Taxes. A word that makes every one of us dizzy to say the least. We all pay them, in fact, every person and company that earns some kind of income. We pay them because we have no choice, and as we know, for not paying them, we can get into conflict with the law…. So let’s check what taxes we face in Poland and how much each of them is.
What is a tax anyway?
Tax is – and here it will be easiest to quote the definition of tax directly from the native version of Wikipedia, which says that it is“an obligatory monetary benefit collected by a public-law association (state, local government unit) without a specific, direct reciprocal benefit. The taxes collected are used for the performance of public tasks.”
What is most striking about the definition of tax is that it is an obligatory benefit that does not provide any reciprocal benefit at the same time. True, in fact, our taxes are used to build roads or maintain, for example, the health service, but when every month we have to pay a significant part of our income to the state budget, and at the same time, driving to work, we bend a brand-new rim in a road rut, then the word taxes, already begins to be associated only with an unpleasant obligation, and not with a common care for the development of the country.
To make matters worse, the state is making sure that as much money as possible flows into “our common coffers,” and in order to make this possible, virtually every income of citizens and businesses operating in the country must be taxed. To this end, those in power have developed a tax system that consists of a whole mass of various taxes, which we list below.
Types of taxes in Poland
At the outset, we wrote about the fact that taxes apply to individuals or companies that earn some kind of income. To a large extent, this is true, but as we will present below, taxes affect each and every one of us, regardless of whether we earn income or only spend money.
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According to government websites, in Poland we can divide taxes into direct taxes, which include:
- corporate income tax (CIT)
- Personal income tax (PIT),
- tax on civil law transactions,
- tax on real estate,
- tax on means of transportation,
- tax on inheritances and donations,
- agricultural tax,
- forestry tax,
- dog ownership tax
as well as three indirect taxes:
- Value Added Tax (VAT),
- excise tax,
- gaming tax.
VAT tax
One of the highest taxes in Poland is VAT, or more specifically Value Added Tax (VAT), which, as the name suggests, is charged on every product and service. There are three VAT rates in the Polish tax system and they are: 23 percent, 8 percent and 5 percent. The vast majority of products and services are, of course, subject to the 23 percent rate, which means that nearly 1/4 of the price of, for example, a set of furniture, is VAT.
The value-added tax is so valuable to the state that for defrauding it – e.g., by vat mafias – the attorney general expects up to 25 years in prison. Such harsh penalties, however, usually apply to multimillion-dollar frauds, but the amount of the penalty may be an indication of how important this tribute is for the state budget. According to data provided by the Ministry of Finance, VAT accounts for about 40 percent of revenue to the state coffers.
Excise tax
It is paid by practically everyone, but not everyone is aware of it. Excise taxes are levied on fuel, energy, tobacco products or alcohol, among others. It is a tax aimed largely at reducing the consumption of substances harmful to citizens by significantly increasing their prices, but it has not been proven that excise taxes actually inhibit their consumption.
When we consider the fact that excise taxes are levied on, for example, energy or fuels, it is easy to see that this is not necessarily about the “well-being of citizens” or their health, but rather about very solid revenues for the state budget. Energy and fuels benefit all of us.
PIT tax
Another extremely important tax, from the perspective of the state budget, is the PIT, or so-called personal income tax. This tax was introduced in Poland in 1991, and after many amendments to the law, it amounts to 17 percent for incomes up to PLN 85,528 per year and 32 percent above that amount.
CIT tax
The CIT tax is an analogous tax to the PIT tax, except that it applies to legal entities, not individuals. Who is a legal entity? These include companies based on the canvass of commercial law, so a limited liability company, joint-stock company, limited partnership, limited joint-stock limited partnership, etc.
The standard CIT rate is 19 percent, but so-called small taxpayers, i.e. companies that have not earned income exceeding €2 million in the tax year, can expect a CIT of 9 percent. It is worth noting that the following are exempt from CIT:
Entities exempt from this tax are:
- State Treasury
- National Bank of Poland,
- budgetary units, special purpose funds established under separate laws,
- multinational enterprises and other economic units established by a state administration body jointly with other countries,
- municipalities in terms of their own revenues,
- Agency for Restructuring and Modernization of Agriculture,
- Social Insurance Institution, pension and investment funds,
- National Fund for Environmental Protection and Water Management,
- provincial funds for environmental protection and water management
- religious organizations
Read more about taxes in Poland at iwaccu.com
