Poland’s Tax System for Foreign Entrepreneurs: What You Need to Know

Poland, as a member of the European Union, attracts an increasing number of foreign entrepreneurs due to its dynamically developing market, favorable investment climate, and relatively low tax rates. However, to successfully conduct business in Poland, it is essential to thoroughly understand the local tax system. Let’s review the basic tax rules and their compliance requirements for owners of international businesses.

Forms of Doing Business
The choice of business structure directly impacts taxation. The most common options for foreign entrepreneurs include:

• Jednoosobowa działalność gospodarcza (JDG) – Sole Proprietorship: A simple and inexpensive form of registration, suitable for small businesses. Income tax is paid as PIT (personal income tax).
• Spółka z ograniczoną odpowiedzialnością (Sp. z o.o.) – Limited Liability Company: A more complex form, but it offers greater asset protection. Income tax is paid as CIT (corporate income tax).
• Zjednoczona Spółka (spółka komandytowa, spółka komandytowo-akcyjna) – Limited Partnership or Joint-Stock Limited Partnership: Flexible forms combining the advantages of JDG and Sp. z o.o.
• Oddział zagranicznej firmy – Branch of a Foreign Company: Represents a part of a foreign company in Poland. Taxation depends on the rules of the country of origin and double taxation avoidance agreements.

Main Taxes and Their Rates in Poland

• Podatek dochodowy od osób fizycznych (PIT) – Personal Income Tax: Applies to sole proprietors (JDG) and individuals earning income in Poland. The rate depends on income level and ranges from 12% to 32% (12% for income up to 120,000 PLN, 32% for income exceeding 120,000 PLN). Non-residents are taxed only on income earned in Poland at the same rates.
• Podatek dochodowy od osób prawnych (CIT) – Corporate Income Tax: Applies to companies (Sp. z o.o.). The standard rate is 19% of the tax base. A reduced CIT rate of 9% applies to small taxpayers if annual revenue does not exceed the equivalent of 1.2 million EUR.
• Podatek od towarów i usług (VAT) – Value Added Tax: The standard rate is 23%, but reduced rates (5% and 8%) apply to certain goods and services. VAT registration in Poland is required if the business’s annual turnover exceeds 200,000 PLN. Non-residents must appoint a fiscal representative in Poland responsible for VAT payments.
• Składki ZUS – Social Security Contributions: Mandatory for sole proprietors (JDG). These include contributions to pension, healthcare, disability, and other social insurance schemes. The amount depends on the chosen income level. As of 2025, Poland’s social and healthcare contribution system includes mandatory payments to the Social Insurance Institution (ZUS) by employers and entrepreneurs. For employees, the social insurance contribution rate is approximately 13.71% of salary, with 9% allocated to healthcare insurance, partially covered by the employer and employee.
• Property Tax: Levied by local authorities, with rates depending on the type and use of the property.
• Vehicle Tax: Applies to commercial vehicles and depends on their weight and category.
• Excise Tax: Applies to goods such as fuel, alcohol, and tobacco. Rates vary by product type and are regulated by national laws.
• Dividend Tax: Dividends in Poland are taxed at a 19% rate for legal entities paying dividends, provided they are Polish residents. This tax is withheld at the source, meaning the company paying the dividends must deduct the tax from the amounts paid. For non-residents, tax rates may vary based on double taxation avoidance agreements. For example, EU countries may benefit from preferential rates below 19%, depending on the specific agreement.

Double Taxation Avoidance Agreements
Poland has numerous double taxation avoidance agreements (DTAs) with other countries. These help prevent taxing the same income in two countries. The main approaches are either tax exemption in one country or a credit for tax paid in the other. For instance, if a Polish taxpayer works in a country with which Poland has a DTA, they can avoid double taxation by paying tax in only one country and accounting for it in the other. Applicability of a DTA depends on the specifics of each case.

Tax Compliance
Tax discipline involves taxpayers adhering to the legal rules and regulations in taxation, including:

• Taxpayer Registration: Businesses must register with the relevant tax authorities (Urząd Skarbowy) and obtain a NIP tax number.
• Accounting: Mandatory for all business forms. It’s recommended to use a professional accountant, especially in the early stages.
• Timely Tax Filing: Late submissions can result in fines and penalties.
• Tax Payments: Taxes must be paid by the deadlines, as delays may lead to sanctions.

Poland’s tax system has its nuances, and understanding them is critical for successful business operations. Foreign entrepreneurs are advised to consult a qualified tax advisor to ensure full compliance and minimize tax risks. Skimping on professional assistance can lead to significant financial losses in the future. Choosing the right business form and effective tax planning are key factors for success in the Polish market.

If you have any questions, feel free to contact us at office@progressholding.pl.