Want to start your own business in Poland, but struggling to figure out the taxes?
Then this episode is for you!
We break down the sole proprietorship taxation system in Poland in detail and in plain English, highlighting what you need to watch out for.
So watch the video to the end, and below is the text version.
In Poland, a sole proprietor has the right to choose their form of taxation.
This means you decide for yourself which taxes and under which system you will pay.
What's more, you can change this system to another one once a year.
Forms of Sole Proprietorship Taxation in Poland
There are 4 forms of taxation in Poland:
- Progressive tax (General rules);
- Linear tax (Flat tax);
- Ryczałt (Lump-sum tax);
- Tax card.
Progressive tax
The general form involves taxing the entrepreneur's profit depending on the amount of income and in accordance with a two-tier scale.
When profit does not exceed 120,000 PLN per year, the tax rate is 17%.
In addition, the entrepreneur must pay ZUS.
For the first six months, an entrepreneur in Poland pays only preferential ZUS - 420 PLN per month, if the income is less than 6,000 PLN, and anything above that is 9% of the income amount.
Later, social contributions will be added to this amount.
Pros and cons of taxation under general rules
The main advantages of this form of taxation are:
- the opportunity to use tax reliefs and deductions;
- paying tax only after deducting the entrepreneur's expenses.
Disadvantages of taxation under general rules:
- after exceeding the tax threshold of 120,000 PLN, the rate increases to 32%;
- a lot of paperwork related to maintaining business documentation.
Linear tax in Poland
When choosing this form of taxation in Poland, note that regardless of the amount of profit, you will have to pay the state 19%.
Just like with taxation under general rules, it is necessary to maintain a Revenue and Expense Ledger.
The linear tax form in Poland is more convenient than the general rules option because you don't need to worry about the tax threshold and the tax-reducing amount.
The ZUS payment system is the same as in the case of taxation under general rules.
Lump-sum tax - ryczałt
A taxation form where the entrepreneur pays tax based on revenue.
This option offers relatively low tax rates ranging from 2% to 17%.
The ZUS amount is also flat in this case:
There are 3 income thresholds: up to 60k, up to 300,000, and over 300,000 zł.
The social security contribution amounts are 336, 560, and 1008 zł.
Please note!
This taxation form can be chosen by entrepreneurs starting their business in the current year, or those whose revenue in the previous year did not exceed 2 million euros.
This form is ideal for entrepreneurs with minimal expenses.
For example, apartment landlords, programmers, freelancers, and so on.
VAT in Poland - Value Added Tax.
In Poland, VAT is 23%, and in some cases can be 3.5%, or 8%..
The zero VAT rate applies to the export of goods or services to other EU countries.
Is your revenue as an entrepreneur less than 200,000 zł per year?
This means you can be exempt from VAT registration.
However, there are types of activities where VAT registration is mandatory.
For example:
- Consulting;
- Accounting services;
- Legal services.
How to calculate VAT on your services and goods?
Add 23% to the price of your product or service.
At the end of the month, calculate how much VAT was paid and received.
The balance must be returned to the state.
Need help choosing a taxation form?Contact us!Submit a request for a consultation below or call the phone number provided.
Useful materials:
5 steps to starting a business in Poland: choosing the business and taxation form, ZUS, and registration
JDG in Poland. Who can become one and how to register a business?
Sp. z o.o. in Poland: everything about taxation and accounting
How to open a company in Poland? Everything about fast online registration of a legal entity - Sp. z o.o. and others
Business and residence permit in Poland: karta pobytu regardless of the business form
Business in Poland - Beginner mistakes: accountant, choosing a business form, fund management
