Poland is increasingly popular among companies looking to expand or establish a presence abroad. A skilled workforce, an increasingly stable economy, and improving infrastructure make business in Poland attractive. However, to succeed, you must navigate elements such as company formation, regulation, taxation, payroll, and compliance.

In this article, Leinonen Poland explains the basics you need to know about employment, payroll, and taxes in Poland.

Company Establishment in Poland

To guarantee easier market access and to gain trust in Poland, establishing a legal entity is recommended. Choosing which type of entity to form is a critical step, affecting taxes, liability, and ongoing compliance. While there are a whole host of (rarely used) options, the most common legal form among entities with foreign capital is a limited liability company (LLC).

Taxation in Poland

Corporate Income Tax (CIT) in Poland

As a standard, companies in Poland pay 19% CIT. However, certain conditions make some businesses eligible to pay a lower CIT rate of 9%.

This rate applies to:

• Small taxpayers whose annual revenues, including VAT, did not exceed EUR 2 million in the previous tax year (converted according to average National Bank of Poland exchange rate)
• Taxpayers starting a new business (for their first tax year in operation)

Value Added Tax (VAT) in Poland

The standard VAT rate in Poland is 23%, but there are four potential VAT rates for goods and services.

The following reduced rates are applicable to certain goods and services:

• 8% VAT is applicable to goods and services including (but not limited to) certain food products, newspapers and periodicals, animal feeding stuffs, and transport of passengers and accompanying luggage
• 5% VAT rate is applicable to basic foods, products for children and hygiene products, printed books, books on disks, tapes and other media, and e-books (with some exceptions)
• 0% VAT rate is applicable to services including (but not limited to) the intra-European supply of goods, international transport services, and the supply of goods to free zones or customs warehouses

Employment & Payroll in Poland

Employment in Poland is governed by the Labour Code. This applies equally, and must be complied with by both the employer and the employee.

Salary in Poland

The average gross salary in Poland is around PLN 8,962 per month. Minimum wage is PLN 4,666 per month, which equates to PLN 30.50 hourly.

Personal Income tax (PIT) in Poland

The amount of PIT an employee pays depends on the amount of income earned:

• Up to PLN 30,000 per year – no income tax payable
• Up to PLN 120,000 per year – 12% income tax
• Over PLN 120,000 per year – 32% tax

Social Security in Poland

Poland’s social security system consists of three main categories:

1. The Social Insurance Institution (ZUS)
2. Obligatory pension funds (OFE)
3. Voluntary pension funds

Overall, employers pay around 22.14% of the employee’s gross salary to social security contributions including pensions, disability insurance, accident fund, labour fund, Guaranteed Employee Benefits Fund, and Employment Capital Plans (PPK) fund. Employees pay around 13.71%, amounting to a total social security rate of 35.85%.

Special Economic Zones are widely used, and companies can be granted various tax benefits when investing in certain regions. Consulting local experts on tax in Poland will help you better understand these nuances.

Terminating Employment

There are three methods of terminating an employment agreement in Poland: termination by mutual consent, termination with notice, and termination without notice. Unless an employee is still on a probation period, a valid reason must be given for terminating the employment.

Non-Residents and Expats

Non-residents who work for a foreign-owned business in Poland that has a permanent establishment or fixed place of business in the country must pay tax on their income.

If the employer does not have a permanent establishment or fixed place of business in Poland, income tax must be paid once the employee has spent more than 183 days in total in the country.

Poland is an increasingly popular destination for expats. As part of the European Union (EU), the Polish labour market is open to all EU citizens. Many foreigners working in Poland operate fully under the Polish system, but other solutions are possible depending on country of origin. For example, if an expat can prove being under the social security of another EU country, payment of certain social costs (ZUS) can be avoided.

How Can Leinonen Support Your Business in Poland?

Setting up to do business in a brand new country can be confusing. If you are considering establishing your foreign-owned business in Poland, you need a local expert by your side. Drawing upon 17 years in Poland serving 80+ clients, Leinonen’s cross-border experts assist you with accounting, payroll, taxes, legal compliance, and company setup. We help you avoid common pitfalls, streamline operations, and ensure local regulations are followed right from the start.

Get in touch today to organise a consultation.

The post BUSINESS IN POLAND appeared first on Leinonen Poland.

In this article, trusted accounting, tax, and payroll experts from Leinonen Poland will explain the essentials. Covering everything from payroll and social security to employee benefits and working hours, we will help set your foreign-owned business in Poland up for long-term success.

Cost of Employment for Foreign-Owned Businesses in Poland

The total cost of employment in Poland includes several components aside from gross salary (the amount paid to the employee before any deductions). This includes social security contributions, Labour Fund, PPK fund, and more.

Social Security Contributions

Employers in Poland are required to contribute to various social security funds on behalf of their employees, and these contributions must be submitted to the Social Insurance Institution (ZUS) by the 15^th of the following month.

As a percentage of gross salary, these contributions are:

• Pension insurance – 9.76%
• Disability insurance – 6.5%
• Accident insurance (calculation based on number of employees and business sector) – typically 1.67%
• Labour Fund – 2.45%
• Guaranteed Employee Benefits Fund – 0.1%
• Employee Capital Plans (PPK) – 1.5% to 4% (depending on employee participation)

Contributions to pension and disability insurance are only paid up to the threshold of PLN 260,190 gross salary.

How is Accident Insurance Rate Calculated?

While employers with fewer than nine employees pay a flat rate of 1.67% for accident insurance, employers with nine or more employees may contribute a different rate. The rate ranges from 0.67% to 3.33%, depending on industry classification. However, it is important to note that foreign employers only pay the flat rate of 1.67%, regardless of company size.

Labour Fund and Guaranteed Employee Benefits Fund

Employers in Poland must also contribute to the Labour Fund and Guaranteed Employee Benefits Fund at rates of 2.45% and 0.10% respectively. These funds will provide unemployment protection and wage guarantees in case of insolvency.

Employment Capital Plans (PPK) Fund

Most employers are also required to provide an additional retirement savings plan under the Employment Capital Plans (PPK) fund, and should contribute a minimum of 1.5% of gross salary to this (with the option to increase contribution up to 4%).

State Fund for Rehabilitation of Disabled People

This contribution is paid by employers who fail to hire the required number of disabled employees (6% of staff for those with at least 25 full-time employees). The amount paid is 40.65% of the average salary for the number of employees that would bridge the gap between actual number of disabled employees and the number of disabled employees that would make up the 6%.

Example Cost of Employment Calculation

The following example demonstrates the potential cost of employment for a gross salary of PLN 5,000.

Employee Remuneration in Poland

Minimum Salary in Poland

In 2025, the minimum monthly salary in Poland is PLN 4,666 gross, with a minimum hourly rate of PLN 30.50 gross.

Income Tax in Poland

There are two basic income tax rates for employees in Poland:

• 12% rate if the tax base does not exceed PLN 120,000
• 32% rate if the tax base exceeds PLN 120,000

Overtime

Overtime work is allowed in special cases. It must be approved by the supervisor, and employees are entitled to additional compensation. The amount varies depending on whether the work is performed at night, on Sundays and public holidays, or on other days. In exchange for overtime work, employers may grant employees time off (the same amount of hours worked).

For overtime work, employees are entitled to the following in addition to their normal remuneration:

1. 100% extra remuneration for overtime work performed:
   • At night
   • On Sundays and public holidays which are not usual work days for the employee
   • On a day off work granted in exchange for work on a Sunday or public holiday
   • Where work exceeds the average 40 hour working week
2. 50% extra renumeration for overtime work performed in any other situation than the above.

Working Hours in Poland

Working Hours and Breaks

The standard working week in Poland is eight hours per day and 40 hours per week.

On any given day, employees are entitled to the following breaks:

• Those working at least 6 hours are entitled to one rest break of at least 15 minutes
• Those working more than 9 hours are entitled to an additional rest break (+15 minutes)
• Those working more than 16 hours are entitled to a further rest break (+15 minutes)

Public Holidays

Work on public holidays can only be performed in specific situations.

According to Article 151 of the Labour Code, these include:

• Where it is necessary to conduct a rescue operation to protect human life or health, property or the environment, or to remove a failure
• In continuous operations, in shift work, and during necessary repairs
• In transport and communication
• In company fire brigades and in company rescue services
• When guarding property or protecting people
• In agriculture and breeding
• When performing works is necessary due to social utility and everyday needs of the population

Employee Benefits and Tax Deductions in Poland

Employee Benefits

Employee benefits play an important role in Poland’s payroll tax system. Some benefits – like lunch coupons and eye glasses refunds – are not subject to social security contributions or income tax. Contributions to the Company Social Benefits Fund (ZFŚS) are also excluded from ZUS contribution calculations.

But other benefits like holiday pay, private medical insurance, life insurance, and sports activities are subject to taxation. Other employee perks (like gym memberships) are also taxed, but may be exempt from social security contributions.

For instance, prizes in the form of jubilee bonuses and gifts for important life events (up to a certain limit) are exempt from social security contributions. Some benefits are also taxable without ZUS contribution if the employee contributes to the costs.

Tax Deductions

Additional tax deductions are available in some circumstances and up to a certain income level.

These scenarios include:

• Single parents with children
• Large families with 4+ children
• Individuals who have recently relocated to Poland
• Young people up to 26 years old
• Working seniors
• Couples filing taxes together

Get Informed on Payroll in Poland With Leinonen

For 17 years, Leinonen Poland has been providing expert consulting on accounting, taxation and payroll in Poland. Our close-knit team of 25 financial experts is trusted by 80+ clients, and we specialise in equipping foreign-owned businesses in Poland with the tools and knowledge they need for long-term success.

Ready to meet your competent expert on accounting and payroll in Poland? Contact us today and speak to one of our consultants.

The post Payroll and Employment in Poland: Key Facts for Foreign-Owned Businesses appeared first on Leinonen Poland.

What is the Split Payment Mechanism?

When using the split payment mechanism (MPP), payments for goods or services are divided into two parts and transferred into designated bank accounts.

• The net amount is transferred into the seller’s account.
• The VAT amount is transferred into a separate VAT account, and money in this account can only be used for statutory payments.

Why Has the Split Payment Mechanism Been Extended?

The split payment mechanism in Poland helps counteract tax fraud by increasing the transparency of transactions. Poland was able to secure the extension after successfully demonstrating improved VAT collections and faster refunds of credits for taxpayers since the mechanism came into force in 2019.

Is the Split Payment Mechanism Mandatory?

The split payment mechanism in Poland can be used voluntarily, but in some cases it is mandatory. Split payment is compulsory for transactions exceeding PLN 15,000 for over 150 “high-risk” goods and services listed in Annex No.15 to the VAT Act.

These Include:

• Metal products
• Laptops and processors
• Recyclable materials
• Fuel for cars
• Construction services

What Is the Penalty for Not Using the Split Payment Mechanism in Poland?

Both sellers and buyers can be faced with penalties for improper split payment mechanism usage. If a seller of goods or services in one of the mandatory categories fails to specify “Mechanizm podzielonej płatności” (split payment mechanism) on an invoice, they will face a fine of 100% VAT. On the flipside, if a buyer does not pay using the split payment mechanism, they will also be handed a 100% VAT sanction.

How Can the Split Payment Mechanism in Poland Benefit Businesses?

All VAT taxpayers are included in the Ministry of Finance’s “white book of taxpayers”. Among other details, this book contains the correct bank account numbers of businesses registered for VAT in Poland. Businesses must be paid into the accounts listed, and face penalties for using unpublished bank accounts. Being able to verify bank account numbers against this database can help buyers establish trust in a seller.

Contact Leinonen for Support With VAT in Poland

By staying compliant with regulations surrounding VAT in Poland, your business can avoid problems and penalties in the future. Leinonen has been providing local expertise to 70+ small and large businesses in Poland for more than 15 years. Specialising in foreign-owned business, our tailor made services can give you the peace of mind that you are staying compliant with unfamiliar and ever-changing regulations.

Unsure how the split payment mechanism affects you, or need more advice on payroll, accounting, or tax and VAT in Poland? Connect with one of our local experts today.

The post Split Payment Mechanism: Extension, Uses, and Benefits for VAT in Poland appeared first on Leinonen Poland.

The National E-Invoice System: Revolutionizing Invoicing in Poland

The KSeF system stands as an innovative ICT platform designed to facilitate the issuance, reception, and archiving of structured invoices within Poland. It provides a framework for the seamless exchange of electronic invoices, particularly in the business-to-business (B2B) areas. Notably, the system is accessible free of charge for both B2B and business-to-government (B2G) transactions.

Introduced from 2022 on a voluntary basis, the KSeF system will transition into a mandatory solution by 2026, requiring compliance from companies of all sizes across Poland. Structured invoices within this system encompass specific information outlined in regulations and are stored in a designated electronic format, enabling easy extraction and processing of embedded data.

The Technical Nuances of KSeF and Challenges for Foreign Entities

However, as with any transformative shift, the implementation of KSeF presents a set of challenges, especially for foreign entities operating within Poland’s economic landscape.

Technical issues: The KSeF system may experience technical issues, which could cause delays or rejections of invoices.

Validation process: Each invoice will be validated by the KSeF from a technical perspective, and any technical mistake will result in rejection by the KSeF. This could cause issues for foreign companies that are not familiar with the KSeF system.

Scope of e-invoicing: The scope of e-invoicing will apply to activities that currently require documentation with an invoice issued in accordance with the Polish VAT Act. However, other activities may be included, such as services subject to VAT exemption. This could cause confusion for foreign companies that are not familiar with the Polish VAT Act.

Fixed establishment criteria: Foreign companies with a fixed establishment in Poland will be subject to mandatory e-invoicing. However, the fixed establishment criteria are controversial in the EU, and the Ministry of Finance plans to issue explanatory notes specifically on the fixed establishment criteria to help foreign companies and their Polish contractors determine whether they have a fixed establishment in Poland.

Attachments to invoices: Businesses cannot add attachments to invoices in the KSeF system. This could cause issues for companies that are used to attaching supporting documents to their invoices.

Corrective notes: Corrective notes are excluded from the KSeF system. This could cause issues for foreign companies that need to issue corrective notes.

Language barrier: The KSeF system is in Polish, which could cause issues for foreign companies that do not speak the language.

Navigating and Focusing on the Transition Period

As the 2026 is not far away, it becomes imperative for foreign companies with operations in Poland to prepare diligently. Seeking IT support to ensure compliance with e-invoicing requirements, understanding the nuances of the KSeF system, and staying ahead of clarifications and guidelines issued by the Ministry of Finance will be crucial.

How Can Leinonen Help With Adapting to E-Invoicing in Poland?

Poland’s shift to mandatory electronic invoicing through the KSeF system represents a significant step towards a digitized future. While the transition presents several challenges, proactive adaptation and alignment with the system will enable businesses to thrive within this new invoicing landscape.

As Poland moves towards digital environment, collaboration between local authorities and foreign entities becomes pivotal in navigating these changes seamlessly, ensuring a smooth transition into an era of enhanced efficiency and digitized financial operations.

If you need a reliable accounting partner in Poland, contact Leinonen.

The post Mandatory E-Invoice System in Poland: Understanding the KSeF Changes Effective from 2026 appeared first on Leinonen Poland.

Like most EU countries, there is an extensive list of public holidays in Poland each year. If you are new to operating a business in Poland, it is vital to know your responsibilities.

When are Poland’s Public Holidays?

Polish public holidays that fall on the same date each year:

• 1^st January – Nowy Rok (New Year’s Day)
• 6^th January – Święto Trzech Króli (Epiphany)
• 1st May – Święto Pracy (Labour Day)
• 3rd May – Święto Narodowe Trzeciego Maja (Constitution Day)
• 15th August – Wniebowzięcie Najświętszej Maryi Panny (Assumption Day)
• 1st November – Wszystkich Świętych (All Saints’ Day)
• 11^th November – Narodowe Święto Niepodległości (Independence Day)
• 25^th December – Boże Narodzenie (Christmas Day)
• 26^th December – Drugi Dzień Bożego Narodzenia (St. Stephen’s Day)

Polish public holidays with varying dates each year:

• Wielkanoc (Easter Sunday) – 20^th April in 2025
• Drugi Dzień Wielkanocy (Easter Monday) – 21^st April in 2025
• Zielone Świątki (Pentecost) – 8^th June 2025
• Boże Ciało (Corpus Christi) – 19^th June 2025

What Legal Entitlements do Employees Have During Public Holidays in Poland?

In Poland, employees are entitled to the following if they work on a public holiday:

• Reduced nominal operating time.
• An additional day off (and another if the holiday falls on a Saturday).
• 100% of their hourly rate on top of their regular remuneration for overtime work.

What are the Legal Obligations of Employers During Public Holidays in Poland?

Employers have several responsibilities in relation to public holidays in Poland. These include:

• Providing the day off or arranging an alternative. Public holidays in Poland should be days off for employees, unless work is necessary for a valid reason (e.g. for medical and rescue services). If an employee works on a public holiday, employers must provide a replacement day off established in accordance with the collective labour agreement, or the individual’s employment contract.
• Providing adequate notice. If an employee needs to work on a public holiday, the employer must let them know and agree on a replacement day off in advance.
• Providing additional remuneration. If an employee needs to work on a public holiday, their employer should pay additional remuneration. This must be in accordance with the provisions of the Labour Code or collective labour agreement.
• Being aware of any special regulations relating to their industry. Some industries have specific regulations around working on public holidays and Sundays.

How is Holiday pay Calculated in Poland?

Alongside public holidays, full-time employees in Poland are entitled to 20 or 26 fully paid days off on annual leave each year. The number of days off allowed depends on how long they have worked for:

• Less than 10 years working = 20 days off.
• More than 10 years working = 26 days off.
• Higher education (bachelor’s or master’s degree) is viewed as equivalent to eight years of work. Therefore, employees with a higher education qualification are entitled to 26 yearly days off after just two years working.

When calculating holiday pay, employers in Poland must consider an employee’s current base salary and variable components (e.g. regulatory bonuses, overtime pay and allowances for night work).

Holiday pay in Poland can be worked out using the following process:

1. Add up the amount of base salary and variable components an employee has earned in the last three-month period.
2. Add up the number of hours the employee has worked during the same period.
3. Divide the total pay by the number of working hours to work out an average hourly rate.
4. Multiply their average hourly pay by the number of working hours in the holiday leave period.

Manage Tax, Payroll and Accounting in Poland With Leinonen

Navigating public holidays and other regulations in a new country can be overwhelming for businesses. Having operated in Poland for over 14 years, Leinonen can offer the detailed, industry-specific support you need with everything tax, payroll and accounting related as you set up your business in Poland.

Currently operating in 11 countries, we have had bases in northern and eastern Europe for more than 30 years, and specialise in managing the intricacies of cross-border commerce. Get in touch today to arrange a consultation.

The post Managing Public Holidays in Poland as an Employer appeared first on Leinonen Poland.

What is the Mobility Package?

The Mobility Package is a set of arrangements that were announced by the European Parliament in July 2020. The regulations came into force twenty days after its announcement, i.e., on August 20, 2020. These regulations introduce changes to various aspects of the transportation industry, including drivers’ driving time and rest periods, the method of delegating drivers, fair competition, and tachographs.

Key Components of the Mobility Package

One of the key requirements of the Mobility Package is that data for drivers’ remuneration must be obtained from the tachograph, a device that records working time. The Mobility Package also regulates the settlement of international drivers’ wages under specific conditions.

The driver’s remuneration should include the following components:

• Base salary
• On-call lump sum
• Lump sum overtime
• Lump sum night hours
• Flat-rate work abroad
• Possible compensation of lump sums for overtime, night hours, and on-call duties
• Possible subsidies to foreign wages (if the driver performs cross-trade and cabotage operations)
• Bonuses, prizes

Understanding ZUS (social insurance) Contributions

The maximum value of the insurance remuneration base is the forecasted average remuneration in the national economy for a given calendar year. Settlement of remuneration should begin with determining the total amount of income (Poland and abroad). After determining the amount of income, it needs to be verified whether it is higher, lower, or the same as the forecast average salary. In 2024, it is PLN 7,824.

Income Tax Implications

The part of the income corresponding to 30% of the amount specified in the regulations on business trips for each day of stay abroad is free from income tax. You should therefore calculate the value of the allowance for each day of your stay abroad. Calculate 30% of this value and reduce the employee’s income by this amount, then calculate the tax precisely.

Conclusion

The basis for calculating remuneration for drivers is the Tachograph report showing working time. International drivers are entitled to two reliefs if they meet the appropriate conditions: income tax relief and social security contribution relief.

The post Understanding the Mobility Package: A Comprehensive Guide for Professional Drivers appeared first on Leinonen Poland.

The core principle of the Estonian CIT is that companies do not pay income tax on their retained earnings until they distribute profits to shareholders. This allows businesses to reinvest their profits without an immediate tax burden. The tax is only due when profits are distributed as dividends, or used to cover losses from previous years.

However, the Polish version of the Estonian CIT has some key differences from the original Estonian model:

• Eligibility Requirements: To qualify for the Estonian CIT, companies must meet several conditions, including being owned solely by natural persons, having a minimum share capital, and maintaining specific accounting records.
• Higher Tax Rates: While the standard CIT rate in Poland is 19%, the Estonian CIT rates are higher – 10% for small taxpayers and startups, and 20% for other companies.
• Limited Tax Preferences: Companies under the Estonian CIT cannot benefit from certain tax preferences, such as the IP Box regime or R&D relief.
• Minimum Period: Once opted for, the Estonian CIT must be applied for at least four consecutive tax years.

Advantages and Drawbacks

The main advantage of the Estonian CIT is the ability to defer tax payments on retained earnings, providing more cash flow for investments and growth. It also simplifies tax accounting by basing the tax calculation solely on accounting data.

However, the higher tax rates, limited tax preferences, and strict eligibility criteria may offset some of the potential benefits, especially for larger companies. Additionally, the lack of established practices and interpretations from tax authorities creates uncertainty around the application of the new regime.

The main benefits of the “Estonian CIT” model for small and medium enterprises (SMEs) in Poland are:

• Deferral of Corporate Income Tax (CIT): SMEs under the Estonian CIT do not pay CIT on retained earnings until they distribute profits as dividends. This allows them to reinvest profits back into the business without an immediate tax burden, improving cash flow and liquidity.
• Fostering Investments and Growth: By not taxing retained earnings, the Estonian CIT incentivizes SMEs to invest their profits into business expansion, innovation, and productivity improvements instead of distributing dividends.
• Simplified Tax Compliance: Companies under the Estonian CIT do not need to maintain separate tax records for CIT purposes. The tax is calculated based on accounting data when profits are distributed, reducing administrative costs.
• Employment Generation: The government expects the Estonian CIT to contribute to the creation of around 120,000 new jobs by enabling SMEs to reinvest more profits into growth and development.
• Crisis Resilience: Retaining profits without taxation can provide SMEs with a financial buffer during economic downturns, improving their crisis resilience.

However, it’s important to note that the Polish version of the Estonian CIT has stricter eligibility criteria and higher tax rates compared to the original Estonian model. SMEs must meet specific conditions related to ownership structure, revenue limits, employment levels, and investment commitments to qualify for and remain under the Estonian CIT regime in Poland.

There are several limitations and drawbacks to the “Estonian CIT” model as implemented in Poland compared to the original Estonian version:

• Stricter Eligibility Criteria: To qualify for the Estonian CIT in Poland, companies must meet specific conditions related to ownership structure, minimum share capital, accounting records, and investment commitments. These requirements are more complicated than in Estonia.
• Higher Tax Rates: While Estonia has a flat 20% tax rate on distributed profits, Poland applies higher rates – 10% for small taxpayers/startups and 20% for other companies. This reduces the tax advantage compared to Estonia.
• Limited Tax Preferences: Companies under the Estonian CIT in Poland cannot benefit from certain tax preferences like the IP Box regime or R&D relief. This makes it less attractive for innovative or R&D-focused companies.
• Minimum Application Period: Once opted for the Estonian CIT, companies must apply it for at least four consecutive tax years in Poland. This reduces flexibility compared to Estonia.
• Uncertainty and Lack of Established Practices: As it is a new regime, there is uncertainty around its application and interpretation by tax authorities in Poland. The lack of established practices creates challenges for businesses.
• Restructuring Limitations: Companies that underwent certain restructuring activities like mergers or divisions face additional restrictions on using the Estonian CIT for a period of time.
• Preliminary Tax Adjustments: When transitioning to the Estonian CIT, companies must make preliminary tax adjustments and may face deferred tax liabilities if they exit the regime before 4 years.

While the Estonian CIT aims to stimulate investments for SMEs in Poland, the added complexities, higher rates, and limited applicability compared to the original Estonian model have raised concerns among businesses about its real benefits.

If you have any questions regarding company taxation in Poland, contact Leinonen.

The post Estonian CIT in Poland: An Overview appeared first on Leinonen Poland.

While the customer pays VAT (the amount is typically added to the price of goods and services), businesses are responsible for correctly filing and paying their VAT return. And with so many goods and services being subject to VAT at varying rates, businesses in Poland must understand their responsibilities to avoid penalties.

VAT Rates in Poland

The standard VAT rate in Poland is 23%, but three reduced rates are applicable in certain scenarios. These are:

• 8%. This rate is applicable to a wide range of goods and services. These include certain food products, newspapers, animal feed, agricultural supplies and healthcare products. The full list of goods and services to which this rate applies can be found in Annex 3 of the VAT Act.
• 5%. This rate applies to basic foods, hygiene products, products for children, and books. More details on the specifics can be found in Annex 10 of the VAT Act.
• 0%. This rate applies to things like exported goods, intra-European supply of goods, and international transport services.

Full details on the goods and services subject to each VAT rate can be found in Poland’s VAT Act.

What are the Most Common VAT Mistakes in Poland?

1. Improper VAT Registration
   The threshold for registering for VAT in Poland is 200,000 PLN in a 12-month period. Businesses exceeding this threshold must register for VAT, even if they perform VAT-exempt activities. If your business is close to this, make sure to register for VAT promptly and accurately, and keep your registration details up to date.
2. Incorrect Invoicing
   Common invoicing mistakes include missing out or including the wrong Tax Identification Number (NIP) on invoices. Errors like this can lead to complications in VAT reconciliation. Double check all invoices before sending them out to clients. This should help you avoid future problems that could lead to incorrect reporting, and ultimately penalties.
3. Documentation and Record Keeping Errors
   Missing or incomplete records may hinder VAT compliance and lead to penalties. Make sure to keep organised records of all your business’ transactions, including receipts, invoices and any other relevant documents. Keep hold of both sales dates and document receipt dates, as these are both required for reporting VAT in Poland.
4. Incorrect VAT Calculations
   This can result in over or underpayment, and ultimately adjustments and penalties. One of the most common VAT mistakes made by businesses is applying the wrong rate of VAT to their goods or services.
   
   Another common error is incorrect VAT deductions; input VAT can only be recovered on services and goods used for taxable business activities.
   
   As an example VAT calculation on leasing passenger cars:
   Mixed Way (Business and Private):
   If the car is used for both business and private purposes (mixed), the taxpayer has the right to deduct 50% of the VAT amount from the leasing instalment or other fees under the contract.
   The 50% limit also applies to expenses related to vehicle operation and fuel purchases.
   
   Business Only Method:
   If a leased passenger car is used by the entrepreneur exclusively in his business activity, the taxpayer is entitled to full deduction of VAT.
   You can deduct VAT not only from leasing instalments, but also from other expenses, including fuel.
   The exclusive use of the car within the enterprise must be properly documented (e.g. registering the vehicle as a company vehicle at the tax office).
   
   Human errors in calculations (e.g. rounding issues) are also common, as are errors caused by poor documentation and record keeping.
   
   Check that you are applying the right VAT rates to your products or services. If possible, use reliable accounting software that can perform VAT calculations automatically, eliminating the possibility of human error. Alternatively, regularly review your calculations to catch discrepancies early.
5. Incorrect Handling of Reverse Charge Transactions
   Mistakes when handling reverse charge transactions are common; it is an area of VAT that can be particularly tricky. If you are unsure, update yourself on the latest VAT regulations or consult with a trusted tax professional.
6. Failing to Meet Deadlines
   You may be required to deliver VAT filings through the Standard Audit File for Tax (SAF-T) system each month or each quarter. Either way, late filing can result in costly penalties. Allow yourself plenty of time to prepare your returns and set reminders to make sure you do not miss deadlines.
7. Lack of Updated Knowledge of VAT Regulations in Poland
   VAT rules and regulations sometimes change, and this often leads to unintentional errors by businesses. Therefore, not staying up to date on tax laws and VAT regulations can result in penalties. One of the best ways to stay educated is by consulting a tax professional.

What are the Consequences of Late or Incorrect VAT Payments?

Businesses can be issued hefty fines for late or incorrect VAT payments in Poland. For failing to file a VAT return or late payment of VAT in Poland, a fine of up to 5600 PLN (around 1230 euros) can be issued. For each year of undeclared VAT, a late payment interest rate of 4% to 14,50% may also be applied.²

Avoid VAT Mistakes in Poland With Leinonen

It takes vigilance, keen attention to detail, and a thorough understanding of the most up to date VAT rules to avoid these common VAT mistakes in Poland. If your company is new to operating in the country, this can be overwhelming.

Leinonen have been supporting businesses in Poland for 15 years, offering tailor-made tax, payroll and accounting services. With 70 small and large business clients in Poland alone and a strong presence in many EU countries, we can offer a unique combination of Polish and cross-border expertise.

Make an enquiry today to find out how Leinonen Poland can support your business, helping you avoid common VAT mistakes in Poland.

The post 7 Common VAT Mistakes in Poland appeared first on Leinonen Poland.

Here are the key details:

1. Applicability:
   • The minimum tax applies to taxpayers who meet the following criteria:
     • Have their registered office or management in the territory of Poland.
     • Generate income, regardless of where it is earned.
     • Conduct business activity through a foreign permanent establishment located in Poland.
     • Have suffered a business loss in the relevant tax year or whose share of income in revenue did not exceed 2%.
2. Tax Rate:
   • The minimum tax rate is 10% of the tax base.
   • It is payable by the due date of the annual return (for 2024, by the end of March 2025).
3. Exemptions:
   • Certain groups of entities are exempt from the application of the minimum income tax regulations. These include:
     • Start-up businesses (up to 3 tax years from commencement).
     • Small taxpayers (annual turnover of no more than 2 million EUR).
     • Financial enterprises, mining companies, and municipal companies.
     • Taxpayers primarily providing health care services.
     • Entities in bankruptcy, liquidation, or under restructuring proceedings.
     • Shareholders or members of companies meeting specific criteria within a group structure.

To calculate the minimum income tax in Poland, you need to determine the tax base and then multiply it by 10%. The tax base is calculated based on the sum of three components: income from other sources, capital gains, and the value of income achieved by the taxpayer in the tax year.

In the classical method, the minimum tax base is the sum of three components.

1. an amount corresponding to 1.5% of the value of tax revenues from operating activities achieved in a given year (other than from capital schemes)
2. debt financing costs incurred for the benefit of related entities in the amount exceeding 30% of tax EBITDA
3. costs of purchasing certain services and intangible rights in the amount exceeding PLN 3,000,000 + 5% EBITDA

Adding part of the costs (above the limit referred to above) for the acquisition of:

• advisory services, market research, advertising services, management and control, data processing, insurance, guarantees and sureties and similar services;
• all types of fees and charges for the use or the right to use rights or values such as copyrights, licenses, know-how;
• transfer of the risk of debtor’s insolvency arising from loans other than those granted by banks and cooperative savings and credit unions, including liabilities arising from derivative financial instruments and benefits of a similar nature.

Taxpayers can also opt for a simplified method where the taxable amount is 3% of the value of tax revenues other than income from capital gains. This simplified method requires informing the tax office in the tax return. Taxpayers can deduct the minimum tax paid for a specific year from their income tax in subsequent years, up to 3 tax years following the year of payment.

The post Poland Sets Up Minimum Business Tax to Stop Profit Moving appeared first on Leinonen Poland.

Can you briefly introduce yourself and tell us about your journey with Leinonen? 

I have been working in Poland and the CEE region for many years in different finance-related positions and always in Finnish-rooted organizations. Leinonen combines nicely both financial services and Finnish roots as the slogan “a very Finnish accounting office” states,  so it was a natural step. In previous positions, I have been on both sides of the table, meaning providing and buying financial services, so I felt I could also provide some insights and ideas to Leinonen services and portfolio.  I started in Leinonen 1.4.2020 and not enough that it was April Fools’ Day, but it was also the very first day of the total lockdown due to COVID-19. The whole country was closed, and we were forced to work remotely, so in fact I met my new team for the first time face-to-face after three months. 

As someone originally from Finland, how has your Finnish background influenced your approach to managing the Poland office? 

My team could better answer this, but I think the Finnish way is low hierarchy and open doors. I try to be easily approachable and listen to ideas and opinions. I emphasize straightforwardness, transparency, and a can-do attitude, which leads to quick decision-making and agile business. It is also valued by our clients that I can relate to those entering the Polish market; I understand their background, expectations, and assumptions.

I try to be easily approachable and listen to ideas and opinions. I emphasize straightforwardness, transparency, and a can-do attitude, which leads to quick decision-making and agile business.

What are the primary goals and objectives you have set for Leinonen Poland for this year? 

We have of course our hard targets linked directly to our everyday work. Our vision is to be part of the infinity game, meaning that we’re here to stay. This makes continuous improvement very important and our goal currently is to build a solid foundation for future development and utilize the technical possibilities enabled by the legislation (such as planned obligatory e-invoices in Poland).   

How do you build teamwork and get your team to work well together? 

We have regular team meetings where we discuss and share different topics. It’s very important that everyone can have a say and contribute; more junior team members have a chance to learn from more senior specialists etc. We have also put extra effort into increasing the awareness of the importance of communication, both internal and external, in the form of training and exercises. We have some celebrations as well, last summer we organized a Summer Days meeting in Poland for whole the Leinonen Group, and locally we meet for Christmas, etc. When teams get to know each other better, it’s also easier to work together.   

How has the shift to remote work impacted Leinonen Poland’s operations, and what strategies have you employed to ensure productivity and cohesion among team members? 

I think this is not an issue anymore. The hybrid work model is a standard nowadays; we do have our office days and remote workdays. The situation now is different than at the beginning of the pandemic time. Now we’re in the driver’s seat and decide how to organize the work in the best way, and we’re not forced to do full-time remote work. Everyone is familiar with the equipment and online tools and the teams are utilizing them impressively well for communicating with each other’s, clients or generally organizing the work, so I haven’t observed any major changes in the efficiency. In our business, the work is anyway very task-oriented, and cyclical (monthly, quarterly, and annual) and we need to deliver on time regardless of the circumstances.   

How do you ensure continuous professional development for your team members and yourself? 

We organize internal and external trainings regarding the legal or tax changes etc., and support with the courses or other ways to increase and improve professional qualifications. We also follow Leinonen Group projects e.g. there is a new program for Team Leaders, which focuses more on management skills.

How do you recharge and maintain a work-life balance, especially given the demands of leading a team? 

I have a dear adulthood hobby, discgolf (also known as frisbee golf) which is the best way to switch off completely from work. Discgolf means hours of outdoor exercise, techniques of throwing discs, and strategy on how to play in different courses in varying terrain or changing weather conditions. You may play with or against others (in a tournament), but mostly it’s about challenging yourself and playing against your own weaknesses.    

What advice would you give to someone aspiring to take on a leadership role in a multinational organization? 

It’s hard to give advice, but at least I have always tried to be open-minded but very clear about my expectations and communication. Having the right people in the right place is very important and I believe very much in teamwork and encourage it.

We extend our heartfelt thanks to Maria for sharing her journey and insights with us. To our readers, thank you for joining us on this enlightening journey. We look forward to bringing you more inspiring stories from our team at Leinonen.

The post Maria’s Leadership Journey at Leinonen Poland appeared first on Leinonen Poland.