The Corporate Income Tax Act sets the regulations for corporate income tax and it is set at 19%, unless in some exceptional circumstances. All corporate income tax (CIT) taxpayers must keep accounting ledgers according to the conditions set out in the appropriate legislation, principally the Accounting Act
Who is liable for CIT?
The Corporate Income Tax Bill states that the following are subject to CIT:
- Companies formed under the Commercial Companies Code (legal rather than natural persons)
- Unincorporated organizational units (except partnerships), organizations and limited joint-stock partnerships when their registered location or management board is in Poland
- Tax groups of companies- a minimum of two incorporated commercial law companies meeting lawful requirements and are tied on the capital level.
- Unincorporated companies whose registered location is not in Poland. They must be legal persons according to the laws of their own country and subject to taxes no matter where the income is generated.
Tax Obligations in Poland
A CIT taxpayer has unlimited tax liability regardless of where their income is earned as long as they have a registered location or management board in Poland. If the location isn’t registered in Poland, or the management board, then the company is subject to limited taxes based on the income generated in Poland.
Objectives of taxation in Poland
There is no doubt as to whether an income taxpayer is liable for corporate income tax, what may vary is how the CIT is applied. This is stated in the Corporate Income Taxation Act and it is worth looking closely at Articles 10 and 21. Article 10 focuses on the consideration of real income. While Article 21 concerns the form of economic activity. If foreign bodies carry out the activity, there is a flat tax rate of20%, or 10% when counted towards the taxpayers base rate liability.
Article 17 consists of a list of those companies that are exempt from taxes. These are considered to be associations, foundations, and societies. The revenues of such companies must be put toward “socially useful purposes”.
Article 12 explains what revenue is considered taxable and includes:
- Received money
- Any exchange difference
- The value of goods from partial returns, rights and other benefits
- Income generated from economic activity (including income that hasn’t been received yet)
- Income taxable once the goods have been released, the provision of a service, or in the moment a property is sold. If the service lasts for a period of time, the revenue date is considered to be the last date the service is provided.
If there is a circumstance that doesn’t fit in with the above, the start date for the revenue is the date the payment was made.
What costs can be deducted
It’s highly complex and impossible to provide a complete list of tax-deductible costs. Therefore, legislators use three generally traits:
- The cost must be borne of the taxpayer rather than the other party
- The cost was derived from acquiring revenues, main a source of income or generate new income
- The cost can’t appear on the list of non-deductible items
Depreciation can only apply to tangible assets like buildings, vehicles, equipment, licenses, etc. A depreciation write-off is usually taken from the principal value of the asset whether that monthly, the end of the fiscal quarter, or the end of the fiscal year.
Other tax deductions
Apart from depreciation, you may be able to deduct the following:
- Lease payments
- Donations to public organizations with a maximum of 10%
- Donations for worship with a maximum of 10% (when donating to both, the combined amount can’t be more than 10%
- Bank loans associated with reconstruction with a maximum of 20% of the loan
- Donations to the Church
- Purchasing new equipment, up to 50% of the cost
If a company makes a loss within a tax year, it can set it off against any income generated within a 5-year period. The most that can be set off is 50% of the loss from that year.
It may be possible to reduce the taxes due based on the taxes that have already been paid on dividends.
Generally speaking, the financial year is considered to be 12 consecutive months. This can be lengthened or shortened for some individual situations. The tax year doesn’t have to be one calendar year.
Obligations regarding advance payments
No taxpayer has to submit a tax return during the year. However, advance payments are compulsory. These payments are made on the 20th day of the following month or quarter.
Annual Tax Returns
Corporate taxpayers have until the end of the third month of the following year to submit tax returns. The CIT-8 form is used to declare income made or losses incurred. Along with this form, a company must submit balance sheets, profit and loss accounts and any further information required.
Article 27 stipulates that taxes or any differences due must be paid before the same date.
The financial statements submitted along with the CIT-8 form must be approved by the board or general meeting etc., before being sent to the tax authority no later than 10 days after the approval. These documents must also be sent to the National Court Register within the first 6 months of the new fiscal year.