Previously, we looked in detail at the taxes that apply to sole proprietors in Poland.
But what about those who are opening a company?
In today's article, we will discuss the taxation of the most common form of doing business, namely a limited liability company, in Polish – Spółka z o.o.
Compared to sole proprietorship, a limited liability company allows you to separate your personal capital from the company's capital.
An undeniable advantage here is that the company itself is liable for its financial obligations.
Also, the funds in circulation are managed by the company itself, whereas a sole proprietor is liable with all their personal assets.
On the other hand, when looking at taxation, this form of business may not be as profitable for small entrepreneurs.
Let's figure it out!
CIT in Poland
Under Polish law, a company pays a profit tax called CIT (Corporate Income Tax), and each of the founders must pay personal income tax when dividends are distributed.
The CIT rate in Poland is just 9% for businesses whose annual revenue does not exceed EUR 2 million.
Companies exceeding this limit are required to pay a 19% tax.
Some companies engaged in specific activities or under certain conditions will also be required to pay tax at this rate.
When paying out dividends, the founder must also pay a 19% tax.
Which, in my opinion, points to double taxation.
If founders pay themselves a salary as the Head of the Board or board members, personal income tax rates of 17% and 32% will apply*.
*(depending on the annual income amount)
However, in this case, their salaries are treated as company expenses, which helps avoid double taxation.
ZUS Contributions - social security and health insurance contributions.
When paying themselves a salary, a co-founder is required to pay a health insurance contribution.
Starting in 2022, this contribution is 9% of the gross salary.
If a co-founder also wants to pay social and pension contributions, they need to register a management contract (kontrakt menedżerski) with ZUS.
VAT in Poland
This is the value-added tax.
Read more about VAT in Poland in this video.
Still have questions?Come to our consultation and we will help you understand all the nuances of registering and running a business in Poland.
Useful materials:
5 steps to starting a business in Poland: choosing the business and tax form, ZUS, and registration
Sole proprietorship in Poland. Who can become one and how to register the activity?
Spółka z o.o. in Poland: all about taxation and accounting
How to open a company in Poland? All about fast online registration of a legal entity - Spółka z o.o. and others
Business and Residence Permit in Poland: Karta pobytu regardless of the business form
Business in Poland - Beginner Mistakes: accountant, choice of business form, fund management
Taxation of sole proprietorships in Poland - What you need to know? - Business in Poland
