Labour costs in Poland are up to four times lower than those in the most developed economies in the EU. However, taxes and social security contributions are a heavy burden. Polish employers must pay approximately 0,67 Euros in taxes and social security for every euro paid to their employees. Employers are obliged to calculate and pay monthly withholding tax, social security and health insurance for their employees, taking into account the employee’s income, decisions on the joint taxation of spouses, and varying amounts of tax deductions. Employees are entitled to almost four week paid holiday per twelve months worked.
The flat rate of corporate income tax is 19 percent. Companies having their registered office or management in Poland are subject to CIT on all their income. Companies not having their registered office or management in Poland are subject to CIT only on income earned in Poland. Taxpayers are no longer obliged to submit tax returns monthly; however, they are still obliged to pay advances on a monthly basis. Taxpayers are obliged to submit CIT-8 tax returns on an annual basis.
The rate of withholding tax (WHT) applicable under Polish law is 20 percent, but a lower rate or tax exemption may be claimed under a double taxation treaty (DTT). Dividends disbursed from Poland are subject to 19 percent withholding tax. Again, a DTT to which Poland is a party may provide for a reduced rate of WHT. Poland has double taxation treaties with almost 80 countries.
The basic VAT rate in Poland is 23 percent and applies to most goods and services. A preferential rate of 8 percent applies to most foodstuffs, pharmaceuticals and medical products, restaurants and hotel services, transportation services as well as residential housing, magazines and newspapers. A reduced rate of 5 percent applies to unprocessed foodstuffs and books. The tax paid on purchases can be offset against the tax collected on sales, which is payable through monthly VAT returns.