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Invest in Poland 2020 [EN]

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TAX SERVICES Invest in Poland 2020 Societies and taxes with amendments from 01 January 2020 THE GLOBAL ADVISORY AND ACCOUNTING NETWORK

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Directory First class performance for full service finance accounting solutions 3 FOREIGNERS BUSINESS START UP IN POLAND Investment basics Tax system in Poland consist of 16 types of taxes Administration compliance Foreigners starting up a business in Poland Business regulations Branch of a foreign company Representative office Forming of companies in Poland 4 4 5 6 7 11 11 12 TAXES Publisher getsix Group ul Zwyci ska 45 53 033 Wroc aw Tel 48 71 388 13 00 Fax 48 71 388 13 10 E mail wroclaw getsix pl Editorial office TaxaGroup Sabina Moczko Wdowczyk Tax Adviser Licence number 09738 getsix Claus Frank Monika Martynkiewicz Frank Ortwin Uwe Jentsch El bieta Naron Anna Kicka Anthony Kerr Design getsix Design Anthony Kerr Marta Bazan Copyright getsix Group Poland 2020 All rights reserved Item Code E0006 Mar 20 ISBN 978 83 947292 1 9 Corporate Income Tax CIT Other tax on corporations Anti avoidance rules Private Income Tax PIT Value Added Tax VAT Taxes on civil agreements PCC Tax audit and legal recourse in Poland Tax ordinance act Interest Tax limits in 2020 Double Taxation Agreement DTA 14 34 36 38 50 67 67 68 69 70 70 LEASING Leasing 73 SOCIAL SECURITY Social security contributions Pension insurance Disability insurance Social security for industrial accidents and occupational diseases Social security for sickness and maternity getsix Partners 75 76 77 78 79 82

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3 FIRST CLASS PERFORMANCE FOR FULL SERVICE FINANCE ACCOUNTING SOLUTIONS Many companies are confronted with the need to reduce accounting costs and to comply with the required financial reporting standards Compounding this problem is the requirement that they must address these requirements with resource constraints on their capital budget and staffing These compliance standards have also added complexities to many of the financial processes getsix has set itself the aim to support companies and entrepreneurs in Poland in addressing these challenges getsix in Poland offers a variety of outstanding professional and complementary services in the following areas Business Services Consulting Accounting Payroll IT Sales Services Tax Legal The customer base of getsix includes Polish clients but also a variety of international companies with Polish subsidiaries and or branches especially from German speaking areas In order to facilitate our mutual co operation with our clients we operate at their disposal a getsix English Desk with a fluent English speaking team of dedicated specialists As well as offering our services in the English language we also offer in German and Polish We have 130 dedicated staff members who have many years of experience in their different areas of expertise who will gladly assist you with your business activities in Poland The range of services we offer can be individually tailored and structured in line with the needs of your company A dedicated staff member will always take responsibility for their clients service as a permanent contact person for advice and support Since 2014 getsix continues to develop and grow within our HLB International membership where we have a leading network of independent advisors and accounting firms Combining the history of innovation collaboration and dedication to help clients grow across borders Through the power of 29 363 professionals across 158 countries linking local expertise and global capabilities to service your needs HLB Poland was established for the Polish alliance of member firms who are well reputable firms in Poland This allows us to be even stronger and more flexible for clients with a collective staff over 220 We cover all areas of accounting auditing payroll HR along with advisory tax and financial services complimented with a fully developed and sophisticated range of technical IT solutions The main advantages for clients steming from the fact that getsix belongs to HLB an established quality network local knowledge with global expertise partner run service which guarantees loyalty of cooperation a range of value added services If you have any questions or queries or just have a question to ask please do not hesitate to contact us getsix is at your service

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4 Invest in Poland 2020 INVESTMENT BASICS TAX SYSTEM IN POLAND CONSIST OF 16 TYPES OF TAXES Currency Polish Z oty PLN Direct taxes Corporate income tax CIT Personal income tax PIT Social security Inheritance and Gift tax Civil law transactions tax PCC Stamp duty Market fees Visitor s tax Tax on certain financial institutions so called bank tax Hydrocarbon tax RTV subscription Accounting principles financial statements Polish GAAP or in some cases IFRS Financial statements must be prepared annually Special rules apply to stock listed companies Foreign exchange control None generally for transactions with EU EEA OECD and certain other countries Permission may be required for certain transactions with other jurisdictions and to conduct certain transactions in a foreign currency Principal business entities These are the limited company Sp z o o joint stock company SA limited joint stock partnership limited partnership sole proprietorship and branch of a foreign corporation Indirect taxes Value Added Tax VAT Excise duty Lottery tax Local taxes Real property tax Transport vehicle tax Agricultural Forest tax Dog ownership fee Tourist tax

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Foreigners business start up in Poland 5 ADMINISTRATION COMPLIANCE Tax year The personal income tax year is the same as the calendar year In the case of taxpayers subject to corporate income tax the tax year is the calendar year unless the taxpayer decides otherwise and notifies the applicable head of the tax office Taxation procedure Taxpayers must self assess and pay advance income tax during the year and may use a simplified method based on previous years results The final calculation and reconciliation of the tax due should be made within three months of the end of the tax year In contrast to other European countries where a general assessment is used by the tax authorities Poland uses the principle of reverse charge by taxpayers The taxpayer must calculate the tax themselve to issue a tax return and to pay the amount due on time Penalties Persons responsible for the tax reconciliation as well as members of the management board in certain cases are subject to penalties for non compliance In certain cases corporate entities may be subject to penalties Criminal Tax Law Penalty for tax evasion criminal charges Penalty for deliberate tax evasion fine or imprisonment Penalty for non submission failing to send or untimely submission sending of the Standard Audit File for Tax SAF T Fine As a general rule administrative procedures Limitation period In principle tax debts become time barred after 5 years Once the limitation period expires the tax liability along with accrued default interest ceases to exist default interests Registration and licensing Polish law protects intellectual property and the licensing of foreign brand names and products is accepted practice Licensing is prevalent in high tech industries pharmaceuticals and retail franchises Licensed products produced in Poland may be exempt from import tariffs and excise duty and may also benefit from being classified as a Polish product The granting of licences is not subject to official restrictions or approval A licenser may not sublicense

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6 Invest in Poland 2020 FOREIGNERS STARTING UP A BUSINESS IN POLAND Legal basis In accordance with the Economic Activity Freedom Act a foreigner is a natural person holding no Polish citizenship a legal person with the seat abroad an organisational entity which has no legal personality and is furnished with legal capacity possessing its seat abroad A Foreigners from member states of the European Union member states of the European Free Trade Agreement EFTA parties to the agreement on the European Economic Area states that are not parties to the agreement on the European Economic Area and that enjoy freedom of established under agreements concluded by those states with the European Community and its member states may establish and conduct economic activity based on the same terms as the Polish citizens B The above rule also applies to foreigners who are not citizens of the states indicated in point A and who have received a permit to settle in Poland have received a permit to stay in Poland under the status of a long term resident of the European Community have received a residence permit in Poland for a specified period of time due to circumstances referred to the Foreigners Act of 13 June 2003 have a refugee status in Poland or enjoy supplementary protection have received a permit for tolerated residence have received a residence permit in Poland for a specified period of time and have been married to a Polish citizen residing in Poland enjoy temporary protection in Poland have a valid Pole s Card are family members of citizens of states indicated in point A above and join or stay with them in Poland C Business activity forms Unless international agreement state otherwise Foreigners other than those indicated above in points A and B have the right to establish and conduct business activity including joining below mentioned partnerships companies and acquiring their shares only in the form of a limited partnership a limited joint stock partnership a limited liability company and a joint stock company Moreover foreign entrepreneurs i e a foreign person conducting economic activity abroad and a Polish citizen conducting economic activity abroad may conduct business activity in the form of a branch office or they may establish a representative office in Poland

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Foreigners business start up in Poland 7 BUSINESS REGULATIONS Limited liability company Sp z o o A limited liability company is the most popular and flexible form of conducting business activity in Poland It is Polish equivalent of the private limited liability company in the UK a soci t responsabilit limit e sarl in France or a Gesellschaft mit besch nkter Haftung GmbH in Germany Limited liability companies may be established for any purpose allowed by law They are often used as special purpose vehicles holding companies and as national companies controlled by international corporations The personal structure of the limited liability company may be in general changed without affecting the legal structure of the limited liability company which is normally not the case with a partnership a limited liability company may also be run by a single founder shareholder However a single shareholder limited liability company cannot incorporate another single shareholder limited liability company Although a limited liability company is a capital company it still preserves some personal elements such as the possibility to limit the disposal of the company s shares or establish the shareholder s right of individual control of the limited liability company The shares of a limited liability company do not take the form of a document and cannot be listed on the stock exchange

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8 Invest in Poland 2020 BUSINESS REGULATIONS Joint stock company S A CONTINUATION A joint stock company is the Polish equivalent of the public liability company in the UK soci t anonyme SA in France and the German Aktiengesellschaft AG Joint stock companies are rather expensive to run and are primarily used for large scale business activities in particular if public is to be considered as a way of obtaining capital Formally it is more structured than the limited liability company The shares of joint stock companies may be publicly traded listed on the Stock Exchange The Polish law provides stricter and more complex rules with respect to public joint stock companies regarding their capitalisation composition of the governing bodies compliance and reporting duties Detail requirements for a limited liability company Sp z o o and a joint stock company S A Capital Sp z o o The minimum capital required to establish a limited liability company is 5 000 00 PLN A limited liability company may have a single shareholder S A The minimum start up capital for a joint stock company is 100 000 00 PLN of which 25 must be paid up before registration A joint stock company can be established by one or more founding members who must sign an articles of association agreement Taxation of capital companies CIT Capital companies are separate taxpayers to CIT In principal the companies are subject to taxation on their global income With regards a management board taxation on their global income only if they have a Polish certificate of residence Taxable income consists of all revenues earned in a tax year financial and operational net of deductible costs This income is subject to CIT at the rate of 19 Capital companies are payers of VAT and other taxes in an ordinary fashion Reserve for supplementary capital Sp z o o None S A 8 of annual net profits until reserve reaches one third of share capital

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9 Foreigners business start up in Poland BUSINESS REGULATIONS Detail requirements for a limited liability company Sp z o o and a joint stock company S A CONTINUATION Founders shareholders Sp z o o There are no restrictions on nationality or residence of shareholders S A The company must be founded by at least one natural or legal person Once the company has been established one shareholder may buy out others There are no residence or nationality requirements Supervisory board Sp z o o If share capital exceeds 500 000 00 PLN and there are more than 25 shareholders the company must have a supervisory board with at least three persons S A a supervisory board with at least three members each appointed for a term of up to 5 years is required Both No residence or nationality requirements but the chairman of the board for banks registered in Poland must have a working knowledge of Polish Management There are no residency requirements Management need not be shareholders for either joint stock or limited liability companies Sp z o o The term of office is not defined S A The management board may be appointed for an initial term of up to 2 years with subsequent terms of up to 3 years each Labour Employees have no influence over the management of private sector firms unless they are shareholders Employees appoint one third of the supervisory board of firms undergoing privatisation but this right expires once 51 of shares are sold Employees are entitled to form trade unions Disclosure Both types of companies are required to prepare annual balance sheets and profit and loss accounts which must be filed with the local court in file format JPK_SF Sole proprietorship A sole proprietor is an individual who conducts business activity in his her own name and on his her own behalf There is no legal requirements regarding the amount of the initial capital to undertake business activity as a sole proprietor in Poland Also no new legal entity is established as a result of such undertaking The business of the sole proprietor may be transformed into a capital company i e a limited liability company or a joint stock company

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10 Invest in Poland 2020 BUSINESS REGULATIONS Civil law partnership CONTINUATION Two or more sole proprietors as well as other legal entities i e partnerships and capital companies may decide to establish a civil law partnership a civil law partnership is not a separate legal entity and does not possess legal personality It also cannot acquire rights or incur obligations in its own name and on its own behalf it can not sue or be sued Contributions and possessions generated during the business operations of the civil law partnership are owned by partners as joint co ownership Civil law partnerships may be transformed into registered partnerships based on a unanimous decision of the partners Professional partnership Professional partnerships may be established by specific professionals as defined and listed in the Polish Commercial Companies Code lawyers architects tax advisers accountants doctors dentist and others The professional partnership may be formed for the purpose of pursuing more than one profession unless the law prohibits this specifically As in the case of registered partnerships professional partnerships do not have legal personality but have legal capacity and capacity to perform legal actions they may acquire rights including ownership of a real estate and incur obligations in their own name as well as sue and be sued Limited partnership A limited partnership is usually preferred when investors seek a way to differentiate their involvement in the partnership entity and consequently their liability for the transactions performed by partnership The distinctive feature of this partnership is that the legal positions of partners are not equal general partner s and limited partner s which results in significantly different levels of rights and liabilities Limited joint stock partnership A limited joint stock partnership is the most complex type of partnership as its structure combines the elements of both the registered partnership and the jointstock company Like other partnerships the limited joint stock partnership has no legal personality but it has legal capacity which means that it may acquire rights and incur obligations in its own name The limited joint stock partnership may also sue and be sued Limited joint stock partnerships are established by at least one general partner and one shareholder Participation of shareholders is a consequence of a capital focused character of the limited joint stock company

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Foreigners business start up in Poland 11 BRANCH OF A FOREIGN COMPANY Basis According to the Polish law foreign entrepreneurs may set up branch offices to carry out business activity in the Polish territory An entrepreneur from a foreign country is allowed to establish a branch on condition that a Polish entrepreneur enjoys equivalent rights in the country of origin of the foreign entrepreneur reciprocity rule unless the international agreements ratified by Poland state otherwise The above does not concern entrepreneurs from EU and EEA countries as well as from countries that are parties to association agreements with the EU in the area of the freedom of establishment Such entrepreneur s may freely set up branch offices in the Polish territory A branch does not possess legal personality it constitutes an integral part of the foreign enterprise and cannot acquire rights or incur obligations in its own name cannot sue or be sued However branches have significant independence with respect to employment matters The scope of business activity of the branch may not go beyond the foreign entrepreneur s scope of activity Some special regulations both in Poland and European Union regarding opening a branch may be applicable to specific industries e g when opening a branch of a foreign bank insurance company or investment company In such cases the opening of a branch should be seen in light of those specific regulations which may differ from the general rules REPRESENTATIVE OFFICE Basis Foreign entrepreneurs may set up their representative offices in Poland The representative office does not constitute a separate legal entity and is treated as part of a foreign enterprise s organisational and functional structure It cannot acquire rights or incur obligations sue or be sued The representative office may be established by the foreign entrepreneur only to advertise and promote the business of the entrepreneur in Poland

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12 Invest in Poland 2020 FORMING OF COMPANIES IN POLAND POLISH TERM Limited Liability Sp ka z ograniczon Company Ltd odpowiedzialno ci ENTRY INTO COMPANY REGISTRY LEGAL PERSONALITY MINIMUM CAPITAL Yes Yes Minimum face value SINGLE MEMBER COMPANY 5 000 00 PLN Yes 50 00 PLN 100 000 00 PLN Incorporated Company Sp ka Akcyjna Yes Yes Minimum face value Yes 0 01 PLN No at least 10 members 5 in an Co operative Co op Sp dzielnia Yes Yes No agricultural co operative Does not apply if at least 3 members are legal persons General Partnership Sp ka jawna Yes No No No Limited Partnership Sp ka komandytowa Yes No No No Limited joint Sp ka komandytowo Yes No 50 000 00 PLN No Sp ka cywilna No No No No Oddzia Yes No No Zak ad No No No stockpartnership Partnership under the Civil Code Branch Permanent tax establishment akcyjna

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13 Foreigners business start up in Poland START UP DUTY WRITING NOTARIAL TRANSPARENCY REGISTRATION WITH THE TAX AUTHORITIES STATUTORY AUDIT TURNOVER 5 000 000 00 EUR BALANCE SHEET TOTAL 2 500 000 00 EUR EMPLOYEES 50 Provided that at Limited Liability 0 5 tax on the articles of association Company Ltd Entry in the Commercial Register Yes Yes No Yes least 2 of those requirements are met Incorporated Company Co operative Co op 0 5 tax on the articles of association Entry in the Commercial Register No Entry in the Commercial Register Yes Yes No Yes Compulsory Yes No No Yes Mandatory Provided that at General Partnership 0 5 tax on the articles of association Entry in the Commercial Register Yes No Yes Yes least 2 of those requirements are met 0 5 tax on the articles of association Limited Yes for the Limited Partnership having Partnership a Limited Liability Company as general Provided that at Yes No Yes Yes least 2 of those requirements are met partner Entry in the Commercial Register Provided that at Limited jointstockpartnership 0 5 tax on the articles of association Entry in the Commercial Register Yes Yes Yes Yes least 2 of those requirements are met Partnership under the Civil Code Branch Permanent tax establishment Provided that at 0 5 tax on the articles of association Entry into the CEIDG free of charge Yes No Yes Yes least 2 of those requirements are met As a rule no Entry in the Commercial Register In the context of Yes any audit of the parent company In the context of Yes any audit of the parent company

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14 Invest in Poland 2020 CORPORATE INCOME TAX CIT Legal basis Act of 15 February 1992 on corporation tax with all amendments Basic information Sources of revenues from capital gains from business activity and from special departments of agricultural production The consequence of this amendment is the separate calculation of the amount of income from these two sources and the lack of possibility to compensate losses from money capitals with income from other business activity The exceptions apply only to banks their revenues will be allocated to one source Subject of taxation The subject of CIT taxation is income constituting the sum of income from both sources capital gains and other economic activity This means that if both of these sources generate a profit it will be subject to a joint taxation at the rate of 19 9 As a rule also revenues from capital gains will be created on an accrual basis due revenues The exception in this respect is to be related to revenues of a typically cash nature i e revenues from shares in profits of a legal entity Residents are taxed on worldwide income non residents are taxed on Polishsource income only Foreign source income derived by residents is generally subject to corporation tax in the same way as Polish source income usually with a foreign tax credit available unless a tax treaty provides otherwise Branches are generally taxed the same as subsidiaries Tax rate CIT There have been two corporate tax rates 19 corporate income tax rate for unlimited and limited taxable corporations however no minimum corporate income tax 9 corporate income tax rates for so called small taxpayers These are all taxpayers whose income in the previous tax year does not exceed 2 000 000 00 PLN including value added tax taxable people starting a business in the tax year of commencement of the business there are limitations in using the 9 rate for some corporations which were transformed

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15 Taxes CORPORATE INCOME TAX CIT Payment method CONTINUATION Monthly advance payments amounting to the difference between the tax due from the beginning of the year and the total sum of already made advance payments are paid into an individual tax account Where applicable advance payments may be paid in a simplified form The obligation to pay advance payments does not apply to taxpayers who have had a tax loss Advance payments do not have to be paid by those PIT and CIT taxpayers whose advance payment for a given month did not exceed 1 000 00 PLN These are cases in which the tax due on income earned from the beginning of the year less the amount of advance payments paid since the beginning of the year does not exceed 1 000 00 PLN If the tax due on income earned from the beginning of the year less the amount of advance payments paid since the beginning of the year exceeds 1 000 00 PLN then the current advance payment must be paid After exceeding the advance payment amount in the given period the amount of 1 000 00 PLN is in fact also paid an advance payment for months not previously covered by such an obligation in which the taxpayer has used the possibility of not paying the advance payment This method is applicable both to taxpayers paying advance payments monthly and quarterly In addition in the case of PIT taxpayers such a rule applies to taxpayers who generate revenues from lease subject to taxation according to the general rules The CIT and PIT taxpayers who use a simplified method of advance payments are not exempt from the obligation to make advance payments Tax loss settlement Tax loss can be settled within 5 years In each year no more than 50 of the loss may be deducted and the remainder in subsequent years alternatively it is allowed to make a one off reduction of income in one of the next consecutive tax years by the amount not exceeding 5 000 000 00 PLN The amount not deducted is subject to the settlement in the remaining years of the five year period provided that the amount of the reduction in any of these years may not exceed 50 of the tax loss amount

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16 Invest in Poland 2020 CORPORATE INCOME TAX CIT Tax liability CONTINUATION unlimited corporations with their executive board or headquarters in Poland limited corporations having no executive board or headquarters in Poland tax liability on the revenue generated in Poland In addition to income from business activities in the territory of Poland and real estate located in Poland claims are also included on the income obtained in Poland which is paid by corporations with their registered office or address in Poland irrespective of the place of conclusion of the contract and the provision of services The income generated in Poland also includes income from securities and the derivatives authorised for exchange listing in Poland as well as through the direct or indirect transfer of company shares and investment fund units in which at least 50 of the assets comprise real estate or rights to real estate which are attributable to the territory of Poland Dividends interest and other claims subject to withholding tax and paid by a Polish corporation are considered to be in Poland The catalogue is open and does not exclude the possibility that other categories of revenue can be considered as income generated in Poland Also worthy of note are the double tax treaties recognised by Poland which in practice could however ensure that certain revenues are not taxed in Poland Affiliated companies According to the OECD convention OECD MA an affiliated entity exists whenever Company is involved directly or indirectly in the management control or capital oft he other company subsidiary or The same persons participate directly or indirectly in the management control or capital of both companies sister company

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17 Taxes CORPORATE INCOME TAX CIT CONTINUATION Estimating the value of the service provision transactions If the value expressed in the price specified in the contract significantly differs from the market value of such goods rights or services the tax authority requests the parties to the contract to change that value or indicate the reasons justifying the disclosure of the price significantly deviating from the market value If no answer is given no change in value is made or no reasons justifying the indication of a price significantly deviating from the market value are provided the tax authority calculates the value taking into account the expert s opinion If the value so determined deviates by at least 33 from the value expressed in price the costs of the expert s opinion are borne by the seller or services provider Deductible operating expenses Tax deductible expenses are expenditures that have been incurred to achieve revenues from a source of revenues or to maintain or secure a source of revenues with the exception of costs listed in Article 16 1 of the CIT Act See the part Non tax deductible expenses on page 20

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18 Invest in Poland 2020 CORPORATE INCOME TAX CIT Taxation of non monetary contributions CONTINUATION The revenue from a non cash contribution is not the nominal value of the shares acquired in exchange for a contribution in kind but the value of the subject of the contribution as specified in the statute articles of association or other document If the value of the contribution differs from its market value the proceeds are determined in the amount of the market value of the contribution This amendment removes the controversies regarding the taxation of assets in kind At the same time however it can make intra group restructuring more difficult Transfer prices The taxpayer is required to prepare local transfer pricing documentation for a controlled transaction of a homogeneous nature whose value less value added tax exceeds the following documentation thresholds in the financial year 10 000 000 00 PLN in the case of a commodity transaction 10 000 000 00 PLN in the case of a financial transaction 2 000 000 00 PLN in the case of a service transaction 2 000 000 00 PLN in the case of a transaction other than the transactions described in sections 1 3 Documentation thresholds will be established separately for any controlled transaction of a homogeneous nature irrespective of the allocation of the controlled transaction to commodity financial service or other transactions cost and revenue side Transfer pricing is verified using the most appropriate method in the circumstances selected from the following methods a comparable uncontrolled price a resale price plus cost net transaction margin division of profits In determining the amount of income loss the tax authority shall apply the method adopted by an affiliate unless the application of a method other than that adopted by the affiliate is more appropriate under the circumstances The taxpayer is obliged to submit a TP R declaration by the end of the ninth month after the end of the tax year In the catalogue of exemptions from the obligation to prepare local documentation the most important is the exemption from the obligation to prepare local documentation for transactions concluded exclusively by affiliates having their residence registered office or management in the Republic of Poland in the tax year in which each of these affiliates meets certain conditions in particular none of them suffered a tax loss If the consolidated income of the capital group in the previous tax year exceeded the limit of 200 000 000 00 PLN the capital group is obliged to submit Master File documentation

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19 Taxes CORPORATE INCOME TAX CIT CONTINUATION Interests of credit externally financed stakeholdings Generally deductible Thin capitalisation rules Insufficient capitalisation debt financing The Corporate Income Tax Act introduced a limitation on the possibility of recognising interest on bank and non bank loans in costs Taxpayers are required to exclude the costs of debt financing from the tax deductible expenses in the part in which the excess of debt financing costs exceeds 30 of the amount corresponding to the surplus of revenues from all revenue sources less interest income over the sum of tax deductible expenses less the amounts of depreciation and amortisation expenses counted as tax deductible expenses as well as costs of debt financing not recognised in the initial value of a fixed asset or an intangible asset Ways of depreciation Depreciation methods straight line declining balance method only allowed for special machinery equipment and transport An immediate write off is possible for low value assets with an acquistion value up to 10 000 00 PLN net Depreciation rates Residential buildings 1 5 Non residential buildings 2 5 Other buildings and structures 4 5 Machinery and equipment 7 25 Cars and lorries 20 Computers 30 If technically verifiable or in case of used assets other rates are permitted Taxpayers may use authorisation premium Using such a solution the taxpayer may make a one off depreciation and amortisation write off up to 100 000 00 PLN and include it in costs in the year in which he adopted the brand new fixed asset for use Provisions Balance Legal Provisions are not recognised for tax purposes in general a few very restrictive exceptions

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20 Invest in Poland 2020 CORPORATE INCOME TAX CIT CONTINUATION Non tax deductible expenses Examples of non deductible costs detailed list in Article 16 Paragraph 1 of the Tax Act Expenses for the purchase of land plots in ownership or the purchase of beneficial interests usufruct rights for a specified in advance limited period in time except the fees and commissions related to the purchase of beneficial interests Write offs for the wear and tear of a passenger car in the portion determined on the basis of the value of the car exceeding the amount of 225 000 00 PLN in the case of a passenger car being an electric vehicle within the meaning of Article 2 12 of the Act of 11 January 2018 on Electromobility and Alternative Fuels 150 000 00 PLN in the case of other passenger cars Interest bank charges and exchange rate differences of loans which increase the investment costs in the acquisition stage Charged but unpaid interests or interests waived payable for debts including loans Most of the accruals set up on the balance sheet Expenses for the acquisition or purchase of shares Entertainment expenses mainly for entertainment Consulting services market research advertising data processing management and control insurance costs guarantees and sureties and services for transferring the debtor s insolvency risk due to non bank loans and co operative savings and credit unions including under derivative financial instrument contracts and similar benefits Special regulations for intangible services Taxpayers are obliged to exclude the following expenses from the tax deductible costs services purchased from related entities or tax havens directly or indirectly however it does not apply to the costs of services licenses and fees paid to unrelated entities the limitation concerns the amount over 3 000 000 00 PLN a year if the taxpayer s tax year is longer or shorter than 12 months the threshold amount of 3 000 000 00 PLN is calculated by multiplying the amount of 250 000 00 PLN by the number of the tax year months which have commenced the amount of costs not deducted in the tax year can be settled in the next 5 tax years on principles and within limits applicable in a given year

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21 Taxes CORPORATE INCOME TAX CIT Commercial real properties tax CONTINUATION The so called minimum income tax was introduced in relation to taxpayers who own commercial and service properties as well as buildings classified as office Article 24b Article 24c of the Corporate Income Tax Act commonly referred to as commercial property tax This tax is a tax on revenues from ownership of a fixed asset being a commercial and service building which initial value exceeds 10 000 000 00 PLN Properties must be properly classified in accordance with the Classification of Fixed Assets The solution is covering to the following commercial properties commercial and service buildings classified as shopping centres department stores independent shops and boutiques other commercial and service buildings office buildings included in the Classification as office buildings What is the tax rate 0 035 monthly 0 42 yearly Withholding tax Interest royalties and others Interest and royalties paid to a non resident and fees for certain intangible assets and legal services e g consulting accounting legal and technical services advertising data processing market research recruitment management inspection services and guarantees etc are subject to 20 withholding tax provided that the rate is not reduced under the agreement on the avoidance of double taxation or the EU Directive on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States According to the expected changes to come into force as of 1 July 2020 if the payments for the same taxpayer exceed the amount of 2 000 000 00 PLN the payer will be obliged to collect the full amount of tax 19 or 20 at the rate resulting from the Polish regulations notwithstanding whether it is possible to apply a reduced rate The tax charged in this way will be refunded on the request of taxpayer or witholding agent where the taxable person has paid the tax from his own resources and has borne the economic burden of that tax The application shall be made in electronic form and the provisions shall specify the information to be included in it and the list of attachments to be attached to it

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22 Invest in Poland 2020 CORPORATE INCOME TAX CIT Withholding tax cont CONTINUATION Requirements for exemption from withholding tax on interest and royalties The condition for exemption from the withholding tax in the case of interest and royalties arising between affiliated companies is that the recipient of the claims is the actual beneficial owner of these claims For the exemption to be applied the Polish taxpayer must obtain a certificate which in addition to the previous elements contains an order that the company or the foreign enterprise which is the recipient of the creditor claims is the actual economic owner Flight tickets The obligation to collect withholding tax on the purchase of flight tickets in the amount of 10 was abolished if the purchase of such flight ticket concerns a scheduled passenger flight Dividends The taxation of dividends is as follows 19 respectively the particular double taxation treaty the application and adherence of the EU Parent Subsidiary Directive for the taxation of parent and affiliated companies Domestic corporations Exemption from withholding tax for payments done by a Poland resident corporation towards another Poland resident corporation Condition The entitled to the dividends must dispose of minimum 10 of the shares of the liable to pay dividends corporation for an uninterrupted period of 2 years The beneficiary of the dividends shall not make use of a tax exemption with respect to his whole income independent from the source of its realisation declaration of the beneficiary of the dividends required

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Taxes If you have questions related to particular tax topics please contact us at your earliest convenience 23

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24 Invest in Poland 2020 CORPORATE INCOME TAX CIT Dividends paid by a Polish company CONTINUATION International Dividends paid by a company established in Poland Dividends received by a Polish resident company with certain exceptions in the case of limited joint stock partnerships from another Polish company or an EU EEA or a Swiss company are exempt from taxation if certain holding and participation requirements are met If the exemption does not apply dividends received are subject to taxation On the other hand any deduction of withholding tax from the amount of due tax in Poland should be preceded by the verification of the existence and records of the relevant double taxation conventions European Union EU European Economic Area EEA Exemptions from withholding tax for dividends paid by a resident in Poland corporation towards a corporation resident in a country of the EU or the EEA Condition The entitled to the dividends must dispose of minimum 10 of the shares of the liable to pay dividends corporation for an uninterrupted period of 2 years The beneficiary of the dividends shall not make use of a tax exemption with respect to his whole income independent from the source of its realisation declaration of the beneficiary of the dividends required Switzerland Exemption from withholding tax for dividends paid by a corporation resident in Poland towards a corporation resident in Switzerland Condition The entitled to the dividends must dispose of minimum 25 of the shares of the liable to pay dividends corporation for an uninterrupted period of 2 years The beneficiary of the dividends shall not make use of a tax exemption with respect to his whole income independent from the source of its realisation declaration of the beneficiary of the dividends required

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25 Taxes CORPORATE INCOME TAX CIT Dividends a Polish corporation receives from CONTINUATION European Union EU European Economic Area EEA Tax exemptions for dividends which a corporation resident in Poland receives from a corporation being resident in one of the European Union EU or European Economic Area EEA countries Condition The Polish corporation must dispose of minimum 10 of the shares of the liable to pay dividends corporation for an uninterrupted period of 2 years The beneficiary of the dividends shall not make use of a tax exemption with respect to his whole income independent from the source of its realisation declaration of the beneficiary of the dividends required Switzerland Tax exemptions for dividends which a corporation resident in Poland receives from a corporation being resident in Switzerland Condition The Polish corporation must dispose of minimum 25 of the shares of the liable to pay dividends corporation for an uninterrupted period of 2 years The beneficiary of the dividends shall not make use of a tax exemption with respect to his whole income independent from the source of its realisation declaration of the beneficiary of the dividends required Other countries with Double Taxation Treaties Set off of already paid withholding tax and pro rata corporate income tax for Polish corporations which dispose for an uninterrupted period of 2 years at least 75 of shares of the liable to pay dividends corporation with its registered headquarters in another country with which Poland concluded a double taxation treaty Other countries without double taxation treaties Set off of already paid withholding tax for Polish corporations which dispose of shares of the liable to pay dividends corporation with its registered headquarters in another country with which Poland did not conclude a double taxation treaty Directive for the taxation of the parent and affiliated company Exemption from withholding tax of capital gains distributions provided that Holding period 2 years Minimum shareholding 10 Payments for interest and royalty to nonresidents Tax exemption applies to Only for interest and royalty payments made between associated companies parent subsidiary relationship or sister sister company Thereby the beneficiary of the payment must maintain a capital shareholding of minimum 25

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26 Invest in Poland 2020 CORPORATE INCOME TAX CIT Choice of the settlement method of accounting of exchange differences CONTINUATION Corporation and Income taxpayers CIT and PIT that are obliged to produce financial reports have the right to choose the accounting method to calculate the exchange differences mentioned in Article 9b Paragraph 1 Point 2 CIT or Article 14b Paragraph 2 PIT The competent tax office should be notified of the accounting method chosen in a tax return filed to the end of the third month of the following year by means of electronic communication in accordance with the provisions of the Tax Ordinance Act In addition during the period of applying a specific accounting method to calculate exchange differences the annual financial statements of taxpayers must be audited by state authorised public accountants In this case the reported and audited exchange differences are tax deductible The introduction of statutory audits aims to confirm the accuracy of the calculated exchange differences The period of applying the accounting method cannot be less than 3 years If you select the balance method of calculating exchange differences taxpayers on the first day of the fiscal year from which this method was chosen include income or deductible expenses accrued exchange rate differences determined on the basis of the accounting regulations on the last day of the previous fiscal year From the first day of the tax year for which you have chosen this method apply the principles of the Accounting Act for calculating the differences Capital gains Capital gains are taxed as ordinary income at the standard corporation tax rate 19 Foreign tax credit Foreign tax paid may be credited against Polish tax on the same profits but the credit is limited to theamount of Polish tax payable on the foreign income Research and development relief Tax on qualified income earned by the taxpayer from qualified intellectual property rights will amount to 5 of the taxation basis The following rights are deemed eligible intellectual property rights patent utility model protection right registered design right topographical and integrated circuit registration right additional protection right for a patent for a medicinal product or plants protection product the right of registration of a medicinal product and a veterinary medicinal product the exclusive right referred to in the Act on the Legal Protection of Plant Varieties copyright to a computer program

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27 Taxes CORPORATE INCOME TAX CIT CONTINUATION Incentives Expenses incurred for acquiring technological knowledge may reduce the taxable base in certain cases a one time depreciation write off up to 50 000 00 EUR also may be available for small and start up taxpayers Merger and division of companies The transactions of merger and division of companies must have economic justification If they do not have such justification and the tax authorities find that the main objective was the tax advantage the acquiring company will have to pay a penalty tax on the income no possibility to deduct tax deductible costs In addition the tax authorities may impose a tax on shareholders In total the authorities may require payment of tax as many as three times twice from the company if another company is taken over and its subsequent sale and from shareholders Amortisation of enterprise value goodwill Possible for an asset deal but only performing the purchase of the whole company respectively a separable part of the business operations Not possible in case of a share deal Taxation of taxable groups of companies All the following conditions must be met The parent company must have at least 75 of shares in the equity of other companies in the group These other companies within the group must have a minimum of 500 000 00 PLN To be able to generate income of at least 2 of the gross income in each tax year Part of a capital group should be a limited liability company or a public company limited by shares Companies operating within tax capital groups cannot count donations to tax deductible expenses

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28 Invest in Poland 2020 CORPORATE INCOME TAX CIT CONTINUATION Tax collection dates and deadlines Annual tax declaration filing until the 31st March of the following year having a deviating tax year until the last day of the third month following the closing date of the tax year Prepayments for CIT must be settled by 20th of the following month Residence A corporation or a limited joint stock partnership with some temporary exceptions is tax resident in Poland if its registered seat or management is located in Poland The consequences of settlement of liabilities by type of transferring Corporate Income Tax CIT VAT Private Income Tax PIT The settlement of liabilities through non cash contributions generates taxable income by the debtor The taxable income is defined as the amount of debts which shall be settled through non cash contributions If the market value of the non cash contribution exceeds the nominal amount of the debt this may be applied with the restriction that in these cases the market value of the non cash contribution is taxable If payables are settled through non cash contributions the amount of the claim is tax deductible but reduced by the VAT payable for the non cash contribution as well as the sum of the depreciation carried out A provision will be added according to which the value of the received non cash contribution is the same amount as the repaid loan credit will not be considered as taxable income Another regulation added which states that the purchase value of properties as well as the intangible and tangible assets which have been received as noncash contributions for the settlement of payables are defined by the value of the settled debt

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29 Taxes CORPORATE INCOME TAX CIT Opodatkowanie dochod w kontrolowanych jednostek zagranicznych CFC CONTINUATION Taxation of Foreign Controlled Entity Income CFC In the CIT and PIT acts there are regulations providing for taxation of foreign income of Controlled Foreign Corporations CFCs A controlled foreign corporation is as a general rule a company that meets jointly the following criteria regarding the scope of control i e the taxpayer has continuously for a period of at least 30 days at least 50 of shares in the capital or 50 of rights voice in control bodies or in state bodies or 50 of the share in profits of a foreign company the nature of the revenue generated i e at least 33 of the revenue the foreign company is a so called passive income i e revenue of a financial nature dividends shares receivables rights and obligations authorial etc the income tax actually paid by the company is lower than the tax it would have paid in the State of residence or on the board of directors taxpayer namely in Poland when calculating this difference the following are not taken into account a foreign controlled foreign plant of a foreign controlled company which is not taxable or exempt in the State of residence In some cases a CFC is exempt from taxation this is due to statutory requirements among other things it can depend on the country of residence of the foreign company the nature of their business and the amount of income received The taxable amount of a CFC shall be the income according to CIT PIT Law but only for income attributable to the Polish taxpayers and the corresponding period of ownership share in the company profits The Polish taxpayer will have the opportunity to deduct the dividend received from the CFC and the amount realised from the sale of share in the CFC from the income mentioned above The taxpayers will be required to Registration of the CFC Independent management of the accounting event recording which will have influence on the income of the CFC as well as Notification of the profit of the CFC The registration and the recording will not be necessary if the CFC s entire income is subject to taxation in a country within the EU or the EEA and also exerts its actual business in this country Currently whether the entity should be recognised as a foreign company is determined by what share in such entity the Polish taxpayer has both individually and jointly with other related entities It is about having shares directly or indirectly

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30 Invest in Poland 2020 CORPORATE INCOME TAX CIT Income taxes of Controlled Foreign Companies CFC cont CONTINUATION For the purposes of the above clarification in the provisions of income tax acts in Article 24a of the CIT Act and Article 30f of the PIT Act a definition of what constitutes a related party is included By this definition the related entity means a a legal entity or an organisational unit without legal personality in which the taxpayer holds at least 25 of equity or at least 25 of voting rights in control or constituting bodies or at least 25 of shares related to the right to participate in profits b a natural person a legal entity or an organisational unit without legal personality which holds in the taxpayer at least 25 of equity or at least 25 of voting rights in control or decision making bodies or at least 25 of shares related to the right to participate in profits in the PIT Act the taxpayer s spouse as well as his relatives up to the second degree c a legal entity or an organisational unit without legal personality in which the entity indicated in b holds at least 25 of equity or at least 25 of voting rights in control or decision making bodies or at least 25 of shares related to the right to participate in profits Article 24a 2 4 of the CIT Act The scope of activities to be performed by a foreign company was significantly changed so that its income would be covered by Polish income tax under the CFC regulations The threshold of obtained passive revenues was reduced from 50 to 33 while the catalogue of such revenues was broadened This category includes revenues from dividends and other revenues from shares in profits of legal entities the sale of shares receivables interest and benefits from all types of loans the interest part of the leasing instalment sureties and warranties copyrights or industrial property rights including the sale of these rights the sale and exercise of rights from financial instruments insurance banking or other financial activity transactions with related entities if the company does not economically generate an added value in relation to these transactions or such value is negligible Article 24a 3 3b of the CIT Act Article 30f 3 3b of the PIT Act

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31 Taxes CORPORATE INCOME TAX CIT Income taxes of Controlled Foreign Companies CFC cont CONTINUATION For the same category of companies the requirement for the tax rate applicable in the country of residence of the company was changed The legislator departed from the principle of comparing income tax rates for the sake of a fixed amount of tax As a consequence a comparison of the actual effective taxation of a given CFC was made Thanks to this an actual reference of tax amounts and verification of mutual relations is to be made This means that a simulation is necessary in which effective taxation in the country of the company s registered seat is compared to the hypothetical taxation of the Polish CIT The condition for the controlled company is met if the difference between the tax actually paid in the country of residence and the company s hypothetical Polish tax i e which the company would pay if it were a Polish resident is higher than the tax actually paid by the company the actually paid tax is one that is not subject to return or deduction in any form However when calculating such a difference the foreign plant of the controlled company is not taken into account the tax from such plant is not paid in the country of residence of the company There is an obligation for controlled companies to include by taxpayers in the register of foreign companies established in other EU or EEA Member States even if these companies carry out a real business activity unless it is is a significant actual economic activity Previously the legislator did not require materiality At the same time it was clarified that in assessing whether the actual business activity is material the ratio of revenues earned by a foreign controlled company from its actual business activity to its total revenues is taken into account Article 24a 18a of the CIT Act Article 30f 20a of the PIT Act In the current legal status the CFC provisions also apply to fixed plants of foreign taxpayers located in Poland The taxation of transformed companies with profits that have been transferred to other types of capital than share capital In the case of converting a company that is an income taxpayer into a company that is not such a taxpayer the taxable income from shared profits and nondistributed profits will be increased by profits that are transferred into other types of capital stock

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32 Invest in Poland 2020 CORPORATE INCOME TAX CIT CONTINUATION So called equity loans Article 20 Paragraph 16 of the Corporate Income Tax law CIT introduced that it excluded tax exemptions for dividends or other income from profit shares of legal persons payable between associated enterprises However this only applies to dividends which are in another country or other income paying company which may thus be deducted from the taxable income or tax base by the paying company Regulations regarding the validity of Certificates of Residence CoR The presentation of a valid CoR will allow entrepreneurs to apply the provisions concerning the avoidance of double taxation in the case of payments for foreign business partners e g dividends or royalties The absence of a valid CoR at the moment in which the payments are executed this will allow the Polish entrepreneur to be charged and pay the withheld tax according to the rates settled in Polish income tax acts without any tax credits or exemptions from withholding the tax The CoR without an expiry date which shall become invalid automatically 12 months after the issue date In exceptional cases it is possible to use a copy of the certificate of tax residence A declaration on the actual beneficiary According to the Act from 13 October 2019 the activity has had a public and publicly accessible Central Register of Real Beneficiaries In connection with the creation of the Central Register of Real Beneficiaries companies are obliged to the transmission of information on their beneficial owners natural persons exercising effective control over legal persons within 7 days counting from an entry or update in the National Court Register Companies registered before 13 October 2019 are required to complete the data on the actual beneficiary by 13 July 2020

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33 Taxes CORPORATE INCOME TAX CIT The issuance value of shares CONTINUATION The issuance value of shares means the price at which the shares are subscribed specified in the company s statute or articles of association and in their absence in another document of a similar nature not lower than the market value of these shares Article 4a 16a of the Corporate Income Tax Act This definition has been introduced for the purposes of regulations regulating the issue of restructuring operations to determine the amount of revenue for restructuring events mergers and divisions The legislator now refers to the nominal value of shares and as a consequence the revenue of the divided company s shareholder is the issuance value of shares in the acquiring company or newly established company if the assets taken over as a result of division and for the division by separation the assets acquired as a result of the division or remaining in the company are not an organised part of the enterprise Similarly the tax deductible expense from the sale of shares of the company taking over the assets of the company being divided or the newly established company is the value previously representing the revenue of the divided company s shareholder i e the issuance value of the shares received The obligation to submit financial statements to tax offices in an electronic form There is no obligation to submit financial statements to tax offices or tax authorities The KRS repository is automatically transferred to the tax authorities Exception the obligation to submit a copy of the resolution approving the financial statements by entities entered in the National Court Register raises interpretation doubts Therefore for your safety resolutions approving financial statements should be submitted separately to the relevant tax office The biggest taxpayers with revenues above 50 000 000 00 EUR and companies that are members of a tax capital group have to accept that the Minister of Finance will make public in the Public Information Bulletin information on them included in their tax statements The introduction of a limit for cash transactions The threshold for the amount of transactions that in relations between entrepreneurs may be paid in cash is 15 000 00 PLN In the event of a cash payment in excess of this amount the expenses on this account cannot constitute a tax deductible cost in CIT

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34 Invest in Poland 2020 OTHER TAX ON CORPORATIONS Capital duty Capital duty is levied at 0 5 of the nominal value of share capital Real property tax Tax is generally levied on the owner of real estate land buildings and construction at rates imposed by the local authorities Tax rates are determined by a resolution of the Municipal Council and now they cannot exceed Property type Tax rate Land designated for the conduct of business 0 95 PLN m2 Residential buildings 0 81 PLN m2 Buildings designated for the conduct of business 23 90 PLN m2 Structures 2 of the property value entered as the basis for depreciation Property tax Article 7 2a adds a new property tax exemption The following are also exempted from the property tax universities the exemption does not apply to subjects of taxation used for business activity public and non public organisational units covered by the education system and bodies running these units where properties are used for educational activities nurseries and children s clubs as well as the entities running them where properties are used as nurseries or children s clubs Social security Employers and employees must make social security contributions in an amount that is approximately 35 of an employee s remuneration with certain caps Stamp duty Stamp duty is levied for example when filling a power of attorney and when the central or local authorities are requested to perform activities such as issuing certificates grant permission etc The applicable rates or fixed amounts are specified in the stamp duty law Transfer tax Tax is imposed at a rate of 0 5 2 on certain types of transactions e g sales exchanges of rights loans that are not generally covered by VAT As a rule transactions exempt from VAT are exempt from transfer tax except for real estate and shares Other Excise tax is charged on turnover of selected goods Shipping companies may opt to pay tonnage tax on certain types of income A special tax is imposed on the excavation of silver and copper

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Taxes If you have any further questions related to the information within this booklet please contact us 35

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36 Invest in Poland 2020 ANTI AVOIDANCE RULES Transfer pricing Discussed in detail in the Transfer prices on page 18 Standard Audit File Jednolity Plik Kontrolny There is an obligation for taxpayers who keep tax books using computer programs to submit these documents in total or in part along with accounting evidence documents to tax authorities for a certain settlement period in the form of a strictly defined electronic format i e structures The concept of the standard audit file is based on the recommendations of the OECD for the Standard Audit File Tax 2 0 and was introduced in many European countries among others Austria the Netherlands France Slovenia Luxembourg Portugal and the Czech Republic Currently the following reporting structures are subject to Structure 1 Accounting JPK_KR Structure 2 Account Statements JPK_WB Structure 3 Stock JPK_MAG Structure 4 VAT register for purchases and sales JPK_VAT Structure 5 Invoices for VAT purposes JPK_FA Structure 6 Tax Revenue and Expense Ledgers JPK_PKPIR Structure 7 Revenue Ledger JPK_EWI The obligation to transfer the data to the tax authorities in the form of the standard audit file can be divided into two areas At the request of the tax authorities JPK_KR JPK_EWI JPK_PKPiR JPK_FA JPK_MAG JPK_WB JPK_VAT Without the request of the tax authorities only JPK_VAT The VAT account in the form of the Standard Audit File JPK_VAT must Without request Every month to the 25th day of the following month to which they relate notwithstanding if the entity is a VAT taxpayer paying VAT quarterly The Minister of Finance and Economic Growth Via an interface of the MFiR saving the JPK_VAT on a data carrier or sending it via email is not allowed Clause for circumventing the law on the exchange of shares The amendment to the Act on Corporate Income Tax CIT provides that the postponement of taxation in the case of exchange transactions involving shares does not apply if one of the principal interests of the exchange transaction of shares is the avoidance or circumvention of taxation This situation is particularly true if the exchange of shares is not based on justified economic aspects In addition Individual interpretations issued before the clause comes into force on tax evasion do not protect the taxpayer if tax advantages are challenged on the basis of this clause after 01 January 2017

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37 Taxes ANTI AVOIDANCE RULES CONTINUATION Disclosure Requirements Certain transactions must be reported to the tax authorities and or National Bank of Poland MDR There is an obligation to provide the Head of the National Tax Administration with information on Mandatory Disclosure Rules MDR MDR is a solution developed on the basis of knowledge of tax law provisions and its practical application Reporting of national MDR is limited to relevant ones only subjectively revenues costs or assets of the beneficiary or its affiliate s exceed the equivalent of 10 000 000 00 EUR or objectively the agreement refers to an asset or righT with its value exceding 2 500 000 00 EUR The entities obliged to report MDR are promoters i e entities that develop offer make available or implement the agreement or manage the implementation of the agreement supporting entities i e entities which with due diligence generally required in the performed activities taking into account the professional nature of the activity the area of specialisation and the subject matter of the performed activities undertook directly or indirectly through other persons to provide assistance support or advice concerning developing marketing organising making available for implementation or supervising the implementation of the agreement beneficiaries namely entities to which an arrangement is being made available or implemented or which are prepared or have taken action to implement the arrangement taxpayers in principle Exit Tax Taxation of unrealised gains by a taxpayer on income is subject to the transfer by the taxpayer to another State of assets including assets forming part of a foreign permanent establishment or from a change of tax residence Thus by its nature exit tax does not apply to any transfer of assets but only to that with which the State loses its right to tax the income effectively generated before the transfer In the CIT Act the rate is 19 of the tax base

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38 Invest in Poland 2020 PRIVATE INCOME TAX PIT Legal basis Law dated 26 July 1991 on Income Tax with all amendments NIP Registration Needs to be performed in the relevant tax office before the date when first PIT advance is due For tax purposes if PESEL is not applicable Tax period For natural persons Calendar year Tax rates The amount reducing the tax depends on the amount of income 1 360 00 PLN based on the tax calculation up to 8 000 00 PLN 1 360 00 PLN 834 88 PLN x taxable basis 8 000 00 PLN 5 000 00 PLN For tax bases exceeding 8 000 00 PLN up to 13 000 00 PLN 525 12 PLN for the tax base exceeding 13 000 00 PLN up to 85 528 00 PLN provided that no flat rate taxation scheduled 525 12 PLN 525 12 PLN x taxable basis 85 528 00 PLN 41 472 00 PLN for amounts exceeding 85 528 00 PLN up to 127 000 00 PLN From the amount exceeding 127 000 00 PLN there is no amount reduces the tax Tax free income income tax allowance 8 000 00 PLN Tax period For natural persons calendar year Tax liability unlimited tax liability on worldwide income unless a Double Taxation Treaty does confine the taxation obligation limited tax liability in certain domestic income Revenue streams Different revenues from 1 Special areas in agriculture 2 Economic activity 3 Self employed personally performed activity 4 Employed activity 5 Capital investment and property rights 6 Rent leasing 7 Capital gains from transfers 8 Activities carried out by a foreign controlled entity 9 Unrealised gains 10 Other income PIT progressive rates 17 and 32 for the excess over 85 528 00 PLN ca 21 000 00 EUR applicable e g to employment income or income on dependent services

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39 Taxes PRIVATE INCOME TAX PIT CONTINUATION PIT flat rate 20 applicable to board members being Polish tax non residents after having completed certain requirements and income generated by the liberal professions 19 e g interest capital gains the sale of virtual currencies income from employment capital schemes etc 5 Innovation Box Described in detail in Research and development relief on page 26 The exit tax amounts to Exit Tax The exit tax amounts to 19 of tax base if the tax value of an asset is established 3 of tax base if the tax value of an asset is not established Lease subject to lumpsum taxation 8 5 up to 100 000 00 PLN 12 5 over 100 000 00 PLN Monthly tax compliance PIT advances for a given month to be paid by 20th day of the following month Advance payments do not have to be paid by those PIT and CIT taxpayers whose advance payment for a given month did not exceed 1 000 00 PLN These are cases in which the tax due on income earned from the beginning of the year less the amount of advance payments paid since the beginning of the year does not exceed 1 000 00 PLN Annual tax compliance An annual tax return for a certain year must be filed from 15th February to 30th April in the year following the tax year Relevance of the tax authorities Both registrations as well as payments of amounts due on personal income tax and the annual PIT settlement for non residents posted to work in Poland should be made at the tax office competent for non resident taxpayers in the area in which the foreigner resides or III Tax Office Warszawa r dmie cie if the work is rendered in more than one region Tax residency Foreign individuals arriving to Poland may become Polish tax residents if their centre of vital economic or personal interest moves to Poland or if they spend in Poland more than 183 days in a tax year Foreign individuals having their domicile in Poland i e having status of Polish tax residents are subject to unlimited tax liability in Poland i e they are subject to taxation in Poland on their worldwide income while individuals not domiciled in Poland i e having status of Polish tax non residents possess limited tax liability status in Poland i e they are subject to taxation in Poland only with respect to income earned on the territory of Poland It should be noted that in order to determine the tax residency status the regulations of the relevant Double Tax Treaty concluded by Poland should be also taken into consideration

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40 Invest in Poland 2020 PRIVATE INCOME TAX PIT Legal basis for rendering work in Poland CONTINUATION Employment contract with the Polish entity Regardless of the tax residency of the foreign individuals income received by them under the employment contract concluded with the Polish entity is always subject to the Polish PIT according to the progressive rates of 17 and 32 The Polish employer is obliged to pay monthly PIT advances on the discussed income calculated according to the progressive PIT rates Foreign individuals are obliged to calculate their final annual tax liability for given year as well as submit the annual PIT return until 30th April of the following year Foreign employment contract and secondment to Poland a Polish tax non residents The foreign individuals are personallyresponsible for all PIT compliance activities required by Polish PIT law i e neither foreign employer nor host entity have any obligations in this respect Please note that the taxable income for Polish PIT purposes includes all income obtained in connection with work in Poland including remuneration bonuses of all kind and benefits in kind Thus most benefits provided by the employer or host entity along with or in place of salary are taxable as regular employment income Income earned by the foreign individuals in Poland may not be subject to PIT in Poland starting from the first day of his or her stay in Poland only if the following conditions defined in the relevant Double Tax Treaty are simultaneously met presence in Poland last in the aggregate less than 183 days during the particular tax year of 12 consecutive months depending on the Double Tax Treaty and the remuneration is paid by or on behalf of an employer who is not a resident of Poland it should be however noted that appropriate analysis of economic employer concept should be performed to assess if this condition is met and the remuneration is not borne by a permanent establishment of the employer in Poland

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41 Taxes PRIVATE INCOME TAX PIT Legal basis for rendering work in Poland cont CONTINUATION If one of the above conditions is not met remuneration from the foreign employment contract is subject to progressive PIT taxation in Poland as of the first day of his her stay in Poland PIT advances on income received from foreign employment contract should be paid on a monthly basis for the months in which the discussed income was received Advance payments for PIT for a given month are to be paid up to 20th day of the next month applying the 17 PIT rate the 32 rate may also be applied after exceeding the tax threshold Natural persons employed under an employment contract until the age of 26 are exempt from income tax However this does not apply as opposed to residents to relationships based on a contract of mandate Foreign individuals are obliged to calculate their final annual tax liability with the use of progressive PIT rates Foreign individuals are also obliged to submit the annual PIT return until 30th April of the following year Only income related to work performed in Poland is reported for Polish PIT purposes b Polish tax residents Generally the same rules applicable to Polish tax non residents as mentioned in point a above should be also applied in case of foreigners being Polish tax residents As a consequence the foreign individuals are personally responsible for all PIT compliance activities required by Polish PIT law i e neither foreign employer not host entity have any obligations in this respect Please also note that the taxable income for Polish PIT purposes includes all income obtained in connection with work in Poland including remuneration bonuses of all kind As well as the total world income accounted for in accordance with the provisions of agreements on the avoidance of double taxation

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42 Invest in Poland 2020 PRIVATE INCOME TAX PIT Board members CONTINUATION a Polish tax non residents Income obtained by foreigners from for example Germany as natural persons being Polish non resident taxpayers who were appointed as members of a management board of a Polish entity on the basis of a relevant shareholder s resolution may be subject to 20 flat rate taxation in Poland All obligations related to PIT relating to this system are performed by a Polish entity in which such a person is a member of a management board b Polish tax residents If a foreigner as an individual who is a member of the management board of a Polish entity becomes a Polish tax resident the tax obtained on the basis of membership in the management board pursuant to a relevant shareholders resolution will be subject to progressive PIT taxation in Poland In such a case the Polish entity would be obliged to pay monthly PIT advances Foreigners as natural persons are also obliged to submit their annual PIT return to the Polish Tax Office by 30th April of the following year Tax deductible expenses in the case of income from the employment relationship From the employment contract the place of permanent or temporary residence is the same town or city as the workplace From several employment contracts the place of permanent or temporary residence is the same town or city as the workplace From the employment contract the place of permanent or temporary residence is a different town or city than the workplace From several employment contracts the place of permanent or temporary residence is a different town or city than the workplace monthly yearly monthly max yearly monthly yearly monthly max yearly 250 00 PLN 3 000 00 PLN 250 00 PLN 4 500 00 PLN 300 00 PLN 3 600 00 PLN 300 00 PLN 5 400 00 PLN

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43 Taxes PRIVATE INCOME TAX PIT CONTINUATION The revenues of authors 50 of the taxpayer s expenses for income generation may not exceed 85 528 00 PLN Creative costs applicable to business revenues pursuant to Article 22 9b of the PIT Act from the following activities creative in the field of architecture interior architecture landscape architecture construction engineering urban planning literature visual arts industrial design music photography audio visual creation computer programs computer games theatre costume design set design resignation choreography artistic violin making folk art and journalism artistic in the field of acting stage dance and circular art and in the field of conducting vocalism and instrumentalism audio and audio video production journalism museum in the fields of exhibition science popularisation education and publishing conservation a related right described in Art 2 2 of the Copyrights Act of 4 February 1994 to an adaptation of a third party s work in translation development and research educational and scientific and teaching at universities Amortisation of intangible assets and tax costs The following are not considered as tax deductible expenses amortisation write offs from the initial value of intangible assets referred to in Article 22b 1 4 7 if these rights or assets were previously acquired or created and then sold by a taxpayer or a company that is not a legal entity of which the taxpayer is a partner in the part exceeding the revenue obtained by the taxpayer from their previous sale Loss in receivables and tax costs The expense is determined only up to the amount of the previously obtained due revenue In the PIT Act the legislator clearly indicated that the revenue from the sale of receivables also in the form of a contribution corresponds to its sales value

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44 Invest in Poland 2020 PRIVATE INCOME TAX PIT Income from economic activity CONTINUATION In particular income from trade or business which include the income of self employed among others Manufacturing construction economics trading providing services employment Work related to mining Employment in connection with the use of intangible assets This type of income also covers acquisition revenue from the sale of operating assets unless it is property for residential purpose Option opportunity for income from economic activity Since January 2004 those revenues can be taxed with a linear tax rate of 19 deviating from the regular taxation on application of the taxpayer until the 20th January each year But by chosing so deductions from the taxable base and joint assessment with the spouse can not be drawn on According to the paragraph 7 added to Article 8 of the PIT Act in the case of spouses earning lease revenue a declaration on the taxation of all revenues by one of them and a notification of the resignation from this method of settling lease revenues may be submitted using the model declaration notification specified by the minister responsible for public finances Taxation of so called cashbacks received from banks cooperatives or other financial institutions will receive a flat rate of an income tax rate of 19 Cashbacks received from banks cooperatives or other financial institutions and finance institutions within the meaning of separate provisions in connection with promotions offered by these entities are subject to 19 flat rate income tax This tax is collected by banks cooperatives e g SKOK and financial institutions as taxpayers

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45 Taxes PRIVATE INCOME TAX PIT Private use of company cars CONTINUATION The value of private use of a company car with an engine of up to 1600cm3 has been a benefit of 250 00 PLN from which social security insurance and tax are deducted In the case of company cars with an engine over 1600cm3 the value of their private use has been at 400 00 PLN from which social security insurance and tax are deducted In the case of using a company car for private purposes for a part of the month the value of the benefit is determined for each day of using the car in the amount of 1 30 of the above mentioned amounts For a group transported to their place of work which is organised by the employer the clear regulation that this transport service does not constitute a claim for financial benefits and is not subject to taxation will apply in the future The prerequisite however is that a motor vehicle with a passenger transport license of more than 9 persons including vehicle drivers is used for the transport of passengers

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46 Invest in Poland 2020 PRIVATE INCOME TAX PIT Income of nonresidents CONTINUATION The Income Tax Act specifies the mandatory list of sources of income of nonresidents which are considered to be in the territory of Poland The amendment also introduces new types of income Income is considered to be achieved in the territory of Poland if from securities including from financial derivatives admitted to trading on the Exchange as well as from their sale or execution the transfer of ownership of company shares inter alia From companies and investment funds in which real estate in Poland represents a direct or indirect asset of at least 50 from claims which are subject to a flat rate tax which is regulated by Article 29 and which are carried out by Polish taxpayers irrespective of the place of conclusion of the contract and the provision of services come Exclusions from tax deductible expenses The following are not considered as tax deductible expenses all kinds of fees and charges for the use or right to use the rights and assets referred to in Article 22b 1 4 7 acquired or created and then sold by a taxpayer or a company that is not a legal entity of which the taxpayer is a partner in the part exceeding the revenue obtained by the taxpayer from their previous sale the tax referred to in Article 30g tax on the ownership of commercial properties Income from a contribution in kind to the company The method of calculating the income from the acquisition of shares in a company co operative contributions taken up in exchange for an contribution in kind is as follows in the event that the value determined in the articles of association or the memorandum of association is not determined or is determined in a manner which does not correspond to the market value the revenue will be determined at the market value subject to general principles With regard to the Polish Limited Partnership on shares as well as to their foreign counterparts treated as income taxpayers these principles are applied exclusively with regard to non monetary deposits whose property or rights are the basis

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47 Taxes PRIVATE INCOME TAX PIT CONTINUATION The catalogue of revenues income classified as the income revenue from the share in profits of legal entities has been expanded Such revenues in addition to those previously allocated to them include revenues from the decrease in the value of shares this is a supplement to the item where income currently revenue from redemption of shares has been indicated for a long time revenues from a participatory loan i e the one where the payment of interest depends on whether the company made a profit or whether it made a profit in the assumed amount revenues from payment in cash in the case of exchange of shares Incentive schemes Taxation of income earned on the disposal of shares acquired under incentive schemes Taxable income arises when the shares are disposed of The concept of the incentive scheme and the parent company was also defined The provisions of paragraphs 11 11b apply to income earned by persons entitled by means of acquisition or purchase of shares in joint stock companies whose registered seat or management board is in the territory of a state with which the Republic of Poland has concluded an agreement to avoid double taxation Revenue from incentive schemes is allocated to the source to which the scheme is linked Therefore if the incentive scheme is related to work it will be taxed as income from the employment relationship and subject to 17 and 32 tax

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48 Invest in Poland 2020 PRIVATE INCOME TAX PIT Changes related to bonus depreciation CONTINUATION The taxpayer may make a one off depreciation and amortisation write off up to 100 000 00 PLN and include it in costs in the year in which he adopted the brand new fixed asset for use This regulation applies only to acquired fixed assets it does not apply to manufactured fixed assets Depreciation can only be applied to brand new fixed assets in groups CFA 3 6 and 8 This means that all means of transport have been excluded group 7 not just passenger cars The minimum value of a fixed asset which could be depreciated or subject to amortisation in this manner must be at least 10 000 00 PLN The regulations allow to include as tax costs also advance payments for the acquisition of new fixed assets which are included in CFA 3 6 and 8 whose delivery will take place in the next reporting periods The limit of 100 000 00 PLN per year will cover jointly the depreciation writeoff and the amount of payment made for the delivery of a fixed asset The limit of 100 000 00 PLN is available to every entrepreneur and in the case of partnerships this limit applies to all partners of the company Taxpayers may choose the moment of making a one off depreciation write off from the following variants already in force a write off may be made at the earliest in the month in which the fixed assets were entered in the register of fixed assets and intangible assets a write off may be made in one of the ways specified in Article 16h 4 of the CIT Act or Article 22h 4 of the PIT Act i e in equal instalments every month in equal instalments every quarter or once at the end of the tax year One off amortisation 10 000 00 PLN is the limit of fixed assets or intangible assets allowing for a one off crediting of expenditure for the acquisition of these assets as tax deductible costs Withholding tax flight tickets Flight tickets Research and development relief Innovation Box Discussed in detail in Research and development relief on page 26 Deduction of donation for blood donation purposes The legislator refrained from differentiating the amount of deduction with what was given as blood or its elements Thanks to this the same deduction can be made when donating blood and plasma 130 00 PLN for 1 litre The obligation to collect withholding tax on the purchase of flight tickets in the amount of 10 was abolished if the purchase of such flight ticket concerns a scheduled passenger flight

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49 Taxes PRIVATE INCOME TAX PIT Deduction of expenses for the travel of the disabled CONTINUATION Deduction of expenses for the travel of the disabled to necessary medical and rehabilitation treatment applies to all disabled people notwithstanding their disability class Nonetheless the deduction is still limited by an annual amount of 2 280 00 PLN 10 080 00 PLN is a limit on the income of a disabled person who is the taxpayer s dependant while the taxpayer settles the rehabilitation allowance for the disabled person supported by this taxpayer In addition it is stipulated that child support is not be taken into account when calculating this income Deduction of Expenses for Maintaining a Service Dog The limit of expenses deducted for maintaining a service dog is 2 280 00 PLN Write offs for the use of passanger cars Write offs for the use of a passenger car are not considered as deductible costs as discussed in detail in the section Non tax deductible expenses on page 20 Deductible expenses Deductible expenses the paid disposal of virtual currency Pursuant to Article 22 14 of the PIT Act tax deductible expenses of paid disposal of virtual currency are documented expenses directly incurred for the acquisition of virtual currency and costs related to the disposal of virtual currency including documented expenses incurred for the benefit of the entities referred to in Article 2 paragraph 1 12 of the Act on Counteracting Money Laundering and Terrorist Financing Deduction of a donation Donations made for the purposes of vocational training to the public schools providing such training referred to in Article 4 point 28a of the Educational Law 14 December 2016 as well as donations to the public facilities and centres described in Article 2 item 4 of this act Thermal modernisation relief A taxable person who owns or is a co owner of a single family residential building is entitled to deduct from tax basis calculated under Article 26 paragraph 1 or Article 30c paragraph 2 the expenditures incurred in the tax year on construction materials equipment and services related to the execution of thermal modernisation in this building as described in the regulations issued on the basis of paragraph 10 which will be completed in the period of 3 consecutive years counting from the end of the tax year in which the first expense was incurred The deduction amount cannot exceed 53 000 00 PLN with regard to all executed thermal modernisation activities in certain buildings owned or coowned by the taxable person

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50 Invest in Poland 2020 VALUE ADDED TAX VAT Legal basis Act of 11 March 2004 on the taxation of goods and services with all amendments Tax rates Standard Tax Rate 23 Reduced Tax Rate 8 e g some foods plants associated with health goods catering and hotel services transportation services public housing Reduced tax rate 5 Especially food specialist books and journals Reduced tax rate 0 Export of goods Intra Community supplies of goods General Values Added Tax on goods and services is a broad based tax levied on the supply of goods and services in Poland Polish regulations are based on EU directives Registration A Polish legal entity is subject to the VAT registration obligation if the value of the sales in the previous tax year does not exceed 200 000 00 PLN Foreign entrepreneurs must register for VAT in Poland before they start any VATable activity in Poland except for limited and expressly listed cases Based on the Polish Fiscal Penal Code if an entity obliged to register for VAT purposes fails to fulfil this obligation it will be liable to pecuniary penalty for fiscal offence in an amount determined individually in each case multiples of the lowest monthly salary Refusal to register a taxpayer The premises for the refusal to register an entity as a VAT payer and to delet the taxpayer from the registerer of VAT payers refusal of registration is possible where verification shows that the data given in the registration application is false the entity does not exist or despite attempts to do so it cannot be contacted or it does not appear and its representive does not appear on the summons of the head of the tax office Deletion of a taxpayer A taxpayer is deleted if the taxpayer does not exist despite documented attempts it is not possible to contact the taxpayer or its representative data provided in VAT R registration form is false the taxpayer or its representative does not on the summons of the head of the tax office of the director of the tax administration chamber or the head of the national tax administration the taxpayer suspended the performance of business activity on the basis of provisions concerning suspension of business activity for a period of at least 6 consecutive months a taxpayer who was obliged to submit VAT declarations failed to submit such declarations for 6 consecutive months or 2 consecutive quarters the taxpayer submitted VAT declarations for 3 consecutive months or 1 consecutive quarters in which it did not indicate the sale or acquision of goods or services with the amounts of tax for deduction

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51 Taxes VALUE ADDED TAX VAT Compliance CONTINUATION a Invoicing Transactions between VAT taxpayers must be documented with invoices The Polish VAT laws strictly regulates the elements that should be included in invoices In general an invoice should contain at least the following obligatory data name and surname or business name of the seller and its address name and surname or business name of the purchaser and its address Polish tax identification numbers of the purchaser and the seller sequential number of the invoice that identifies the invoice date of issue date of supply if such date is determined and differs from the invoice issue date in the case of continuous supplies the taxpayer can indicate the month and year of the supply name kind of goods or services unit of measure and quantity of the goods sold or scope of the services rendered unit of price of the goods or services without VAT Net unit price value of the potential rebates including these for the earlier payment if they were not included in the net unit price Abridged invoices may be used if the total amount of due amounts on the invoice does not exceed 450 00 PLN or 100 00 EUR if the invoice is issued in EUR Simplified invoices may not include elements of the invoice that are marked with provided that the invoice includes information enabling to determine the value of VAT in relation to particular VAT rates If a VAT invoice is to be issued on the basis of a fiscal receipt this receipt must contain the tax identification number NIP of the purchaser b EU VAT tax Polish VAT regulations comply with Directive 2006 112 EC c Filing Registered VAT taxpayers are required to submit monthly or quarterly returns to the competent tax office and keep registers of purchases and sales subject to VAT VAT quarterly declarations may be submitted by small taxpayers only if 12 months from the month in which the VAT registration has been registered as an active taxpayer in the respective quarter or in the previous four quarters no delivery of goods has been carried out which is listed in Annex 13 of the Turnover Tax Law unless the total value of such goods less the tax does not exceed the value of 50 000 00 PLN Additionally registered VAT EU taxpayers performing intra community and acquisitions of goods into Poland and intra community supplies of goods and services from Poland are also required to submit EC Listings returns on a monthly bases summary information

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52 Invest in Poland 2020 VALUE ADDED TAX VAT Compliance cont CONTINUATION d Payment refunds The tax due to the tax authorities is calculated as the output VAT minus the input VAT on purchase invoices As a rule the surplus of output VAT over input VAT must be paid within 25 days following the month in which the VAT obligation arose for small taxpayers the VAT due must be paid within 25 days following the quarter in which the VAT obligation rose If the input VAT exceeds the output VAT a VAT refund is generally available e Penalties In general if the obligations binding upon Polish VAT taxpayers are not fulfilled the tax authorities may impose the penalties provided for in the provisions of the Polish Fiscal Penal Code Additionally if any VAT liability arises taxpayers are obliged to pay the outstanding VAT amount due along with the attendant penalty interest White list of VAT taxable entities A list of information on VAT payers It contains information on the status of the company and was created to make it easier for entrepreneurs and authorities to verify whether a given entrepreneur is an active VAT taxpayer and to confirm his bank account number The legislator has provided for sanctions for payments to bank accounts not registered in the white list PIT and CIT taxpayers at the moment of payment to an account other than the one indicated in the white list of taxpayers for a transaction exceeding 15 000 00 PLN gross do not include the above mentioned expenditure in the TDE unless within 3 days they notify the head of the tax office applicable for the invoice issuer VAT taxpayers are jointly and severally liable for the amount of VAT at the moment of payment to an account other than the one indicated in the white list of taxpayers for a transaction exceeding 15 000 00 PLN gross unless within 3 days they notify the head of the tax office applicable for the invoice issuer or make a split payment

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53 Taxes VALUE ADDED TAX VAT CONTINUATION Application to non residents The entities without the status of Polish residents i e seated outside Poland performing transactions taxable in Poland according to the Polish VAT provisions e g intra community acquisitions of goods in the territory if Poland are obliged to register for VAT purposes in Poland as a consequence fulfil the obligations imposed under Polish VAT law on registered VAT taxpayers Deliveries The tax applies to the supply of goods against payment which also includes the delivery of goods and services free of charge The taxpayer has the right to deduct input tax paid on goods and services provided that the input tax is used for taxable activities Gratuitous transfers A gratuitous transfer of gifts of small value and samples are not subject to taxation as long as it is made for associated with the business purposes Handovers of publicity and information printing materials are now generally not excluded from taxation a new definition of the sample has been introduced Place of supply of goods cross border transactions The goods dispatched or transported by the person supplier them the consignee or third party is the place where the goods are located at the beginning of dispatch or transport to the buyer begins Goods not dispatched or transported the place of supply where the goods are located at the time of delivery e g land buildings Services Principally these are all services that are not goods Tax base is the amount by which the service has been paid

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54 Invest in Poland 2020 VALUE ADDED TAX VAT Place of performance CONTINUATION Rule Place of service in favour of a taxpayer businessman is the location of its registered office or fixed place of management or permanent residence Place of service in favour of a subject who is not an entrepreneur consumer is the country of the seat or fixed place of management or fixed place of residence of the power generator Exeptions Intermediation services in favour of final consumers place of the primary activity with real estate related services location of the property Transportation services Transport of persons the place of transport taking into account the distances covered Transport of goods in favor of consumers the place of transport taking into account the distances covered Transport of goods in favour of consumers the beginning and the end of the movement on the territory of two different member states take place the place of commencement transport Support services to the transport services place of activity execution Services in the field of arts culture and nature of the sport science education entertainment In favour of contractors Application is the basic rule location of the seat of the contractor Favor of consumers the place of activity execution Admission to an event business and consumer location of event Restaurants and catering services place of activity execution Short term rental of means of transport place where the means of transport is actually put at the disposal of the customer

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55 Taxes VALUE ADDED TAX VAT CONTINUATION Place of performance cont Electronic services In favor of contractors application is the basic rule location of the seat of the contractor In favour of final consumers Based resident outside the EU or based resident in the EU where the services are provided from a third country by a resident service suppliers location of the seat domicile of the beneficiary Based resident in the EU where the services are provided from an EU Member State by a resident service suppliers location of the seat or fixed place of management or fixed place of residence of the power generator Intangible services e g sale of rights advertising legal banking financial and insurance services supply of staff in principle apply the basic rule exception applies only to consumers have the office residence in a third country location of the seat residence of the beneficiary Telecommunications radio and television broadcasting services exemptions if the services are rendered for the benefit of end users vary by domicile residence of both the provider and the service recipient Services in the tourism sector location of the seat or fixed place of management or fixed place of residence of the power generator New special procedure for the VAT rules on telecommunications radio and television as well as on electronic services The place of performance will always be the legal domicile the place of residence or habitual residence of the non taxable consumer Article 28k of VAT Act of telecommunications radio and television as well as electronic services This shall apply regardless of supplier s status and the location of his business activities It also applies to foreign entities entities not resident or have a permanent place of business within the territory of the EU

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56 Invest in Poland 2020 VALUE ADDED TAX VAT Reverse Charge Reversal of the tax liability CONTINUATION It applies generally in the case when the supplier service provider is a foreign entity does not have a registered office or a permanent place of business in Poland and the buyer is a Polish VAT payer Invoices without VAT reference on passage of tax liability tax identification numbers of the entrepreneurs both supplier and beneficiary A foreign entity is obliged to pay the tax if he provides real estate related services and is registered for VAT purposes in Poland in the case of other services the control of the Polish beneficiaries must be settled in the case of goods trade the foreign supplier is obliged to settle the tax if he she for VAT purposes in Poland Reverse charge in case of construction services The obligation to apply the reverse charge mechanism arises in the case of construction services provided by subcontractors who are active VAT taxpayers The catalogue of services subject to taxation under special rules is included in Annex 14 to the VAT Act It covers in principle most of the most popular construction works including plastering painting or concreting Reverse charge in case of turnover in certain categories of goods Goods to which reverse charge applies are listed in Appendix no 11 Article 17 paragraph 1 item 7 of the VAT Act The goods subject to the reverse charge procedure include metal sheets gold in the form of raw material or semifinished product electronic equipment telephones consoles laptops in transactions above 20 000 00 PLN Real estate The buyer pays the VAT or applies the tax exemption for the delivery of a property after the fulfillment of special conditions Rental Subject to VAT in either case Sale Subject to either the VAT or the tax on civil law transactions The latter is payable if the VAT exemption or neither side VAT payer is

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57 Taxes VALUE ADDED TAX VAT CONTINUATION 0 Tax Rate ZW Inter alia after the fulfilment of special conditions Intra Community supplies of goods Export of goods specific costs directly linked to the export of commodities related services international transport services Services in the scope of processing and refinement of goods VAT exemption inter alia Delivery of second hand goods used solely for the purposes of an activity exempt net of tax Financial services provision of loans management of bank accounts money exchange with the exception of leasing factoring or advice without services which establish an integral part of financial services even if they are appropriate and necessary for the provision of financial services services which form part of the provision of financial services In other words the tax exemption of auxiliary services for financial and insurance services Insurance and re insurance services certain medical services certain education services Services in the area of social welfare Services in the area of social insurance Certain services in the area of culture or sport

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58 Invest in Poland 2020 VALUE ADDED TAX VAT VAT decuction on expenses related to the use of passenger cars CONTINUATION VAT amounts subject to deduction depend on the purpose of use of a certain vehicle If a passenger car is used for various purposes including for economic activity as well as for private purposes the right to decution is limited to 50 The deductible amount depend on what a taxpayer uses the vehicle for If a car is used for mixed purposes that is for both business and private use the right to deduct limited But if a taxpayer uses a car exclusively for own business purposes they are entitled to deduct the full VAT amount A full right to deduct shall also apply when a motor vehicle is structurally designed to transport at least 10 persons including the driver must follow from vehicle documents Limited deductibility not only VAT on purchase If a motor vehicle with the permissible maximum weight not exceeding 3 5 tonnes is used for both business and private use the taxpayer will be entitled to deduct 50 of VAT This applies not only to VAT on purchase ICA or import of vehicles as it used to be but also to VAT on repair operation and purchase of component spare parts Unlimited deductibility recording obligations The taxpayer will be entitled to deduct 100 of VAT provided that the vehicle is used exclusively for the taxpayer s business activity purposes Furthermore the following conditions must be met The taxpayer must establish the rules of using the vehicle saying that they may be used exclusively for the taxpayer s business purposes A vehicle mileage logbook must be kept for the vehicles used exclusively for the taxpayer s business purposes The vehicle mileage logbook should include without limitation vehicle registration number logbook s start and end date odometer count and number of kilometres driven It should be kept starting from the date when a vehicle is used exclusively for the taxpayer for the taxpayer s business activity If the taxpayer fails to file the above mentioned information on time his vehicle will be considered to be used exclusively for business purposes only after the day the information is filed

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59 Taxes VALUE ADDED TAX VAT Input tax reduction cont CONTINUATION Information filing deadlines Taxpayers who are going to use cars exclusively for business purposes for which a logbook will be kept will be obliged to notify the head of competent tax office of the vehicles used exclusively for business purposes VAT 26 form The VAT 26 information should be filed within statutory deadlines Liability for breach of the information obligation A taxpayer who fails to file the VAT 26 information on time or who provides false information and deducts 100 of VAT at the same time is subject to penal and fiscal liability fine of up to 720 so called daily rates where such daily rates range from 56 00 PLN to as much as 22 400 00 PLN

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60 Invest in Poland 2020 VALUE ADDED TAX VAT Accelerated refund of VAT CONTINUATION Fundamental period 60 days from the date of filing the tax return shortening to 25 days possible assuming all reported in the tax return accounts must be settled at the time of filing the tax return 180 days if in a given billing period no taxable transactions were made An accelerated 25 day refund period for VAT is still possible although the use of this advantage is subject to a number of requirements which must be met The VAT refund with this shorter deadline is possible if the input tax VAT in connection with acquisitions which is shown in the tax return with the exception of the pre tax surplus from acquisitions which is deducted from the previous tax period and which from invoices which document the sums owed and which are paid in full through a bank account of the taxpayer in a bank which is domiciled in Poland or through an account of the taxpayer in a co operative bank of which he is a member in the identification application other invoices documenting receivables If the total amount of such duties does not exceed 15 000 00 PLN has been settled by the taxpayer from the customs documents the import declaration and the decisions referred to in Article 33 2 and 3 and Article 34 the import of goods which are settled in accordance with Article 33a on the intra Community acquisition of goods and the provision of services for which the recipient of the service is the taxpayer shall indicate in the tax declaration the tax liability arising from those transactions the input tax or the pre tax surplus has not been settled in the previous tax periods and does not exceed 3 000 00 PLN in the tax return the taxpayer presents a document to the tax authority which confirms the settlement of the tax confirmation of the transfer made by the account indicated to the tax office the taxpayer for more than 12 consecutive months immediately preceding the tax period in which the latter applies for a refund of 25 days was registered as an active person subject to VAT submitted a VAT declaration for each tax period

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61 Taxes VALUE ADDED TAX VAT CONTINUATION Re imbursement of input tax for foreign companies Can be filed for Application in Polish language for entrepreneurs from the EU in electronic form Appropriate Revenue Office II Warsaw Srodmiescie The application can cover a period of minimum 3 months and can not exceed 1 year Handing over until the 30th September of the following year Issued by the tax office on the amount of the recognised tax is generally issued within 4 months from the application levy Reimbursement will be made within 10 working days of the decision Intra Community supply to registered entrepreneurs Provided that the following conditions are fulfilled a tax rate of 0 in Poland will be applied The supply was carried out towards an entrepreneur registered for VATpurposes in another membership country of the European Union and The goods have left Poland and the supplier has appropriate evidence and The supplier has mentioned the correct tax identification number on the invoice To end users The taxation on supplies of goods to consumers private individuals in another membership country of the European Union takes place in Poland Exceptions Means of transport inter alia passenger cars are always taxed in that country to which the consumer ships the new means of transport Mail order business The goods are handed over in the name of the supplier to the final consumer provided that the value of the goods sold exceeds a certain turnover limit on the part of the supplier Reporting requirements Summing up reports UE VAT are to be delivered in general on a monthly basis To be captured Intra community deliveries of merchandise Intra community purchases Deliveries under the so called intra Community supply triangle Services to foreign companies from EU Member States in which the tax liability to beneficiaries passes When the tax changes become chargeable The tax obligation arises at the moment of delivery of goods or service Definitions of the tax base As a rule the modifications of the rules is the direct implementation of the definition contained in the VAT directive The new tax base includes all payments which have a direct impact on the price of goods and services rendered by the taxpayer The new VAT regulation explicitly mentioned what is included in the tax base like additional costs commissions packing and transportation costs as well as insurance costs In case of free deliveries or services the values or comparable prices of the goods and services concerned will build the new text base If there are no comparable prices the tax base includes all costs incurred at the tax point

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62 Invest in Poland 2020 VALUE ADDED TAX VAT Time restrictions on the deduction of input tax CONTINUATION The right of deduction arises in the period in which the seller s tax liability in relation to the goods or services supplied become chargeable but should not be earlier than in the tax return for the period in which the buyer received the invoice or customs documentation Therefore it is very important that you are certain when the tax liability has arisen due to the documented through the relevant invoice The regulations give you the right to deduct intra Community acquisitions of goods from the receipt of the seller s invoice The taxpayer can reduce the tax due by the input VAT resulting from the intra Community acquisition of goods referred to in Article 9 of the Turnover Tax Law if the latter takes into account the value of the VAT payable on intraCommunity goods acquired in the tax return in which you are obliged to settle this tax this is not later than within a period of three months from the month in which a tax liability has been incurred with regards to the goods purchased The correction of the reduced deduction will be possible at the time the invoice was received Invoicing requirements A taxpayer can issue invoices by the 15 day of the month following the month of delivery of goods service and it may issue an invoice up to 30 days before the delivery of goods service Prefactor Prefactor which applies to VAT deduction of expenses on business activity and activity of other type that cannot be assigned in total exclusively to one of the two cathegories of activities The method of calculating the prefactor was left to the taxpayer with the VAT Act introducing a catalogue of illustrative data that can be taken into account personnel data area data financial and trading data time related data The choice of the method used to calculate the value of the prefactor is free but the preindicator must be representative and meet the specifics of the taxpayer s business

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63 Taxes VALUE ADDED TAX VAT Sanctions CONTINUATION It is clear from Article 110a 1 of the Turnover Tax Law the taxpayer must evaluate with the possible imposition of sanctions by the Director of the Tax Office or the Tax Inspectorate if the taxpayer confirms in a submitted tax return a taxable amount lower than the tax liability shows a tax differential to be reimbursed or a pre tax offset which is higher than the tax burden a tax difference to be deducted from the tax liability for the next tax periods which is higher than the tax liability a tax difference to be reimbursed a pre tax adjustment or a tax difference to be deducted from the tax liability for the next tax periods but a tax liability to be borne by the tax office did not submit any tax returns and did not pay the tax liability In this case the Director shall determine the amount of tax to be paid as well as the additional tax liability amounting to 30 of the amount by which the tax credit was submitted or 30 of the amount by which the tax difference to be reimbursed the tax difference to be deducted from the tax liability has been increased for the next tax periods Register of active VAT taxpayers introduced The Head of the National Revenue Administration will maintain an electronic register of active VAT taxpayers The register of active VAT taxpayers will be made available in the Public Information Bulletin on the respective website of the office servicing the minister in charge of public finance in a way that allows checking the data contained in the register The register of active VAT taxpayers will be updated on business days once a day Data on taxpayers deleted from the register as active VAT taxpayers are kept for a period of 5 years counted from the end of the calendar year in which the taxpayer was deleted from the register

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64 Invest in Poland 2020 VALUE ADDED TAX VAT Obligation to use the split payment method CONTINUATION Some products and services are subject to the obligation to apply the split payment method which results from art 108a of the VAT Act appendix no 15 When making payments for goods or services listed in this appendix documented by an invoice in which the total sum of receivables amounts to 15 000 00 PLN taxpayers are obliged to apply the split payment mechanism On the other hand a taxpayer who is obliged to issue an invoice is obliged to accept payment of the amount of receivables resulting from that invoice using the split payment mechanism Invoices should be marked split payment mechanism under pain of additional tax liability Lack of such a mark will result in a sanction amounting to 30 of the VAT amount indicated in the invoice unless the receivable was paid using the split payment mechanism The application of the split payment mechanism will be based on the following the payment of the amount corresponding to all or part of the tax amount resulting from the invoice received is made to the VAT account the payment of all or part of the amount corresponding to the net sales value resulting from the invoice received is made to a bank account or an account in a co operative savings and credit union for which a VAT account is kept or is otherwise settled The split payment mechanism for goods other than those listed in Annex 15 to the Act is still not mandatory but the legislator has provided for a number of incentives for these transactions to convince taxpayers to use this form of settlement These incentives are as follows abandoning the principle of joint and several liability abandoning the imposition of additional tax liability no use of increased interest from the VAT tax debts up to 150 of the standard rate accelerated refund of excess input VAT Deposits and withdrawals The VAT account will allow to deposit only cash from the payment corresponding to the amount of VAT paid to the supplier of goods or the service provider using a dedicated transfer message VAT amount refund in the case of issuing a corrective invoice using a dedicated transfer message by the tax office

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65 Taxes VALUE ADDED TAX VAT Vouchers CONTINUATION Regulations provide for two types of vouchers within the meaning of instruments subject to the obligation of their acceptance as remuneration for delivery of goods or rendered services namely a single purpose voucher SPV for which the place of supply of the goods or services to which the voucher relates and the amount of due tax value added tax or similar tax arising from the supply of such goods or services are known at the time of issue of the voucher a multi purpose voucher a voucher other than a single purpose voucher A single purpose voucher entitles the holder to receive certain goods or services where the level of taxation in particular the VAT rate the identity of the supplier and the Member State in which the supply of the goods or services linked to a certain voucher can be determined definitively from the outset VAT is charged on the sale of the voucher With regard to multi purpose voucher the tax is charged at the actual supply of goods or services in exchange for the voucher accepted by the supplier In other words in this case VAT should be charged when the goods or services to which it relates are supplied Bad debt relief Bad debt relief is the possibility to correct the tax in case the creditor fails to pay the invoice Lack of payment for the sales invoice within 90 days from the due date results in the obligation of correction on the part of the buyer On the part of the creditor meaning the supplier to whom payment is due this is a privilege which he she may but does not necessarily have to use

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66 Invest in Poland 2020 VALUE ADDED TAX VAT Consequences of delay by failure to meet the deadlines and dates CONTINUATION Delay penalties currently 8 per annum Penalties for late payment only for VAT up to 30 of the tax liability Since the new year the Directors of the Tax Office or the Tax Inspectorate have been able to impose on taxpayers additional obligations of 30 of the amount by which the tax credit has been reduced or 30 of the amount by which the tax difference or the tax difference to be deducted from the tax liability for the next tax periods A correction of the error can reduce the rate from 30 to 20 An additional obligation arises when the treasury finds that the VAT subject in the submitted shows a taxable amount lower than the tax liability shows a tax differential to be reimbursed or a pre tax offset which is higher than the tax burden a tax difference to be deducted from the tax liability for the next tax periods which is higher than the tax liability a tax difference to be reimbursed a pre tax adjustment or a tax difference to be deducted from the tax liability for the next tax periods but a tax liability to be borne by the tax office Furthermore 30 of the penalties also apply to taxpayers who do not submit tax returns and do not settle the tax burden against the tax authorities In the current legal situation increased default interest rates are threatened when uncovering a lack of a VAT declaration or a lack of a settlement of the tax liability 100 of the VAT on false invoices The percentage of additional commitments increases to 100 of the input tax that results from the invoices if it is established that the invoices with increased deductible VAT have been issued by a non existent legal entity activities which have not been carried out as regards the part relating to those activities amounts which do not correspond to reality with regard to the items for which amounts are not true support the activities in which Article 58 of Civil Law applies as regards the part relating to those activities

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67 Taxes TAXES ON CIVIL AGREEMENTS PCC Purchase of real estate 2 0 Memorandum of association 0 5 Loans 0 5 Proprietor Shareholder loans 0 5 TAX AUDIT AND LEGAL RECOURSE IN POLAND Subject The formal correctness of the tax declaration stands in the focus of the control A separate tax bill is not created Audit of the Tax Office Determination of the tax liability on the merits and amount The revenue office issues a protocol thereafter which can serve as evidence in a tax proceeding Control method It is determined whether the taxes were paid on time If default interest accrues the tax authority shall issue a tax assessment in the amount of tax due and default interest are fixed Tax audit performed by the finance control group It is checked whether the taxpayer has declared his tax liabilities on the merits and the amount properly If a tax liability determined a separate tax bill enacted Tax payers can draw on in Poland in fiscal matters on the following rights Appeal against a decision Complaint to the Provincial Administrative Court Nullification suit with the Supreme Administrative Court Legal action with the European Court of Justice

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68 Invest in Poland 2020 TAX ORDINANCE ACT Verification of the contractor Taxpayers may obtain from the tax offices a certificate regarding the following information about their contractors conducting business activity confirmation that the contractor has or has not submitted a tax return or other document he was obliged to submit pursuant to the provisions of tax acts confirmation that the contractor has or has not included in the tax return or other document the events he was required to include pursuant to the provisions of tax acts confirmation that the contractor is or is not in arrears with taxes resulting from a tax return or other document submitted pursuant to the provisions of tax acts Evidence in tax proceedings The open catalogue of evidence in tax proceedings may include documents gathered during the analysis performed by the National Tax Administration

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69 Taxes INTEREST Interest on tax arrears Interest on tax arrears amount to the double basic NBP Lombard loan interest rate and 2 however not less than 8 Statutory interest 5 statutory interest 10 maximum interest Statutory interest for delay 7 interest for delay 14 maximum interest for delay Interest for delay in commercial transactions The interest rate for delay in commercial transactions will therefore be 9 5 Reduced rates Reduced interest on tax arrears at 50 of the interest rate on tax arrears applies if the following conditions are fulfilled simultaneously a legaly binding correction of tax return is submitted no later than within 6 months from the date of the expiry of the time limit for submitting the tax return the tax arrears are paid within 7 days from the date of submitting the correction of tax return Leniency Notifying the authority by the taxpayer on committing a prohibited act by it excludes punishability of the act if it takes place before the tax authority identifies this fact and the notified failures are settled at the moment of submitting the notification Increased rate The increased interest rate of 150 of the base rate currently 12 will apply to tax refunds on goods and services as well as to back up excise duties and customs duties This rate shall be applied if the tax authority detects in the course of its tax procedures verification activities tax audit or tax proceedings an understatement of tax liabilities overestimation of overpayment or tax refund in the amount exceeding 25 of the amount due and higher than the amount of 5 x minimum salary or the lack of the tax return and tax payment

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70 Invest in Poland 2020 TAX LIMITS IN 2020 In 2020 current income limits concerning inter alia status of smallbusiness enterprises Small business enterprises ma y podatnik for PIT CIT 8 507 000 00 PLN Small business enterprises ma y podatnik for VAT 5 104 200 00 PLN Income limit that entitles lump sum of taxation of recognised income 1 088 125 00 PLN The amount of net income that requires to bring records of accounts by individuals partnerships of individuals partnerships of individuals partnerships and social co operatives 8 746 800 00 PLN Maximum total amount of depreciation in a year as part of one off depreciation 214 000 00 PLN DOUBLE TAXATION AGREEMENT DTA Double Taxation Agreement DTA Poland concluded Double Taxation Agreements DTA s with 81 countries which comply with the OECD Model convention Governance of the right for taxation looks differently in the case of share disposals in real estate companies Following the OECD Model Convention for those Double Taxation Agreements DTA s marked with yes the country of location of the real estate possesses the right for taxation vis a vis share deals and not the country of residence domicile of the seller Tax rates mentioned in the Double Taxation Agreements DTA s can be applied only then when the tax payer possesses and provides a certificate of residence issued by the Inland Revenue office of the applicable country

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71 Taxes COUNTRY ENTRY INTO FORCE PROPERTY CLAUSE DIVIDENDS IN INTERESTS IN ALBANIA 27 06 94 no 5 10 10 5 ARMENIA 27 02 05 yes 10 5 10 10 LICENSES IN AUSTRALIA 04 03 92 yes 15 10 AUSTRIA 01 04 05 yes 5 15 0 5 5 AZERBAIYESN 20 01 05 yes 10 10 10 BELARUS 30 07 93 no 5 15 0 10 0 BELGIUM 29 04 04 yes 5 15 0 5 0 5 BULGARIA 10 05 95 no 10 0 10 5 CANADA 08 12 12 yes 0 5 15 10 5 10 CHINA 07 01 89 no 10 0 10 7 10 CROATIA 11 02 96 yes 5 15 0 10 10 CYPRUS Protocol 09 11 12 no 0 5 0 5 5 CZECH REPUBLIC 13 06 12 no 5 0 5 10 DENMARK 31 12 02 yes 0 5 15 0 5 5 ESTONIA 09 12 94 no 5 15 0 10 10 FINLAND 30 03 79 no 0 5 15 0 0 10 FRANCE 12 09 76 yes 5 15 0 0 10 GERMANY 19 12 04 yes 5 15 0 5 5 GREAT BRITAIN 27 12 06 yes 0 10 0 5 5 GREECE 28 09 91 no 19 10 10 10 HUNGARY 10 09 95 no 10 0 10 ICELAND protocol 08 12 12 yes 5 15 0 10 10 INDIA 26 10 89 yes 15 0 15 20 INDONESIA 25 08 93 no 5 15 0 10 15 IRELAND 22 12 95 yes 0 15 0 10 0 10 ISRAEL 30 12 91 yes 5 10 5 5 10 ITALY 26 09 89 no 10 0 10 10 KAZAKHSTAN 13 05 95 yes 5 15 0 10 10 KOREA 21 02 92 no 5 10 0 10 10 Exemption from withholding tax pursuant to the directive on rulers and controlled companies Parent Subsidiary Directive

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72 Invest in Poland 2020 CONTINUATION COUNTRY ENTRY INTO FORCE PROPERTY CLAUSE DIVIDENDS IN INTERESTS IN LICENSES IN KUWAIT 25 04 00 no 0 5 0 5 15 LATVIA 30 11 94 yes 5 15 0 10 10 LITHUANIA 19 07 94 yes 5 15 0 10 10 LUXEMBOURG protocol 11 12 12 yes 0 15 0 5 5 MALAYSIA 05 12 78 no 0 0 15 0 15 MALTA 24 11 94 yes 5 15 0 10 10 NORWAY 29 01 13 yes 0 15 5 5 PORTUGAL 04 02 98 no 5 15 0 10 10 RUMANIA 15 09 95 no 5 15 0 10 10 RUSSIA 22 02 93 no 10 0 10 10 SAUDI ARABIA 01 06 12 yes 5 0 5 10 SINGAPORE 04 11 12 yes 0 5 15 0 5 2 5 SLOVAKIA 21 12 95 no 5 10 0 10 5 SLOVENIA 10 03 98 no 5 15 0 10 10 SOUTH AFRICA 05 12 95 no 5 15 0 10 10 SPAIN 06 05 82 yes 5 15 0 0 10 SWEDEN 15 10 05 yes 5 15 0 5 SWITZERLAND 25 09 92 no 5 15 10 0 10 THAILAND 13 05 83 no 20 0 10 5 15 18 03 03 no 5 15 0 5 5 15 THE NETHERLANDS THE PHILIPPINES 07 04 97 yes 5 15 0 10 TUNISIA 15 11 93 no 5 10 12 12 TURKEY 01 10 96 no 5 15 0 10 10 UKRAINE 11 03 94 yes 5 15 0 10 10 21 04 94 no 0 5 0 5 5 USA 23 07 96 yes 5 15 0 10 YESPAN 23 12 82 no 10 0 10 0 10 UNITED ARAB EMIRATES Exemption from withholding tax pursuant to the Directive on rulers and controlled companies Parent Subsidiary Directive

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73 Leasing LEASING Leasing types In their everyday work entrepreneurs deal with two kinds of leasing operational and financial These two definitions also result from the tax regulations Choosing the form exclusively depends on the taxpayer using the lease contract which can be subject to the needs of settling the tax costs and the term of predicted usage of the subject of the leasing The Operational Leasing With this form of the contract the subject of the leasing is recognised as assets of the leasing party for instance a leasing company Thus it is the leasing party who is obliged to make the depreciation and amortisation expenses However the leasing instalments constitute the tax deductible expenses of the party using the subject of the contract VAT and an initial charge are added to these instalments The sum of the instalments set in the contract reduced by the due VAT has to correspond to at least the initial value of the tangible fixed assets Shall the term of the contract expire the leaseholder is entitled to redeem the used subject The Financial Leasing Choosing this kind of the lease contract the taxpayer has to know that the subject of the contract is to be recognised as the asset of the Leaseholder thus unlike the operational leasing it is the leaseholder who is obliged to make the depreciation and amortisation expenses Additionally the user may only recognise the interest part of the leasing instalment as the tax deductible expenses VAT shall be paid in full in advance together with the first instalment immediately after collecting the subject of the contract It is worth mentioning that the customer becomes the owner of the subject of leasing automatically after the last instalment is paid

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74 LEASING Invest in Poland 2020 CONTINUATION Key Differences Depreciation and amortisation The Operational Leasing The Financial Leasing Duty of the leasing party Duty of the leaseholder Longer than 40 of the depreciation Term and amortisation time of the subject real Over 12 months property at least 10 years Tax deductible The user recognises the net instalments expenses and the initial charge as the expenses VAT Redeeming Added to the leasing instalments The user recognises the interest part of the leasing instalments and the depreciation and amortisation as the expenses Paid in advance together with the first instalment Depending on the depreciation and After paying the last instalment the subject amortisation rate and the redemption term becomes the possession of the user The key factor when choosing the form of leasing are definitely the initial costs which are significantly lower in case of the operational leasing due to the lower involvement of equity The majority of contracts concluded on the Polish market are the operational lease contracts one of the reasons of such situation may be the fact that in case of the financial leasing VAT has to be paid in full in advance Choosing the operational leasing is also recommended in case the planned term of using the subject is relatively short For this reason it is possible to increase the current operational costs which means reducing the tax base

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75 Social security SOCIAL SECURITY CONTRIBUTIONS Employer s obligations concerning ZUS Polish employers have the obligation to incur the costs of social security insurance to the Social Insurance Institution and are payers of contributions to the Social Insurance Institution and the National Health Fund The contributions for social insurance for employees and employers are calculated on the basis of the employee s gross income The employer is responsible for withholding and remitting the full amount of social security contributions employee s share and employer s share to the relevant authorities The rates of social security contributions are Insurance Employer Employee Retirement Pension 9 76 9 76 Disability 6 5 1 5 Sickness Not applicable 2 45 Work Accident Between 0 65 and 3 33 Not applicable Health Not applicable 9 00 Labour Fund LF 2 45 Not applicable Fund of Guaranteed Employee Benefits FGEB 0 10 Not applicable The contribution calculation basis for the retirement and social security insurance in 2020 cannot exceed 156 810 00 PLN Social security in Poland The social insurance system in Poland is universal and compulsory Social insurance covers people who are among others employees persons working on the basis of contracts of mandate or run a business activity NOTE Social security in Poland covers the EU citizens on the same basis as Polish citizens

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76 Invest in Poland 2020 PENSION INSURANCE Pension insurance The retirement and social security insurance aims to provide payment of retirement benefits for persons who have reached the retirement age retirement pension payment of benefits in the event of inability to work due to sickness disability pension The employer is the payer of due contributions to the Social Insurance Institution Pension is granted to women who are at least 60 and men who are at least 65 There is no minimum insurance period required for granting the pension Decisions about granting pensions are made by the Social Insurance Company s bodies which are of proper jurisdiction due to the place of living of the person who is applying for the benefit The proceedings for granting pensions start after submitting the application by an applicant

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77 Social security DISABILITY INSURANCE Disability insurance Disability insurance guarantees cash benefits in case of losing income connected with the risk of disability inability to work or death of a breadwinner in a family In such a situation persons who pay disability insurance premiums are granted disability pension for incapacity for work which is a substitution for remuneration or income and in the case of death of an insured breadwinner in a family the members of their family are granted family pension The premium for disability insurance is 8 of the basis of the assessment of the amount of premium where 6 5 is from the funds of the employer and 1 5 from the funds of the employee 1 Disability pension for incapacity for work Disability pension for incapacity for work can be granted to an insured person who fulfils all of the following conditions Is considered a person who is partially or entirely unable to work Has proven contributory and non contributory periods Inability to work started in the periods strictly set out in the Act A person who is entirely unable to work is a person who has lost the ability to perform any job A person who is partially unable to work is a person who to a considerable degree lost their ability to perform a job which is consistent with the level of that person s qualifications Inability to work and its level is certified by a board certified occupational medicine physician from the Social Insurance Company as the first certifying instance An applicant has the right to raise an objection to the physician s opinion to the Social Insurance Company Medical Board as the second certifying instance 2 Family pension Family pension is granted to entitled family members of the person who at the time of death Had a fixed right to a pension or fulfilled the conditions for obtaining it Had an established right to a bridging pension Had an established right to an inability to work pension or fulfilled the conditions to receive it They were on pre retirement allowance They were on pre retirement benefit They were receiving a teacher s compensation payment

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78 Invest in Poland 2020 SOCIAL SECURITY FOR INDUSTRIAL ACCIDENTS AND OCCUPATIONAL DISEASES Social security for industrial accidents and occupational diseases Security for industrial accidents and occupational diseases covers inter alia employees persons who work on the basis of contracts of mandate and persons carrying out business activity Benefits in respect of accidents at work and occupational diseases may be granted to the insured person They are Sickness benefit from accident insurance for the insured person whose inability to work arose as a result of an accident at work or occupational disease Rehabilitation benefit is paid after the sickness benefit has finished if the insured person is still unable to work and further treatment or rehabilitation give them a chance to regain ability to work One time compensation for an insured person whose health was damaged permanently or for a long period of time or for the members of the family of a deceased insured person or a person who collected disability pension Disability pension for an industrial accident or occupational disease for an insured person who has become unable to work due to an industrial accident or an occupational disease Training allowance is granted to a person with reference to whom retraining was stated as appropriate due to the inability to work in a current profession because of an industrial accident or occupational disease Family pension for the family members of a deceased insured person or a person entitled to disability pension for an industrial accident or occupational disease and allowance to family pension for an orphan The amount of the accident security premium varies from 0 67 to 3 33 of the basis of premium assessment The accident security premium is entirely covered by the employer

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79 Social security SOCIAL SECURITY FOR SICKNESS AND MATERNITY Social security for sickness and maternity Persons who are obligatorily insured for sickness and maternity are mainly employees Persons covered by obligatory pension and disability pensions insurance who inter alia work on the basis of an agency agreement or contract of mandate carry out non agricultural activity can also be insured voluntarily for sickness and maternity The amount of the sickness contribution is 2 45 of the sum for the basis of contributions The contribution is covered from the funds of the insured person The following benefits are paid due to insurance in case of sickness and maternity Sickness benefit Sickness benefit sick pay is granted to the insured person who became sick during the period of sickness insurance The right to sickness benefit is due after the expiry of the so called waiting period A person who is obligatorily covered by sickness insurance is entitled to sickness benefit after 30 days of continuous sickness insurance A person who is covered by this insurance voluntarily acquires the right to sickness benefit after the period of 90 days of continuous sickness insurance The sickness benefit is granted to an insured person in the amount of 80 of the basis of assessment and for the period of being hospitalised in the amount of 70 of the basis of assessment If the inability to work which was caused due to an accident on the way to or from work at work started during pregnancy or concerns tissue cell or organ donors then the sickness benefit is paid in the amount of 100 of the basis of assessment Rehabilitation benefit The rehabilitation benefit is granted to an insured person who can no longer be given the sickness benefit but still is unable to work and further treatment or rehabilitation give them a chance to be able to work again The benefit is granted for the period necessary to give them a chance to regain ability to work but not longer than for the period of 12 months

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80 Invest in Poland 2020 SOCIAL SECURITY FOR SICKNESS AND MATERNITY Social security for sickness and maternity cont CONTINUATION Maternity allowance Maternity allowance is granted to an insured woman who at the time of sickness security or at the time of a child care leave gives birth to a child takes a child up to 7 years of age for upbringing and in the case of a child with regard to whom there was a decision about an adjournment of compulsory education up to 10 years of age and who started legal proceedings for adoption in the Guardianship Court takes for upbringing as surrogate parents except for professional surrogate parents not related to the child a child up to 7 years of age and in the case of a child with regard to whom there was a decision about an adjournment of compulsory education up to 10 years of age Maternity allowance is paid during maternity leave for 20 weeks in the case of the birth of one child In the case of the birth of more than one child between 31 37 weeks Parental leave is granted immediately after maternity leave

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81 Social security SOCIAL SECURITY FOR SICKNESS AND MATERNITY Social security for sickness and maternity cont CONTINUATION Maternity allowance for the period specified in the Labour Code provisions as a period of parental leave is granted for up to 32 weeks in the case of the birth of one child and for the adoption for upbringing and to apply to the guardianship court for instituting proceedings for adoption or acceptance of upbringing as a foster family with the exception of a professional foster family of one child up to the age of seven and in the case of a child towards whom it was decided to postpone the compulsory schooling up to the age of ten 34 weeks in the case of the birth during one delivery of two or more children and in the case of a simultaneous adoption for upbringing of two or more children The maternity allowance for the period corresponding to the period of parental leave can also be used by both parents at the same time however the total period of the leave enjoyed by both parents must not exceed 32 or 34 weeks Attendance allowance Attendance allowance is granted for the period of a special leave when it is necessary to take care of a healthy child who is under 8 a sick child who is under 14 or other sick member of the family Attendance allowance is granted for not more than 60 days in a calendar year if a person takes care of a healthy child who is under 8 or a sick child who is under 14 If a person takes care of a sick child who is over 14 or other sick member of a family the allowance is granted for not more than 14 days The allowance is paid in the amount of 80 of the basis of allowance assessment

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82 Invest in Poland 2020 getsix PARTNERS With great pleasure the getsix Partners would like to take this opportunity to give thanks to all our special clients for giving us your trust to assist your businesses and to provide you with our best possible service getsix Partners have the philosophy that our dedicated employees are not only the wealth of our business but also make getsix different and stronger It is important to us that we always try to provide added value to our clients and potential clients in this ever changing world Our mission is to provide our clients with best in class full range services in Accounting and Finance HR and Payroll Tax and Legal complimented with our ISO and Microsoft accredited IT services and solutions getsix continues to establish itself in Poland and beyond while maintaining and developing our standardised processes Giving our clients a one stop shop or full service solutions we believe empowers them to realise their vision through our tireless pursuit of first class and innovative services and solutions In this Invest in Poland 2020 booklet we have tried to encompass all that you might require to know and also what we feel is important in a handy sized booklet We are unable to provide all tax and legal laws and regulations but hope we have helped to bring the main points together for a quick and simple reference Our team of experts and specialists will maintain our commitment to serving your business beyond your expectations Take care of your core business getsix will do the rest

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The status of all information complies with the effective date of the publication No responsibility is taken for the published information Editorial deadline 30 03 2020 Publication Year 2020 This publication was prepared by getsix in co operation with the TaxaGroup All rights including partial reprints photo mechanical reproduction as well as the evaluation of databases or similar devices reserved The authors have prepared this publication at hand with the utmost care Nevertheless small inaccuracies can never be avoided in such a comprehensive work The editors in chief therefore do exclude all liability for any consequences which might result from an application of this whole documentation in real life and practice For binding information you are requested to take up direct contact with the editors in chief Our Memberships Our Certification Our Partnerships Our Competencies

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D SSELDORF KATOWICE Item Code E0006 Mar 20 LOCATIONS ISBN 978 83 947292 1 9 getsix eu poland accounting eu facebook com getsix linkedin com company getsix twitter com getsix_Group WROC AW ul Zwyci ska 45 53 033 Wroc aw Tel 48 71 388 13 00 Fax 48 71 388 13 10 Claus Frank Monika Martynkiewcz Frank E mail wroclaw getsix pl KATOWICE ul Konduktorska 33 40 155 Katowice Tel 48 32 723 21 00 Fax 48 32 723 21 10 Monika Martynkiewicz Frank E mail katowice getsix pl POZNA ul Wyspia skiego 43 60 751 Pozna Tel 48 61 668 34 00 Fax 48 61 668 34 10 Roy Heynlein E mail poznan getsix pl BERLIN REPRESENTATIVE OFFICE Pariser Platz 4a D 10117 Berlin Deutschland Tel 49 30 208 481 200 E mail berlin getsix de WARSZAWA Sky Office Center ul W Rzymowskiego 31 02 697 Warszawa Tel 48 22 336 77 00 Fax 48 22 336 77 10 Ortwin Uwe Jentsch E mail warszawa getsix pl D SSELDORF REPRESENTATIVE OFFICE FOMACON Business Center M rsenbroicher Weg 191 D 40470 D sseldorf Deutschland Tel 49 221 972 670 00 E mail duesseldorf getsix de SZCZECIN ul Storrady wi tos awy 1a 71 602 Szczecin Tel 48 91 351 86 00 Fax 48 91 351 86 10 Roy Heynlein E mail szczecin getsix pl