Income tax is related to the financial result of the company. Along with the general conditions for applying income tax for the difference between income and expenses of a company, there are some specifics in Poland regarding its payment, exemption conditions, rates, and benefits, which are provided below.

Links to detailed information. The main conditions for taxation with income tax are given on government websites biznes.gov.pl and podatki.gov.pl.

Income taxpayers are:

• legal entities,
• organizational units without forming a legal entity,
• limited liability companies, joint-stock companies, foundations, cooperatives,
• partnerships,
• tax capital groups,
• non-incorporated companies with a registered office or board of directors in another country if they are subject to taxation under the law.

The subject of income taxation is the income (excess of income over expenses incurred) received by the organization in a given tax year, which is the amount of income from:

• capital gains and
• other sources of income.

If deductible expenses exceed income, the difference is a loss from that source and there is no basis for income tax. A loss incurred in a given tax year can be settled (by reducing income) over the next 5 years.

Place of registration of income taxpayers. Companies with a registered office or board of directors in Poland pay income tax on their total income, regardless of where it is received. Companies that do not have their seat or board of directors on the territory of the Republic of Poland are taxed only on income received in Poland.

Income for income tax. Income tax revenues include money received, monetary values, exchange differences or the value of things, rights or other benefits received free of charge or partially for a fee.

Revenue arises on the date of transfer of a thing, disposal of ownership or provision of a service, including partial provision of a service, no later than: issuing an invoice or paying off receivables.

Deductible income tax expenses are expenses incurred to generate income or maintain or provide a source of income.

They may include expenses that are directly related to income, such as expenses incurred in purchasing commercial goods, as well as expenses that are only indirectly related to the income received.

Expenses directly related to income are paid in the year in which these incomes are received. Other expenses are paid in the year in which they are incurred.

The date of occurrence of costs is the date of their recognition in accounting based on an invoice or other accounting document.

To be eligible for a taxable expense deduction, the expenses must:

• be incurred by the taxpayer and not by another person (as a rule, it is important not to actually pay, but to have the costs),
• be incurred to generate income, maintain or provide a source of income,
• does not apply to expenses that are not accepted for tax accounting.

Deductible expenses include amortisation charges. Acquired fixed assets and intangible assets are subject to amortisation, i.е. buildings, structures, machinery, vehicles, investments in fixed assets of third parties and property rights such as licenses, copyrights and other rights, development costs.

As a rule, taxpayers write off amortisation from a certain initial cost of fixed assets – in equal installments on a monthly basis or at other intervals. There is also the possibility of a one-time write-off with the value of an intangible asset up to PLN 10,000 or for "small" entrepreneurs, or in the first year of doing business.

Tax-deductible expenses include leasing (rent) payments, depending on the terms of the agreement. Lease (rent) payments are deducted from the taxable base if:

• the contract is concluded for a certain period of at least 40% of the standard amortisation period, if the subject of the leasing contract is movable property or intangible assets*, or concluded for a period of at least 5 years, if its subject is real estate*,
• the amount of commissions (including the sale price), net of VAT payable, corresponds at least to the initial value of the subject of the contract, and in the case of the conclusion of a subsequent lease agreement for a fixed asset or intangible asset that was previously the subject of such an agreement, corresponds at least to its market value on the date of conclusion another lease agreement,
• the leasing agreement, if the user is an individual who is not engaged in entrepreneurial activity, is concluded for a certain period.

* Subject to amortisation.

The tax base is the amount of income from sources of income (capital gains and other income) for which the taxpayer can use the deductions to which he is entitled.

Some income (dividends, income from licenses used by foreign taxpayers) may be taxed at a flat rate, excluding deductible expenses – in such a situation, income is the tax base.

Income tax exemptions. The income of taxpayers is exempt from income tax, provided that they are directed to:

• statutory activities of payers, for example, scientific and technical, educational, sports and other,
• for socially beneficial purposes, for example, supporting social initiatives for the construction of roads and telecommunications in rural areas and rural water supply, charity, health care and social assistance, professional and social rehabilitation of the disabled and religious services, and others,
• for research purposes, for example, in the implementation of robotics, the development of a prototype of a new product and others.

Income tax rates are:

• 19% of the tax base,
• 9% of the tax base on income (excluding capital gains) for "small" taxpayers (with an income not exceeding 2 million euros according to the PLN exchange rate) and those who start a business in a given tax year.

Income tax advances. Monthly advance payments for income tax are paid before the 20th day of each month for the previous month, and the advance payment for the last month of the tax year – before the 20th day of the first month of the next tax year. If a tax return is filed and the tax is paid before the deadline for paying the advance payment for the last month, this advance payment is not paid.

Income taxpayers can pay monthly advances in a simplified form, that is, in the amount of 1/12 of the amount of tax indicated in the tax return submitted in the year preceding the given tax year.

Quarterly advances can be paid:

• taxpayers starting a business – in the first tax year,
• "small" taxpayers.

Quarterly advances are paid before the 20th day of each month following the quarter for which the advance is paid, and the advance for the last quarter of the tax year – before the 20th day of the first month of the next tax year. If a tax return is filed and the tax is paid before the deadline for its payment, the advance payment for the last quarter is not paid.

Taxpayers do not pay monthly or quarterly advances if the tax due on income received from the beginning of the year, less the amount of advances paid from the beginning of the year, does not exceed PLN 1,000. Advances are collected from the moment (for that month) when the total income exceeded this amount.

Income tax reporting. Taxpayers are required to submit an annual tax return on the amount of income (or loss) for a given tax year by the end of the 3rd month of the following year. If the tax year of the taxpayer is the same as the calendar year, then it is March 31 of the following year.

In addition, the taxpayer is required to submit financial statements to the National Court Register within 6 months of the new financial year.

The deadlines for paying income tax are set before the end of the 3rd month of the year following the tax year. If the tax year of the taxpayer coincides with the calendar year, the tax is paid before March 31 of the following year.

A special form of taxation, available from January 1, 2021, is a lump sum payment on company income, i.e. Estonian income tax. In this case, the subject of taxation (income) is the net profit, which will be directed by the company both for the purposes of its current activities (without paying advances, bookkeeping tax records) and for paying dividends.

When taxed (profit distribution), the effective tax rate (comprising corporate income tax and tax on dividends paid to shareholders) will be lower than in the case of a standard income tax. For "small" taxpayers, the rate will be 20% instead of 26.29%, and for other taxpayers – 25% instead of 34.39%.