CIT in Poland for Limited Liability Companies, Including Those Managed by Foreigners
Corporate income tax (CIT) in Poland is one of the key tax obligations for capital companies, including limited liability companies (sp. z o.o.). It is especially important for entrepreneurs, both domestic and foreign, to understand its functioning principles. The following article discusses the basic rates, tax reliefs, and specific regulations concerning limited liability companies managed by foreigners.
Basic CIT Rules in Poland
A limited liability company is subject to corporate income tax, which in Poland is 19% of the company’s income. However, for small taxpayers and newly established enterprises, a preferential rate of 9% applies, provided that their annual revenue does not exceed 2 million euros.
Who Is Subject to Taxation?
Entities required to pay CIT include:
- Limited liability companies (sp. z o.o.),
- Joint-stock companies,
- Limited partnerships and limited joint-stock partnerships (since 2021),
- Branches of foreign companies operating in Poland.
Our legal experts are readily available to provide professional answers to your inquiries regarding the tax system in Poland.
CIT Specifics for Companies Managed by Foreigners
Foreign entrepreneurs increasingly establish companies in Poland, attracted by the favorable business environment. However, understanding tax residency rules and CIT settlement methods is crucial for them.
Company Tax Residency
A limited liability company is considered a Polish tax resident if its registered office or actual management is located in Poland. This means that the company’s income is taxable in Poland, regardless of where it is generated.
Dividends for Non-Residents
If a foreigner owns a company, dividend payments are subject to a 19% tax rate. However, under double taxation treaties (DTT), preferential rates or complete tax exemptions may apply. To take advantage of such relief, a certificate of tax residency is required.
Tax Reliefs and Preferences for Limited Liability Companies
Estonian CIT
One of the most beneficial tax solutions in Poland is the so-called Estonian CIT, which allows for deferring tax payments until profits are distributed. This solution is particularly attractive for companies reinvesting their earnings in growth
R&D Activity Relief
Companies engaged in R&D activities can benefit from tax preferences, including:
- The ability to deduct eligible costs,
- Exemptions under the Polish Investment Zone program.
IP Box
Companies earning income from intellectual property can benefit from a preferential 5% CIT rate if they meet the conditions of the IP Box program.
Reporting and Accounting Obligations
Keeping Accounting Records
Limited liability companies are required to maintain full accounting records, which include:
- Recording all financial transactions,
- Preparing financial statements,
- Submitting an annual CIT-8 tax return to the tax office.
Tax Declarations
CIT is settled in the form of an annual CIT-8 declaration, which must be submitted by the end of March each year.
Frequently Asked Questions (FAQ)
How is CIT calculated for a limited liability company in Poland?
Can a foreigner establish a company in Poland without Polish residency?
What tax reliefs are available for companies in Poland?
How can a foreign company avoid double taxation in Poland?
What are the reporting obligations for limited liability companies in Poland?
How to reduce CIT in Poland?
Optimal CIT Strategies for Limited Liability Companies in Poland
A limited liability company in Poland is subject to CIT at rates of 9% or 19%, with numerous tax reliefs available, such as Estonian CIT or IP Box. Foreigners managing such firms should pay attention to tax residency issues and accounting and reporting obligations. Understanding these principles enables optimal tax planning and helps avoid issues with the tax authorities. Additionally, taking advantage of available tax relief programs can significantly reduce the overall tax burden, making Poland an attractive destination for business.
WRITE TO US