Forms of taxation on economic activity in Poland – entrepreneurs decide

20 January 2017 is the deadline for entrepreneurs to choose the form of taxation for economic activity conducted in Poland. Polish fiscal system gives you the right to choose one of the four options: linear taxation, lump sum taxation on revenue, tax scale with tax rates 18% and 32% and tax card.

It is worth remembering the set deadline, as lack of decision on this issue means automatic preservation of the existing settlements method. A written statement needs to be submitted to the competent tax office in due time.

When making such decision, an entrepreneur should take into account at least a few factors. Form of taxation is a very important element of enterprise functioning. First of all, you need to thoroughly analyse the company’s financial situation, as the level of accrued profits is an important factor when performing such assessment.

Taxation on general terms is viewed as beneficial in the case of companies that do not grow high profits, as the entrepreneurs choosing the progressive scale are entitled to use a lower, 18% tax rate. Therefore, when annual profits do not exceed the first threshold (85 thousand PLN), maintaining the progressive scale allows them to preserve settlements at the rate of 18, and not 19 percent.

Tax scale is dedicated to companies and entities performing business activity – tax is imposed on profits, i.e. the difference between the revenue and expenditure paid in connection with the carried-out operations.

However, it is worth to note the fact that an entrepreneur may also choose the option of linear taxation on income at the rate of 19%. Another option is lump sum taxation on income, with the rate depending on the type of activity.

For beginner entrepreneurs, there is also an option of tax card settlements, and the decision regarding this needs to be made at the time of establishing a company. The method is regarded as one of the simplest forms of taxation on business activity in the Polish fiscal system. No obligation to maintain accountancy is another relief.

Monthly tax is established by the head of tax office who makes the decision based on the data on the type and scope of the performed business activity, the number of employees, also taking into account the population of the place where the activity is carried out.

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.