Poland payroll and tax overview.

Poland is one of central Europe’s largest and most populous nations and is the sixth-largest economy in the European Union. Poland’s northern coastline meets the Baltic Sea and it shares land borders with the Czech Republic and Germany to the west, Lithuania to the north, Belarus and Ukraine to the east, and Slovakia to the south. A developed, regional power, Poland is also a dynamic and resilient market economy: it has experienced consistent growth since the early 1990s and reached an estimated $566 billion nominal GDP in 2019 (with a growth rate of 4.1%). The most important sectors of the Polish economy include manufacturing, mining, agriculture, tourism, financial services, and banking, while the energy sector is also a major financial contributor via coal, electrical and renewables. Split into 16 administrative districts, Poland is a stable, presidential republic and is served by extensive rail and road networks that connect it to other lucrative markets across Europe. As an EU member-state, Poland enjoys free trade with countries across the bloc, while it is also a member of the UN, NATO and the OECD. In 2019, Poland was ranked 40 on the World Bank’s Ease of Doing Business Survey.

Why invest in Poland?

Investors targeting Poland should consider the following benefits and advantages:

• Market opportunity: Poland has a population of 38 million people - the 6th largest in the EU. With 30% of Central Europe’s market share, Poland is a leading European investment target, attracting capital from all over the world, but mainly from Germany, the UK and the US.
• Government support: Poland’s government has several initiatives to encourage foreign and domestic investment projects - including a corporate tax rate of 19%. Special Economic Zones have been set up to offer businesses additional tax relief and employment incentives, while government financial grants are available under certain circumstances.
• Economic strength: Poland’s economy weathered the 2008 financial crisis well, and has led the EU in growth in subsequent years - from 1.4% in 2013, to 4.6% in 2017. Poland is a major beneficiary of EU funds, with €105.8b allocated to the country for the 2014-2020 period.
• Labour force: Poland’s educational system is amongst the best in Europe, producing skilled and motivated employees for a competitive market. More than half of the workforce is employed in the services sector, and there is no shortage of trained economists, engineers, scientists and IT experts with high levels of English language proficiency.
• Advantageous location: Located at the heart of Europe, Poland is situated on the doorstep of several important markets, including Germany, the Czech Republic, Scandinavia, and Russia. As an EU member-state, Poland benefits from the free movement of labour and goods across the bloc, and connection vast numbers of potential customers.

Foreign Direct Investment in Poland

Polish law is rather favourable to foreign entrepreneurs. The government offers investors various forms of state aid, such as CIT Tax at the level of 19% and 9 % in case of so-called ‘small taxpayers’ whose income doesn’t exceed EUR 1.200.000. Euro and investment incentives in 14 Special Economic Zones (among others: income tax exemption, real estate tax exemption, competitive land prices), several industrial and technology parks, the possibility to benefit from the EU structural funds, brownfield and greenfield locations. According to the National Bank of Poland (NBP) the level of FDI inflow into Poland in 2006 amounted to €13.9 billion.

Registering A Company And Establishing an Entity in Poland

For the implementation of payroll, the following documents are required:

• Certificate of incorporation (if the company has a legal entity or representation office in the country).
• Power of attorney for the activpayroll in country payroll partner, so that the payroll partner can register on behalf of the client.
• Submission of the official forms for registration, which the activpayroll payroll partner can provide and assist in the filing of the forms.

This process can take up to 3 weeks to complete.

There is no legal requirement to set up an entity in Poland, although the UK company must register with the Polish tax authorities to obtain a tax number so that income tax and social security payments can be made to the Polish authorities.

Obtaining a tax number in Poland does not mean that the UK entity is registered as an entity or has any kind of corporate presence or has to do any corporate accounting/returns in Poland, it is simply a process which enables the company to report and pay the necessary employment tax liabilities to the authorities.

Once the tax number has been obtained, the foreign company is then required to calculate, withhold, report and remit Polish income tax and social security to the Polish authorities in the same way as a Polish company would do for an employee. Therefore, a Polish payroll function will be required to take care of these obligations even if the individual continues to be paid outside of Poland (which is allowed).

The alternative to the UK company applying for this tax number in Poland is for the employee to take on the responsibility as a “self-payer”. All of the above requirements would still exist; however, it would be the employee that was responsible for calculating, withholding, reporting and remitting the appropriate income tax and social security liabilities in Poland. The company would fund the individual who would then take care of all the obligations.

Business Banking in Poland

An in-country bank account is mandatory to process payroll in Poland.

It is possible to open either a Polish currency or foreign currency bank account in Poland. To open an account in Poland, the foreign national will normally be required to show their passport and evidence of residence in Poland. Some banks require a minimum deposit.

Normal banking hours are from 9:00 to 17:00, Monday to Friday. Banks are closed on Saturdays and Sundays.

Working Days and Working Hours in Poland

In Poland, the average working hours are 40 hours a week (8 hours a day - 5 days a week). Working hours are usually from 8:00 to 16:00.

Basic Facts about Poland

General Information

Poland lies at the heart of central Europe, on the southern shores of the Baltic Sea. The existence of sovereign Polish state can be traced back to around the 11th century and the establishment of the Kingdom of Poland, but modern Poland emerged in 1918, and fell under Soviet rule in the aftermath of the Second World War. After a revolution in 1989, Poland became a democratic republic and opened up to the world, subsequently joining a variety of international organisations such as NATO, the UN, the OECD - and, in 2004, the European Union. Poland’s climate is temperate and mild, and its terrain a mixture of coastal, plains, lakes and lowland regions, along with southern mountain ranges, including the Carpathians. The history and heritage of Poland attracts visitors from around the world, who come to visit its bustling cities - including capital Warsaw - and explore areas of spectacular natural beauty.

Official Name: Republic of Poland

Population: 37.97 million (World Bank, 2017)

Capital: Warsaw

Main Language: Polish

Major Religion: Christianity

Monetary Unit: Złoty (PLN)

Main Industry: Machine Building, Iron and Steel, Mining Coal, Chemicals, Ship Building and Food Processing

GNI per Capita: $30,010 (World Bank, 2018)

Internet Domain: .pl

International Dialing Code: +48

The tax year runs from 1st January to 31st December.

Income Tax in Poland

In Poland, employees are taxed on any income earned if they have lived in the country for at least 183 consecutive days during the tax year.

All earnings resulting from employment are taxable and this includes in-kind benefit earnings as well as cash remuneration.

Typical taxable items include the following:

• Base salary
• Payments for overtime
• Various allowances (some only over a certain limit)
• Awards and bonuses
• Cash equivalents for holiday leave not used
• Pecuniary performance made on behalf of employee
• Value for other benefits-in-kind (non-pecuniary performance)
• Housing provided by the employer
• Payments made by the employer for the benefit of an expatriate in his/her home country, either to provide retirement benefits tailored to the individual employee or to all/the majority of employees.

An income up to 85 528 PLN, received from working relationship, employment relationship, tolling agreement and revenue from contracts of mandate, by the person under the age of 26 is tax-free. After exceeding this limit, the employer will charge tax advance according to the tax scale.

Tax returns are due by 30th April every year.

Employers are required to deduct personal income tax from their employees’ pay and submit those payments to the proper tax office by the 20th of the following month.

Social Security in Poland

Social security contributions are obligatory and payable by employers. They are financed by both employers and employees. Employers must deduct the appropriate amount from the employees’ salaries and pay the contributions to the social security office by the 15th day of the following month.

The social security system in Poland is composed of: the social insurance and welfare system, health insurance system, benefits in respect of unemployment and family benefits.

The institutions forming social security in Poland include the following:

• Social Insurance Institution – cash social insurance benefits
• Agricultural Social Insurance Fund – benefits from the social insurance of farmers
• Ministry of Labour and Social Policy – benefits in respect of unemployment, family benefits and social benefits
• National Health Fund - benefits in kind from health insurance
• Open Pension Funds - collect and invest funds to part-finance pension under new rules within the second pillar
• Occupational Pension Programmes - collect and invest funds to finance a supplementary/voluntary pension under the new rules within the third pillar.

The Employee Capital Plans (PPK) are currently being implemented in Poland as a form of universal and voluntary system of long-term savings, available to all employees who are subject to the pension and disability social insurance.

New Starts in Poland

In Poland, the country’s extensive employment laws dictate that the employer will have to collect certain information from the employee.

This information includes:

• Full name
• Cost centre
• Date of birth
• Address (town, street, building number, zip code)
• Bank details (bank name, bank account number (IBAN), bank address)
• Start date
• Job title
• Annual salary
• Work certificates from their previous employers
• Education documents
• Personal income tax form
• Statement on joint spouse taxation
• Statement of higher costs of obtaining income
• Statement on disability
• Retirement funds paid to date by the employee in a given year

All necessary forms and registration should be submitted to the proper social security authorities.

New Employees Moving to Poland

Employees have to register on their own with the cantonal authority in their resident city when they move into Poland from abroad or if they move to a different canton. Nonetheless the employer has to file specific forms for tax at source as well as for social security including pension fund.

The employees have to be registered at the place of residence as soon as possible (e. g. in Zurich new starts must be registered within 14 days after moving to Zurich).

The documents/information required for setting up a new start is as followed

• Completed joiner sheet
• Copy of working contract

Tasks by Payroll Provider (depending on contractual organization):

• Registration AHV (governmental social security)
• Starting procedure for registration for child allowance (Please note the questionnaire has to be sent to and completed by the employee)
• For foreigners without permanent permit of domicile (without permit "C") an additional form has to be completed for registration of tax at source
• Registration pension (BVG)

Leavers in Poland

When an employee leaves, they should be deregistered with the social security authorities (ZUS). The employee’s period of insurance will be over. The final payment will be paid as the normal payment on the next pay date.

As part of the payroll process, employers in Poland must register with the tax and social security authorities, and decide on details of their pay-cycle, such as pay frequency and payment methods. Employers have withholding obligations towards their employees’ salaries - specifically relating to income tax and social security contributions. The complexity of Poland’s tax system means that many foreign employers outsource their pay process to a third-party global payroll provider to take advantage of compliance expertise, and ensure accuracy and efficiency.

In Poland, income tax rates are as follows:

• Up to 3091 PLN: 0%
• 3091 to 85,528 PLN: 18%
• Over 85,528 PLN: 32%

Social security contributions cover pension funds, medical, health and accident insurance, invalidity and labour funds. Employees contribute at around 13.71% of their salaries to social security, while employers’ standard rate is 20.61%. Employers may provide pay-slips to their employees online, and must keep all payroll documents for at least 50 years.