Pay just 9% corporation tax on your company in Poland – all about reduced corporation tax in Poland

In today’s article we explain how Poland’s corporation tax system works and means your company only pays between 9 and 0% tax (a tax of 9% deferred, like in Estonia).

Staatenlos is not only for nomads or people wanting to leave their country. We are also always on the lookout to find interesting options for those who, for whatever reason, prefer to stay in their country of origin.

Ultimately, with a good understanding of national and international taxation systems, residents in countries under a heavy tax burden can optimise their tax situation.

We have mentioned in our blog the ways you can optimise your tax situation using international structures. In the end, for residents in countries with high taxation, it will almost always be necessary to act through independent and legal fiscal entities, that is to say, companies with share capital.

If you have been reading our blog for a while, the whole issue of CFC rules, business legitimacy and effective management will sound familiar to you. Keeping all these points in mind is key in avoiding paying local taxes despite having established the company abroad.

Today, we are going to delve into greater depth on this topic. We will explain how Poland, a modern country, with a well-educated, engaged and hard-working population, with a minimum wage in 2023 of only 3600 PLN (equivalent to €763), could be a great option to internationalise your business and optimise your taxes.

Since early 2019, Poland has one of the lowest corporation tax rates in the whole of the European Union, with only 9%. What’s more, since 2021 they have added a special plan which allows you to defer paying corporation tax until the profits are distributed among shareholders. Does this sound good? Well let’s get to it.

On Poland’s reduced corporation tax

At the beginning of 2019, Poland reduced its corporation tax from 15% to 9% on the first €1.2m of turnover. This special plan was improved shortly after with its use being extended to the first €2m of turnover.

If you do drop-shipping or you have business selling goods, you are likely to exceed this limit quickly. However, if you offer services or digital products without having a vast difference between turnover and profit, this system could be quite interesting.

That said, it is important to bear in mind that this reduction only applies to earnings from the company’s activity, not on capital gains which are always subject to a corporation tax of 19%.

On the special Estonian system in Poland (Estonian CIT)

In addition, from the 1 January 2021 the ‘special Estonian system’ was introduced. This system applies to companies which satisfy the following requirements.

• Earnings below 100 million PLN (€21,702,259.85)
• Shareholders must be physical people
• It does not have shares in other companies
• The company must have a minimum of three employees (not including the shareholders)
• The company’s passive income must not exceed its active income
• It must be able to demonstrate an appropriate level of capital investment

The great advantage of this system is that taxes are not paid until the profits are distributed, that is to say, as is the case with Estonian companies, corporation tax is deferred until the payment of dividends.

You can have recourse to this system for four years, extendable by another four years.

Founding a Polish company having a personal tax residence outside the country

It is completely legal to have foreign companies, however, so that the tax authorities in your country of residence recognise the foreign company and does not create problems for you owing to it paying lower taxes, that company must satisfy a series of requirements.

The EU member states and the countries with which Poland has signed a double taxation agreement have to satisfy, generally speaking, fewer requirements but do not have these advantages.

In any case, in order to benefit from the lower tax burden of a Polish company it is necessary to have a physical office in the country, from which the company can operate.

So, for argument’s sake, if you were living in a country bordering Poland, you could set up your office in Poland, commute there every day and thus pay very little in corporation tax. However, bearing in mind that you are reading this article in English, it is most likely that this is not your situation.

The office must have at least one room and must be sufficiently fitted out with all the equipment necessary for the business operations. Generally speaking, it will need a telephone and internet connection, as well as a desk and filing cabinets. The company’s important files and contracts must be somewhere in the office. The internet and fixed telephone usage bills are considered a good indication that in the office genuine business activity takes place.

You will have to hire a Polish worker who works at least part-time. Non-wage costs for a business owner rise to around 20% of social security contributions and to 18% of the payroll tax for an assistant. A salary of €400 should be sufficient.

In any case, take into consideration that if you want to benefit from the special Estonian system you will have to hire at least three Polish residents.

It is advisable to try to ensure that the creation of the company in Poland makes sense also from a strategic point of view. In other words, establishing your company in Poland should not be in order to pay less tax, but also to make use of cheaper labour there, to expand your business in the Eastern or Central Europe, to facilitate negotiation with suppliers, and so on.

Lastly, the role of the administrator is crucial. It must be evident that he or she is managing the company from Poland. The simplest thing would be to make a resident of Poland administrator, but, if one of the administrators lives in Germany, for example, they should be able to prove that when they act as administrator they do so from Poland.

If a Polish administrator is chosen, it is important to bear in mind that the manager cannot be a mere trustee, they must work in the company and receive a corresponding salary. They must have at their disposal sufficient means to, for example, authorise the signing of bank accounts. In the case of Poland, the minimum monthly salary should be around €1,000.

Having an administrator residing in Poland with a monthly salary in line with their role and who is actually available if someone calls the office, solves all potential problems, even if all of the shareholders live abroad.

In terms of the shareholders, they will be able to receive profits from the company in the form of dividends. Poland will generally deduct 15%, but this amount will be recompensed by the taxes that you have to pay in your country of residence.

General information about Polish companies

In Poland, apart from corporation tax of 19% (9% if your turnover is below €2m), VAT is charged at 23%. As usual, VAT affects in particular sales to private individuals.

In 2019, Poland also introduced an IP-Box in line with the new EU directives. In the case of taxing an IP-Box, intellectual property (IP=intellectual property) is taxed at a reduced rate. However, following a European reform of this concept, this now only applies, at most, to IT software and patents, and not to books or info products of any kind like occurred before.

Nevertheless, if you are selling some kind of software or you have a patent, considering that the IP-Box allows you to pay only 5% corporation tax, it may be worth finding out if this applies to your situation.

Polish trading companies have a name which is practically unpronounceable in other languages, Spółka z ograniczoną odpowiedzialnością (Sp. z o.o.), but in essence, they are the same as any other Limited Liability Company (LLC). The cost of setting up a Sp. z o.o. is relatively low, at 5,000 zloty (equivalent to €1,100).

In theory, any physical or legal person, national or foreign, can be the shareholder or administrator of a Sp. z o.o. Indeed, both functions can be combined and carried out by the same person. However, the potential founders must bear in mind that Polish corporation law does not allow a single-member company to be a sole shareholder of another Polish company. This must be taken into account if you want to use the company in Poland as subsidiary to another company.

The banking sector in Poland

The Polish banking system is relatively stable in comparison to most of the countries in the Southern Europe. The banking scene is multifaceted and offers modern services at attractive prices. Not for nothing Poland is becoming an increasingly popular financial centre for foreign companies of all kinds. Despite having the zloty as its national currency, accounts in euros are becoming increasingly widespread.

Our associates in Poland have recommended the banks mentioned below. In general, a visit to the branch in person is often necessary once in situ. The only account you can open remotely is with the French banking giant BNP Paribas.

• Alior Bank – you can open an account the same day
• Millennium – you can open an account the same day
• BNP Paribas – you can open an account remotely
• PEKAO – you can open an account the same day
• BZWBK – you can open an account the same day
• BÓS – you can open an account in two to three days
• BPS Bank – you can open account in three to four days
• Citibank – visit required following company inscription in the register
• Credit Agricole – you can open an account in five days
• BGK Bank – you can open an account in five days
• GETIN BANK – you can open an account in five days
• Raiffeisen – you can open an account in five days
• ING Bank – interview and cv required, account the same day
• mBank – interview and cv required, account the same day

Setting up your Polish company

Like in every jurisdiction, you must decide whether you wish to found a new company or acquire a pre-existing company. In the case of pre-existing companies, the only thing that happens is the shares are sold to the new owner. You also need to modify the constitution of the company to change its name and regulations. The chief advantage of choosing a pre-existing company is it already has company tax code, as in Poland these can take one to two months to be processed. The disadvantage worth mentioning is that you will need to ensure that the company does not carry any problems (debts, obligations, etc.).

Currently, in Poland, pre-existing companies can present their VAT declarations every quarter. In 2017, the rules changed meaning new companies had to declare every month. In general, it is preferable to be quarterly, as it saves a lot of time and makes it easier to deduct paid taxes. However, given that shelf companies are a rare commodity, they are often more expensive.

You can set up your Polish company remotely, but this usually entails a slight price increase. It is better to take a short trip to the country to open a bank account. If you don’t want to go, you can contract the services of a Polish embassy to sign the founding documents or consult a public notary with the relevant stamp for Poland.

All the pre-existing companies possess:

• Articles of association
• Inscription in the KRS (National Court Register)
• Inscription in the REGON (Central Statistics Office)
• NIP (Tax Identification Number)
• Inscription in the PL-VAT
• Inscription in the EU-VAT
• A virtual office with several addresses in different parts of Poland

However, it is just as easy to create a new company in Poland. The company can be created in a few days. If you need a quick launch it is preferable to choose a pre-existing company, as the processing of the VAT in Poland can take up to two months. That said, a new company can be more easily adapted to the needs of the founder in respects of, for example, the constitution and the company title. This is also possible in the case of a shelf company, but it requires a huge effort and extra costs.

Our associates in Poland can help with the usual services, such as accounting, tax advice and business consultancy.

Personal residence in Poland

By the way, if you are wondering what Poland looks like as an option for your personal residence, unfortunately it is not the most attractive country in this area. There is a 19% withholding tax on dividends from Polish companies. The same 19% applies for self-employed income, partnerships, and capital gains. For other types of income, there is an exemption up to PLN 30,000, after that income is taxed progressively at 17%, and above PLN 120,000, 32%.

Of course, you will pay less tax than if you reside in Portugal, Spain, Germany, France, etc., but there are much more interesting options in Europe, such as Bulgaria, Romania, Malta, Cyprus, Andorra, etc.

However, taxes are not everything. Poland is a big country with many relevant, well-connected cities with a lot of history like Warsaw, Krakow, Breslau, Łódź or Gdańsk – for those who want to live in a country where they have many things to do, Poland is much more suitable than Malta, for example.

Poland’s size is also relevant for those who want to get local clients. With almost 40 million inhabitants, the country has a much larger domestic market than most of the other options mentioned.

In terms of cost of living and development, Poland is also a very nice option. Even living in the capital, the cost of living is not as expensive as in Western European countries, but the infrastructure is already better than in Balkan countries, for example. Trains and trams are common in the main cities.

As for immigration, there are a few main ways to obtain a temporary residence permit in Poland for those who are not EU citizens: starting a business, studying, conducting scientific research, or getting a local job.

For entrepreneurs, it is necessary to establish a business activity and demonstrate that it will generate at least 15,000 euros of income per year. Multiples of this income allow an equivalent number of temporary residence permits for entrepreneurs, but that is not necessary to bring in family members of the applicant. Investors can also invest in real estate as a qualifying business.

In all cases, the applicant needs to prove that he or she has health insurance valid in Poland, a place to stay, and that they have the financial means to support themselves during their residence in the country.

Permanent residence, on the other hand, is obtained after five years of uninterrupted legal residence. Uninterrupted means that you have not left the country for a period longer than 6 months and all interruptions in a given period do not exceed 10 months in total.

The language is certainly not easy to learn, but for those who accept this challenge, naturalization is possible after only 3 years of permanent residence, or 2 years if married to a person of Polish citizenship for the last 3 years. Polish citizenship ranks as the fourth most powerful in the world, giving visa-free access to 157 countries, including the United States, Canada, Australia, New Zealand, and Japan. Although the country does not explicitly recognize dual citizenship, there are no penalties for having two citizenships.

Finally, if you invest in cryptocurrencies, you’ll be interested to know that in Poland, although you have to declare all your cryptocurrencies, you don’t pay taxes until you exchange your cryptos for fiat. In other words, you can make all the trades you want, but you won’t pay taxes until that crypto is converted into fiat currency (euros, dollars, zloty or whatever).

To conclude

With their new 9% corporation tax and even the possibility of deferring the payment of taxes until the distribution of dividends, Poland has become one of the most attractive countries in the EU for those who need their company there.

In political terms, Poland’s trajectory as a force opposing the mainstream within the EU has pros and cons; for example, an advantage is that Poland is less strict in applying regulation such as the General Data Protection Regulation (as well as offering a corporation tax rate of only 9%).

Although a 9% corporation tax is not perfect, it is 16% lower that what you pay in many other countries, and this applies to a turnover of up to €2m.

If you were wondering, in general terms, it will start to make sense to move your company from another European country to Poland if you already have annual pre-tax profits of €100,000.

Now, if you need help to set up and manage a company in Poland, contact us. Our local partners will provide competent and reliable support so you can benefit from the opportunities that Poland offers.

Of course, if you are not sure whether this is the best option or you wish to know how everything would look in your particular case, you can book a consultancy.

You know, because your life is yours!