Corporate Taxation Options in Poland: How to Choose the Best One for Your Business

Poland offers one of the most business-friendly tax systems in Europe, attracting both large and small enterprises, domestic and foreign. The system is divided into two levels: national taxes (paid directly to government authorities) and local taxes (with a similar payment structure). This stable and attractive economic environment encourages entrepreneurial activity — including from neighboring countries — and makes Poland a great platform for entering international markets.

There are several corporate taxation options available in Poland, each with its own advantages and disadvantages. Choosing the right system is crucial to minimizing the tax burden and ensuring the financial health of your business. Below, we present the main types of corporate taxation and guidance on selecting the most appropriate one.

Main Types of Corporate Taxation in Poland

1. Corporate Income Tax (CIT – podatek dochodowy od osób prawnych)

This is the most common taxation system for companies in Poland. CIT is relatively simple to administer and easy to understand, making it attractive to many businesses. However, it may be less beneficial for companies with low profits or specific business structures.

There are two CIT rates on taxable profit:

• 19% – standard CIT rate
• 9% – reduced CIT rate

The 9% rate applies to entrepreneurs whose annual turnover does not exceed EUR 1,200,000 (converted to PLN at the average NBP exchange rate).

2. Flat-Rate Tax (liniowy podatek dochodowy)

This system applies to sole proprietors and offers a flat 19% income tax rate. It may be advantageous for individual entrepreneurs but is rarely used by legal entities such as companies.

3. Lump-Sum Taxation (ryczałt)

This simplified system offers fixed tax rates for specific business activities, without complex accounting requirements. It suits small businesses with simple turnover. Tax rates vary by activity type and may be more beneficial than CIT for low-turnover businesses.

However, ryczałt is limited to certain types of activities and turnover thresholds, making it unsuitable for many companies.

Factors That Influence the Choice of Tax System

• Profit level: High-profit companies may benefit more from CIT. For low-profit firms, a simplified system may be better.
• Type of activity: Some business types benefit from ryczałt, others from CIT. For example, freelancers or service providers may prefer ryczałt, while trading companies typically choose CIT.
• Business structure: The legal form (LLC, joint-stock company, etc.) affects available tax system options. Some simplified systems are only available to sole proprietors.
• Future planning: Choose a system that also fits your business development plans. A suitable system today may be inefficient as revenue grows.
• Administrative complexity: Simplified systems require less accounting work compared to CIT.

Recommendations for Choosing a Taxation System

• Conduct a thorough analysis: Consult a tax advisor before choosing your system. They can evaluate your specific situation and help you decide wisely.
• Consider all factors: Don’t focus only on the tax rate. Take into account complexity, restrictions, and future growth plans.
• Review regulations regularly: Tax laws may change, so it’s important to reassess your chosen system periodically and adjust if needed.

Selecting the right corporate tax system in Poland is a critical decision. A detailed analysis, expert consultation, and considering all relevant factors will help you choose the most effective solution — one that minimizes tax and maximizes profit. Remember, timely consultation with an experienced tax advisor will save you time, money, and stress in the long run.

Questions? Write to us at office@progressholding.pl