Payroll accounting & social insurance

Payroll calculations is an inevitable part of doing business. If you decide to employ personnel, you need to remember about the obligations that come with it. Employers do not only need to pay out salaries or wages, but also need to make sure that they comply with all legal and tax obligations related to paying remuneration.

A substantial part of everyone’s salary goes to Social Insurance Institution, or ZUS. Founded in 1934, the body deals with all things related to work and retirement. If is financed, to a large extent, by mandatory contributions that are calculated based on an employee remuneration and settled on a monthly basis.

To go from gross salary to net salary, an employer needs to deduct the social insurance contributions paid by the employee. These are pension, disability and sickness contributions. They are 9.76, 1.5 and 2.45 percent of salary respectively. After these deductions, the amount you are left with constitutes the basis for calculating health insurance contribution. The contribution rate is 9% of the basis, but a part of it diminishes the basis for calculating income tax. Before we get to the income tax calculations, you need to also take into consideration the deductible expenses related to employment.

To arrive at the basis for calculating income tax payments, deduct the social insurance contribution, and the deductible employment expenses from the gross salary. Advance payments for income tax are charged at the rate of 18%. However, the amount you end up is deducted by 46.33 PLN and also by the part of health insurance contribution we established later, i.e. 7.75% of the gross salary. This is the amount you need to contribute to tax authorities. Advance income tax payments are provided tax authorities on monthly basis.

This is the end of payroll calculations on the part of an employee. To sum up, the gross salary is made smaller by pension, disability, sickness and health contributions and income tax. As you can see, payroll accounting in Poland is nothing but simple and easy.

What This Means for Businesses in Poland

Tax policy changes in Poland have direct implications for both domestic and foreign-owned businesses. Companies operating in Poland must stay informed about regulatory developments to optimize their tax position and maintain compliance. The Polish tax system includes CIT (19% standard, 9% for small taxpayers), VAT (23% standard rate with reduced rates of 8% and 5%), and various sector-specific levies.

For international entrepreneurs and investors, understanding the Polish tax landscape is essential for business planning. Poland offers several attractive incentives including the Polish Investment Zone (up to 15 years of CIT exemption), R&D tax relief (up to 200% deduction), and the IP Box regime (5% effective CIT rate on qualified intellectual property income). Professional tax advisory can help identify the most beneficial structure for your specific situation.

The interplay between Polish domestic tax law and international tax treaties is particularly important for foreign-owned entities. Transfer pricing regulations, withholding tax provisions, and anti-avoidance rules (GAAR) require careful navigation to ensure both compliance and optimization.

If you are doing business in Poland or considering entering the Polish market, Zalewski Consulting can help. Learn more about our tax advisory services in Poland, or contact us for a free consultation.