Inflation Rises to 2.5% in May, Slightly Below Expectations

Preliminary data from the Central Statistical Office (GUS) indicate that consumer inflation in May reached 2.5%, up from 2.4% in April and 2% in March. This increase, while notable, is lower than the anticipated 2.8% forecast by economists.

The GUS released its flash estimate on Wednesday, revealing that prices for consumer goods and services rose by 2.5% compared to May 2023, with a month-over-month increase of 0.1% from April 2024. Specifically, the price index for May stood at 102.5 year-on-year and 100.1 month-on-month.

Food and non-alcoholic beverages saw a 1.6% price increase from the previous year and a 0.3% rise from April. Fuel prices for private transportation increased by 3.6% year-on-year but decreased by 0.3% compared to the previous month. In contrast, energy prices dropped by 1.8% compared to May last year and by 0.2% from April this year.

Adam Glapiński, President of the National Bank of Poland (NBP), recently addressed potential inflation trends for the coming quarters. He expressed concerns about a possible rise in inflation, citing uncertainties in the scale of this increase. Glapiński highlighted that the discontinuation of certain fiscal measures could contribute to this uptick.

As of early April, the reduced VAT rate on food products ceased to be in effect, and energy price shields are scheduled to end mid-year. According to Glapiński, preliminary estimates suggest that these changes could drive inflation above 5% by the end of the year, significantly exceeding the inflation target.

The GUS data underscore ongoing inflationary pressures in Poland, influenced by various factors including fuel and energy prices, as well as changes in tax policy. As the economic landscape evolves, close monitoring of these trends will be crucial for policymakers and consumers alike.

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.