Legal and tax regulations in Poland for limited liability companies

Legal and tax regulations in Poland for limited liability companies

Regulations governing the registration of companies in Poland

Foreign entrepreneurs setting up companies in Poland want to know the general rules and regulations governing the conduct of business in the Republic of Poland, as well as the rules of taxation and the rates of the main types of taxes. We will try to answer these questions in today’s article.

Legislation is a system of rules enacted by a legislative body or directly by the inhabitants, which apply in Poland. This includes the registration of foreign companies in Poland. The basic legal acts regulating all commercial companies in the Republic of Poland are:

  1. The Code of Commercial Companies – the basic law regulating the relations between companies and their counterparties, the organisational structure of companies, the rules of business conduct, etc.
  2. The Accounting Act – regulates the accounting of companies, including reporting principles, documentation of transactions, auditing requirements, etc.
  3. The Taxes and Fees Act – regulates the taxation of commercial companies, determines tax rates, tax payment deadlines, etc.
  4. The Competition and Consumer Protection Act – sets out the rules that companies must comply with regarding competition, including prohibition of unfair competition, advertising rules, consumer protection, etc.

Commercial companies in Poland can be registered as different types of companies, such as limited liability companies, joint stock companies, limited liability companies, etc. Each type of company has its own specific rules and requirements, which must be observed in accordance with Polish law.

One of the basic requirements for commercial companies is the registration of the company with the state authorities and the register of companies. Companies must also have articles of association, which define the purpose and rules of the organisation. In addition, companies must pay taxes, keep records of their activities and comply with competition and consumer protection regulations. If companies violate the law, they may be subject to fines, penalties or revocation of the right to do business in Poland.

Regulations governing a limited liability company in Poland

If you have decided to start a business in Poland and register a company (in this case, we will talk about the formation and opening of a limited liability company here and below), you should take into account the basic regulations governing a limited liability company, which include:

  1. The Commercial Companies Code – the basic piece of legislation governing the formation, organisation and operation of a limited liability company.
  2. The Bankruptcy and Reorganisation Law – regulates the bankruptcy proceedings of a limited liability company.
  3. Mandatory Liability Insurance Act – requires mandatory insurance of a limited liability company against liability to third parties.
  4. Personal Data Protection Act – regulates the processing of personal data in a Ltd.
  5. The Value Added Tax Act – regulates the tax obligations of a limited liability company.

In addition, the limited liability company must comply with other laws governing its activities, such as labour laws, tax laws, environmental laws, etc.

Let us consider separately the Commercial Companies Code on the establishment of a limited liability company (sp. z o.o.) in Poland, which contains the following necessary and important rules for the establishment of a company:

  1. The name of the company must be original and must not repeat the names of companies already registered in Poland.
  2. The company must have at least one founder in order to establish a limited liability company.
  3. The amount of share capital must be determined. In Poland, the minimum share capital of a limited liability company is PLN 5,000 (approximately USD 1,200).
  4. Choose the form of management of the company: one-person or multi-person (decisions are made by majority vote).
  5. Define the scope of activities and other aspects of the company.
  6. Draw up a memorandum of association, approve it and register it with the commercial register.
  7. Register the company with the National Court of Justice.
  8. After registration, register with the relevant tax and social security authorities
  9. Announce the incorporation of the limited liability company in official newspapers.

IMPORTANT: Remember that establishing a limited liability company in Poland is a serious process and all aspects of the process should be taken care of. If you have any questions or doubts, it is best to seek legal advice. Progress Holding also provides legal advice at all stages of establishing and creating a limited liability company in Poland.

Value added tax (VAT)

Value added tax (VAT) in Poland is a tax on the sale of goods and services, which is paid at all stages of production or supply. The VAT rate is usually 23%, but there are also reduced rates of 8%, 5% and 0% that apply to certain categories of goods and services.

Companies registered as value added tax payers must collect value added tax from their customers and pay it to the tax authorities. Companies can also match the tax they have paid on the purchase of goods and services with the tax they have collected on the sale of goods and services.

Value-added tax is reported monthly – by the 25th day of the previous month and payment. Reporting boils down to summarising the tax transactions for the month and then completing and submitting the relevant tax returns to the tax office. The declaration forms for value added tax in Poland are NIP-7 (for companies registered as value added tax payers) and VAT-7 (which includes NIP-7, but is also used when registering new companies).

In Poland, limited liability companies (abbreviated as Sp. z o.o.) are required to pay VAT when selling goods or services on a B2B basis (i.e. when selling to other companies rather than to end consumers).

There are two ways of paying VAT in Poland:

  1. Cash payment system (cash register VAT) – you can choose this system if your turnover in the last 12 months does not exceed PLN 2 000 000. In this case, you are obliged to create a special cash point and issue VAT invoices there.
  2. If your turnover exceeds PLN 2 000 000, you are obliged to register with the Tax Office and use the standard VAT calculation formula. You are also obliged to submit regular reports to the Tax Office.

Do not forget that tax regulations and VAT requirements in Poland may change, so it is advisable to consult a tax advisor or accounting specialist to keep up to date with all changes and obligations.

Corporate Income Tax (CIT)

CIT (corporate income tax) in Poland is a tax on the profits of companies registered in Poland. The CIT rate is currently 19% and does not depend on the type of business activity of the company.

The tax is calculated on the profit the company makes during the year, after deducting any expenses. In Poland, expenses for salaries, rent, equipment, investment in research and development, land tax, etc. are deductible.

Companies registered in Poland must file an annual tax return by the end of the third month of the following year, more precisely by 31 March. The following forms are used for this purpose:

  • CIT-8 – for companies with revenues not exceeding PLN 1,200,000
  • CIT-8A – for companies with revenues exceeding PLN 1,200,000
  • CIT-10 – for companies with foreign revenues
  • CIT-12 – for new companies that made no or little profit during the year.

Limited liability companies (Ltd.) are obliged to pay PIT for their employees.

The specifics of calculating PIT for limited liability companies in Poland are as follows:

  1. The tax is calculated on the annual income of the employee.
  2. The tax rate depends on the level of income and ranges from 17% to 32% of annual income.
  3. The limited liability company is obliged to deduct tax from the salaries of its employees on a monthly basis and pay it to the tax office.
  4. The company must also notify the tax office of all salaries paid to its employees and pay tax in accordance with tax regulations.
  5. In addition to the basic tax rate, there are a number of additional taxes and deductions that may be linked to certain types of income or social programmes.

In general, the calculation of PIT for a limited liability company in Poland is complex and requires companies to comply with all tax law regulations and requirements. Calculations can be submitted electronically on the website of the tax office in Poland or in paper form.

IMPORTANT: Correctly calculating and paying taxes on time is an important part of managing a company’s finances and prevents potential penalties and problems with the tax authorities.

The process of setting up a business in Poland is quite time-consuming, but in general, if the entrepreneur approaches the matter competently, there should be no particular problems. If you want to set up a company in Poland and save time and effort, it is better to turn to professionals who are well versed in all stages of setting up a company and are familiar with the local regulations. We are ready to help you at every stage. If you have questions or would like more advice on this topic, please contact us at office@progressholding.pl.



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