subject to income tax; therefore, Mr. Smith will pay the tax on the amount of 100,000 PLN.

In order to determine income, we need to know both the revenue and expenditure.

Revenue consists of money and monetary assets received by or made available to the taxable person during a calendar year, as well as the value of benefits received in kind and other free performances.

This is a basic, general definition, which, depending on the source of revenue and the type of tax may be more or less different. In any case, to put it simply, revenue consists of the money and other benefits that a taxable person receives.

On the other hand, revenue expenditure consists of expenses incurred in order to obtain revenue. These expenses are subject to various regulations as well. In practice, the question which expense can or cannot be considered an expenditure item might be complicated and ambiguous. A positive difference between revenue and expenditure is income. In other words, if revenue is higher than expenditure, we deal with income.

Sometimes (especially in business activities), an opposite situation occurs, namely expenditure turns out to be higher than revenue. Then we deal with a loss. Loss means that no income has been earned and thus there will be no tax.


Mr. Jones buys a passenger car for 30,000 PLN. After 5 months he sells the car for 25,000 PLN. Because the transaction revenue (25,000 PLN) is lower than the expenditure (30,000 PLN), Mr. Jones records a loss of 5000 PLN on the transaction. Therefore, the car sales transaction will not be taxed.

According to Income Tax Acts, a loss recorded in a given year may be deducted from taxable income in subsequent years, on the proviso that the loss can only be deducted over the period of 5 consecutive years, and that a single annual deduction must not exceed 50% of the entire loss.


Anna pursues a business activity. In 2008 her business records a loss of 10,000 PLN. In 2008 she does not pay the tax. In 2009 her business earns 50,000 PLN income. She can use that income to reduce her business loss from the previous year; however, the loss deduction must not exceed 50%, so she may deduct up to 5000 PLN.

So Anna deducts the amount, and thus her taxable income in 2009 amounts to 45,000 PLN. She can deduct the remainder of the loss (5000 PLN) over the next 4 years.

Taxation of revenue

As a general rule in the income tax regime, taxation is applied to income. But tax regulations also allow for situations where it is revenue rather than income that is taxable. One might ask why? After all, revenue is almost always higher than income (in real life it is rather unlikely to earn revenue without incurring some expenditure), which means that we pay the tax on a higher taxable base.

But it makes sense somehow. Firstly, rates of taxes on revenue tend to be lower. Secondly, revenue is easier to determine compared to income (as we do not have to establish expenditure). Therefore, lump-sum taxes are aimed at simplifying the settlements with tax authorities. For this reason, revenue taxation is often referred to as lump-sum taxation.


Trevor is engaged in a clothing trade business. In 2012 he earns sales revenue of 100,000 PLN and incurs expenditure of 70,000 PLN. Thus, Trevor earns income of 30,000 PLN.

For simplicity reasons, let us assume that at the beginning of 2012 Trevor could choose between two taxation schemes for his business activities, namely income taxation at the rate of 19% or revenue taxation at the rate of 3.5%.

Within the income taxation scheme, Trevor will pay: 30,000 PLN x 19% = 5700 PLN.

Within the revenue taxation scheme, Trevor does not have to bother about expenditure, and can pay less tax because of the lower tax rate:

100,000 PLN x 3.5% = 3500 PLN.

In our example, the lump-sum tax calculated on revenue is more advantageous. Not only was it easier for us to calculate the taxable base, but also the tax calculated turned out to be lower.

Of course, the lump-sum tax on revenue will not always be more advantageous. Moreover, a taxable person is free to choose the form of taxation in some situations only. The lump-sum tax is in fact an exception to the rule, which is to tax all income.

It is worth mentioning here another concept related to taxes in general, and to income taxes in particular, namely the taxable base.

Colloquially speaking, the taxable base is what we pay the tax on. It is therefore an expression of the object of taxation in terms of value or quantity.

In income taxes, the taxable base consists of income or revenue, and this base is expressed as money. In the case of the lump-sum tax (i.e. the tax paid by the clergy), the taxable basis may be the number of inhabitants (of a parish or a locality).

For some other taxes, the taxable base can be expressed in a different unit of measurement, such as square metres, cubic centimetres, litres, pieces, quintals or hectares.

Another important tax concept in general, and for income taxes in particular is the tax rate. The tax rate is a figure that in conjunction with the taxable base makes it possible to specify the tax amount. In income taxes, tax rates may be fixed or variable.

In the case of a fixed rate, the tax amount increases in proportion to changes in the amount that is subject to the tax (the rate is also known as a proportionate or flat rate).

In Poland, variable rates are progressive, which means that the amount of taxes increases with the increase of the taxable base.

The tax rate is expressed as a percentage or an amount.

Flat rate

Taxable persons in corporate income tax pay the tax according to the flat rate of 19%. It means that no matter what the taxable base (i.e. the amount of income); their tax will always be 19% of the base.

Variable (progressive) rate

As a rule, individuals pay the tax according to a progressive variable rate.

2013, 2014

Basis for calculation

The tax will amount to

more than

up to




18% minus 556.02 PLN of the tax credit



14,839.02 PLN + 32% on the excess over 85,528 PLN

A progressive income tax rate means that the tax rate will soar once a specific threshold is exceeded. In the currently applicable framework of taxable bands, income of up to 85,528 PLN is taxed at the rate of 18% minus 556.02 PLN. The excess over the threshold is taxed at the rate of 32%.


A taxable person who earns income of 80,000 PLN pays the tax of:

80,000 PLN x 18% – 556.02 PLN = 13,844 PLN (the tax is rounded off to the nearest whole zloty).

The real tax rate is therefore: 13,844 PLN / 80,000 PLN x 100 = 17.31% (rounded to two decimal places).

A taxable person who earns income of 88,000 PLN pays the tax of:

14,839.02 PLN + 2472 PLN x 32% = 15,630 PLN.

The real tax rate is therefore: 15,630 PLN / 88,000 PLN x 100 = 17.76%.

With an increase in income from 80,000 PLN to 88,000 PLN, the tax rate increases by 2.60%.

This is what we call progressive taxable bands.

With the amount-based rate we deal in lump-sum taxes.


A parish priest in a parish with less than 1000 inhabitants pays a quarterly tax amount of 416 PLN.

A taxable person in income tax

While trying to define the tax concept with our own words, we will find out that the two most important criteria for the definition are: the object and the subject of taxation.

In income tax, the object of taxation is income, as we have already mentioned. Exceptionally, the object of taxation may be revenue or the size of a locality or a parish.

On the other hand, the subject of taxation is a party responsible for payment of the tax. Simply put:

- taxable persons in income tax are parties that have earned income, and are therefore obliged to pay income tax. They may be individuals, legal persons and non-corporate bodies, which are obliged to pay the tax in accordance with legal regulations.

An individual is any person from the moment of birth.

A legal person is an organisational unit which may be the subject of rights and obligations under civil law. The fact of having a legal personality stems either directly from the Act (e.g. Article 33 § 1 of the Civil Code), or from the fact that an entity is entered into the register (e.g. Article 12 of the Code of Commercial Companies dealing with corporations).

The concept of other non-corporate body is not defined in the legal regulations. These include, for example, partnerships and other entities, which are considered taxable persons by legal regulations.

As we know, a taxable person is obliged to pay the tax. The tax is paid to a tax authority, usually a tax office.

With income tax it is often the case that tax calculations and payments are handled not by a taxable person on their own but by an intermediary known as a tax payer.


A person who derives their income from employment does not actually pay income tax on their own. Instead, their employer acts as a taxpayer, i.e. it is obliged to calculate the tax, collect it from the taxable person (the employee) and pay it promptly to a tax authority.

The taxable person is only obliged to submit an annual tax return in which they will disclose the income earned and the tax collected by the taxpayer (specifically: tax advances). Most frequently, the sum of tax advances corresponds to the annual tax, so a taxable person does not have to pay any extra amounts (though sometimes it may be necessary to supplement the tax, for example, when several sources of income exist, or when income is earned from abroad). Sometimes a taxable person who benefits from tax reliefs may recognise an overpaid tax in their annual return.

In some cases, a taxable person may be relieved from the obligation to file an annual tax return by the taxpayer (the employer) or by, for instance, the Social Insurance Institution (ZUS).

Taxation of income of individuals and legal persons

Earning means taxes. This general rule means that any entity that earns income is a taxable person in the income tax regime (with such entities including individuals, legal persons and other bodies). An exception to this rule may apply if a taxable person chooses the lump-sum taxation scheme:

then, even though a taxable persons has not earned income, they will have to pay the tax just because they earned some revenue (and such situations should also be borne in mind when one opts for lump-sum forms of taxation).


Let us assume that Trevor, whom we mentioned before, is engaged in a clothing trade business and earns in 2012 the sales revenue of 100,000 PLN but incurs expenditure of 120,000 PLN. By the same token, then, Trevor records a loss of 20,000 PLN.

If Trevor opted to pay income tax (within the general scheme), they would not have to pay any tax. If, however, he chose the lump-sum taxation, he would have to pay the tax of 3500 PLN anyway (even though he suffered a loss).

Taxable persons' income (revenue) may be subject to taxation in accordance with the provisions of:

- Personal Income Tax Act of 26 July 1991;

- Act of 20 November 1998 on the Lump-sum Income Tax on Certain Revenue Earned by Individuals;

- Corporate Income Tax Act of 15 February 1992;

- Act of 24 August 2006 on Tonnage Tax.

Personal income tax

The universal nature of personal income tax is expressed both subjectively, which means that the tax is levied, in principle, on all individuals, and objectively, which means that the tax is paid on all types of income that may be obtained by an individual.

So in the Personal Income Tax Act (which was amended more than 200 times over 21 years), we find regulations concerning income derived from:

a) employment;

b) civil law agreements;

c) business activity (self-employment of individuals);

d) special branches of agricultural production;

e) rental;

f) capital gains and property rights;

g) sales of real and other property;

h) other sources.

Any person who earns income from any of the above-listed sources becomes a taxable person. And as we become an individual from the moment of birth, taxable persons in income tax are also children who earn income (e.g. from their own work or based on orders); however, in the case of minors, annual returns on children's behalf are submitted by their parents).

The catalogue of taxable income items is thus, as we can see, a very broad and open one. This is because of the fact that the legislator has reserved for itself the right to tax “other sources of income”, which sometimes inspires the tax authorities to quite absurd ideas, such as the taxation of neighbourly help.


According to a lunatic idea of the tax authorities, if a neighbour gives us a morning lift to work in his car, we obtain income (because we have not had to spend ten or so zloty on a ticket), and such income should be taxed.

Although it may sound ridiculous, the idea is in fact justified under the Personal Income Tax Act.

The only income items that are certainly not subject to personal income tax are those expressly excluded from taxation by the Act itself, namely:

- from agricultural activities, with the exception of revenue from special branches of agricultural production – agricultural activities are subject to agricultural tax instead;

- from forest management within the meaning of the Act on Forests and the Act on the Allocation of Agricultural Land for Afforestation – the activity is subject to forest tax instead;

- subject to the provisions on inheritance and donations tax;

- from transactions that may not be the subject of legally binding agreements (in general, this exclusion means that income derived from crime must not be taxed);

- resulting from the division of joint property of husband and wife resulting from cessation or limitation of the joint property regime, and revenue from a distributive award following the cessation of a system of separate estates in matrimony, or the death of one of the spouses;

- of a ship owner that is taxed pursuant to the Act of 24 August 2006 on Tonnage Tax;

- from benefits related to married life referred to in Article 27 of the Family and Guardianship Code, which are covered by joint property of husband and wife.

The last item on the list above means “intra-familial benefits”. So, as we have mentioned before, a tax authority is entitled to demand the tax on “income” resulting from the use of a lift to work, but not if the lift was given by a spouse.

Limited and unlimited tax obligation

The universal nature of personal income tax is also reflected in the 'unlimited tax obligation'. This obligation means that a person who lives in Poland cannot escape the tax. So even if we leave the country to work abroad, the Polish tax authorities will still be interested in our foreign earnings. This is because of the fact that a person whose place of residence is Poland is subject to the tax in Poland on their entire income, regardless of whether it has been earned in Poland or in another country. The same applies to foreigners who live or earn their income in Poland.

However, if we earn money abroad, an issue of eliminating double taxation will occur because foreign income of persons living in Poland will attract both the Polish tax authorities and the tax authorities in the country where such income is earned.

However, as we have as already mentioned, personal income tax does not apply only to persons who live in Poland. Taxable persons will also be those who earn money in Poland. Here we deal with the 'limited tax obligation'.


Karl lives in Chotěbuz (Czech Republic) and works in Cieszyn (Poland). Because he earns income in the territory of Poland, his corresponding income is taxable in Poland too – pursuant to the Polish tax regulations (but also according to the Polish-Czech double taxation convention).

So the unlimited tax obligation means that if a person lives in Poland, their entire income earned during the year, including foreign income, is taxable in Poland.

In contrast, the limited tax obligation means that a person who earns money in Poland, although they do not live here, will pay the tax on income earned in Poland.

So it may turn out that taxable persons subject to income tax in Poland are more numerous than the total population.

The object of personal income tax consists of income, and if a taxable person derives their income from more than one source, the object of taxation in a given tax year is the sum total of income from all sources of revenue. This principle is not applied to income (revenue) that is taxed in the lump-sum scheme, and business income subject to the flat-rate tax, capital gains income and income derived from property rights and sales of real property – such income is taxed separately.

Annual tax settlement

Following the end of a tax year (for individuals the tax year corresponds to the calendar year)

– by 30 April of the following year (if that day falls on a Saturday or Sunday, the last day of the period should be the day following the holiday(s)) – taxable persons subject to personal income tax are required to file with a tax office the tax return(s), stating the amount of income earned (loss incurred) in a tax year.

30 April is also the deadline for payment of the tax amount stemming from an annual return.

Lump-sum income tax

The Act of 20 November 1998 on the Lump-sum Income Tax on Certain Revenue Earned by Individuals regulates taxation of certain revenue (income) earned by individuals:

a) involved in non-agricultural business activities;

b) earning revenue from rental, subletting, lease, sublease or other contracts of a similar nature, provided that such contracts are not concluded as part of non-agricultural business activities;

c) clergymen.

The Act distinguishes three forms of the tax:

1) lump-sum amount on registered revenue that is available to persons who derive their revenue from a business activity or rental;

2) “tax card” scheme available to certain entrepreneurs;

3) lump-sum income tax on revenue earned by the clergy, paid by clergymen.

For individuals who pursue a business activity, or derive their income from rental, a general rule is taxation with personal income tax. However, if they satisfy certain conditions specified in the Lump-sum Tax Act, they may declare their intent to pay the lump-sum tax.

In the case of the clergy, we deal with the opposite situation: in principle, they are subject to the lump-sum tax, but if they want to, they can waive that right and pay personal income tax.

Lump-sum amount on registered revenue

The lump-sum tax on registered revenue is paid on individuals' revenue from non-agricultural business activities, including the activities in the form of a civil partnership of individuals and in the form of a general partnership of individuals.

The lump-sum tax on registered revenue may be paid by taxable persons who start a business activity and opt for this taxation scheme, and if they were active in business in the preceding year – provided that their last year's business revenue did not exceed the equivalent of 150,000 EUR.


In 2012 Rob took up a trading business.

Because he wanted to pay the lump-sum tax on registered revenue, prior to the start of business activities he notified his intent to the head of a tax office (if no such notification had been submitted, he would have been subject to personal income tax in the general scheme).

The Act provides for 5 tax rates (3%, 5.5%, 8.5%, 17% and 20%), depending on the type of business.

The taxable base is revenue (not reduced by revenue expenditure).

Taxable persons that use this taxation scheme are obliged to keep: the records of revenue for each tax year separately, the equipment records, and the register of fixed and intangible assets.

Some types of businesses cannot use the lump-sum taxation scheme (including pharmacies, businesses buying and selling foreign exchange, or businesses trading in parts and accessories for motor vehicles).

As regards settlement and reporting obligations, taxable persons are obliged to calculate and pay the tax at monthly or quarterly intervals, and file an annual tax return at the end of the year (by 31 January).

Fixed-amount tax (“tax card”)

This is by far the simplest form of taxation available to taxable persons engaged in some forms of business activity (mainly small-scale craftsmen).

A taxable person using the “tax card” scheme receives from the head of a tax office a decision stating a monthly amount of the tax (depending primarily on the type of activity, the size of the locality in which the business is conducted, and the number of employees).

Taxable persons in the “tax card” scheme are exempt from the obligation of bookkeeping, filing tax returns and paying income tax advances.

Corporate income tax

Entities having legal personality (primarily corporations: limited liability companies and joint stock companies) are taxable persons in corporate income tax.

In addition to legal persons, the following entities are also subject to the tax:

- non-corporate bodies, with the exception of companies without legal personality (i.e. partnerships), except that corporations in the process of formation are taxable persons;

- tax capital groups (groups consisting of at least two corporations having legal personality which are linked by capital and satisfy the conditions specified in the Act);

- companies without legal personality having their registered office or management in another state, if pursuant to the tax regulations of that state they are treated as legal persons and are taxable on their entire income in that state, regardless of where such income is earned.

Taxable persons in corporate income tax pay the tax on income, i.e. the excess of revenue over expenditure. In the case of certain revenue (e.g. dividend), the object of taxation is revenue.

The tax rate is 19% and at the end of each year taxable persons are required to submit their annual tax returns.

Tonnage tax

This tax is of the least importance for the budget. The tax is paid by shipping companies operating marine commercial vessels in international shipping.

The taxable base is income, which is determined in a rather peculiar way.

The taxable base in tonnage tax consists of a shipping company's income that corresponds to the product of: the daily rate (dependent on the net register tonnage of the ship) and the period of service in a given month of all ships operated by the company the income from which is subject to tonnage tax.

The tonnage tax is 19% of the taxable base and is paid for monthly periods.

Shipping companies are obliged to file with a tax office their tonnage tax returns, stating the tax due for a given tax year by 31 January of the following year.

Tax scale for personal income tax


Income up to 85 528,00zl – 18% minus the tax reduing amount 556zl 02gr


Income above 85 528,00 zł - 14 839 zł 02 gr + 32% surplus over 85 528 zł


Minimum employee wage 2015r.


1 750,00 zł


Important deadlines


On the 15th day of each month – immovable property tax payment by legal persons


On the 20th day of each month – income tax advance payment by employers and their employees, income tax advance payment by legal persons


On the 25th day of each month – VAT declaration submittal, VAT payment


On the 30th of each April – annual income tax return submittal, tax payment