2022 Poland Tax Guide: Pay 3-8.5% tax as a foreigner
Region: Central Europe
Population: 38 million
Capital: Warsaw
In this guide, we'll go through Poland's 'lump sum' revenue taxation system, starting at 3% and effective up to €2,000,000. The information is updated based on the Poland's most recent fiscal code changes in 2022, as part of the 'Polish Deal' (Nowy Ład).
Population: 38 million
Capital: Warsaw
In this guide, we'll go through Poland's 'lump sum' revenue taxation system, starting at 3% and effective up to €2,000,000. The information is updated based on the Poland's most recent fiscal code changes in 2022, as part of the 'Polish Deal' (Nowy Ład).
Who am I? I'm Jason, an investor and internationalisation enthusiast. I’ve lived in 6 countries, hold 4 citizenships and residencies, bought real estate in 3 countries and have hired in over 20 countries for my tech businesses. In the UK, I would pay an effective rate close to 40%, but I legally lowered it to an effective single digit tax rate by leaving and moving to Central & Eastern Europe. I know Poland well, I have done business in the country since 2015 and have done dozens of real estate deals in Warsaw (fix and flip as well as rentals).
Whilst Poland isn’t known for being a low tax country, it’s lump sum revenue tax system can work very well for a wide range of location independent businesses, including: IT developers, product managers, designers and e-commerce store owners.
Poland’s 3-15% revenue tax, for up to €2,000,000
Tax rate: Both self-employed individuals and companies with revenues up to €2,000,000 / year can opt-in to pay taxes based on their revenue, as opposed to profit.
The exact revenue tax rate depends on what industry your business falls under; some examples as follows:
There are some nuances as to which exact category your business falls under for lump sum tax rate purposes. This can be clarified through obtaining an individual tax ruling where the Polish tax authorities will issue a written confirmation on the applicable tax rate in your exact case, as well as through proper structuring of your business activity (e.g. the specific way your contract is drafted with clients).
Who it works well for: The lump sum tax system works great for businesses with relatively high profit margins, low costs and few employees. What’s nice about Poland’s revenue tax system is the high revenue limits and the fact that it can be applied for self-employed individuals.
Revenue tax systems often apply to companies only, which then requires you to pay a dividend tax on distribution. E.g. a software developer in Poland can simply pay 8.5% on revenue and have the funds in his personal account, whilst a software developer in Romania would pay 3% revenue tax, but a further 5% dividend tax when he withdraws money from his company to this personal account.
Social / health insurance: You will pay a fixed social / health insurance tax of around 1000 PLN / month, regardless of what you earn. However you can skip social / health insurance payments, by suspending your business activity at any time (e.g. for 2 months when you are on holiday with no revenue).
At the time of writing, there is also an alternative tax regime where you will pay an 8.5% tax rate on profit, with the ability to deduct expenses and pay no social insurance. However there is a limit of 85,528 PLN per year. The set-up cost is low and this option works very well for those just starting out, or those who would like to try out Poland before establishing a business activity or limited liability company. Feel free to reach out if you want to learn more.
VAT: In general, no VAT is charged if you do not sell to Polish customers. If you sell to Polish customers, the VAT rate is 23%.
Entry requirements: EU citizens can enter and work in Poland without any restrictions. It is moderately easy for citizens from non-EU countries to obtain a work visa in Poland.
Warsaw's old town:
Poland’s 3-15% revenue tax, for up to €2,000,000
Tax rate: Both self-employed individuals and companies with revenues up to €2,000,000 / year can opt-in to pay taxes based on their revenue, as opposed to profit.
The exact revenue tax rate depends on what industry your business falls under; some examples as follows:
- 3% revenue tax for e-commerce store owners (including Amazon FBA, drop-shippers, gumroad and e-book sellers)
- 5%, 8.5% or 12% revenue tax for software developers. This depends on the exact type of work and the way the contracts are structured with your clients, but the vast majority can qualify for 8.5%
- 8.5%-12% revenue tax for product managers
- 8.5%-14% revenue tax for UX, UI and graphic designers
- 15% revenue tax for marketing / business consultants
There are some nuances as to which exact category your business falls under for lump sum tax rate purposes. This can be clarified through obtaining an individual tax ruling where the Polish tax authorities will issue a written confirmation on the applicable tax rate in your exact case, as well as through proper structuring of your business activity (e.g. the specific way your contract is drafted with clients).
Who it works well for: The lump sum tax system works great for businesses with relatively high profit margins, low costs and few employees. What’s nice about Poland’s revenue tax system is the high revenue limits and the fact that it can be applied for self-employed individuals.
Revenue tax systems often apply to companies only, which then requires you to pay a dividend tax on distribution. E.g. a software developer in Poland can simply pay 8.5% on revenue and have the funds in his personal account, whilst a software developer in Romania would pay 3% revenue tax, but a further 5% dividend tax when he withdraws money from his company to this personal account.
Social / health insurance: You will pay a fixed social / health insurance tax of around 1000 PLN / month, regardless of what you earn. However you can skip social / health insurance payments, by suspending your business activity at any time (e.g. for 2 months when you are on holiday with no revenue).
At the time of writing, there is also an alternative tax regime where you will pay an 8.5% tax rate on profit, with the ability to deduct expenses and pay no social insurance. However there is a limit of 85,528 PLN per year. The set-up cost is low and this option works very well for those just starting out, or those who would like to try out Poland before establishing a business activity or limited liability company. Feel free to reach out if you want to learn more.
VAT: In general, no VAT is charged if you do not sell to Polish customers. If you sell to Polish customers, the VAT rate is 23%.
Entry requirements: EU citizens can enter and work in Poland without any restrictions. It is moderately easy for citizens from non-EU countries to obtain a work visa in Poland.
Warsaw's old town:
Poland vs traditional tax havens:
Most will pay a tax rate of 5-15%, which is higher than taxes in Dubai or other havens, but still very competitive by European standards. Apart from taxes, a core benefit of Poland is :
Would you like to see whether you or your business can legally pay less tax through offshoring? Schedule a 1-on1 strategy call with me, or check out services offered.
Some apartments I bought, renovated and rented out in Warsaw, Poland
Most will pay a tax rate of 5-15%, which is higher than taxes in Dubai or other havens, but still very competitive by European standards. Apart from taxes, a core benefit of Poland is :
- Highest concentration of highly skilled and affordable talent in the EU including for IT and software development, who also speak fluent English. Poland has established itself as the Central & Eastern European hub for large corporations, which in turn drives millions of young educated migrants and students, both from Eastern countries and increasingly from Southern Europe as well.
- Poland also has highly liveable yet affordable cities, where I have personally lived in a for a few years and purchased real estate in. Cities here offer infrastructure, entertainment and amenities on the same level as the West, but at roughly half the cost - and without the crime and social / homelessness problems.
- By establishing your business and generating income here, you can qualify for mortgages to build up your rental property portfolio, in a market where you can expect rental yields from 7-10%.
- Poland's macro economic situation also fairs better than the rest of the EU, with some of the highest GDP growth rates within the EU over the last decade
Would you like to see whether you or your business can legally pay less tax through offshoring? Schedule a 1-on1 strategy call with me, or check out services offered.
Some apartments I bought, renovated and rented out in Warsaw, Poland
Would you like to see whether you or your business can legally pay less tax through offshoring? Schedule a 1-on1 strategy call with me, or check out services offered.
See also
Jason Wong Founder, Flag Ventures I grew up in Hong Kong & the UK, having spent over 10 years in each country. I first visited Eastern Europe in 2015 and saw the contrast between a place where the best days are ahead vs. the ‘developed world’ which is in continuous decline. Over the past 7 years, I’ve lived in 4 different countries, worked on various tech ventures, and co-founded a VC backed startup with a 100+ headcount. I hold citizenships and residencies in 4 countries. In the UK, I would have been taxed at an effective rate of around 40%. By moving to lower tax countries, I lowered my effective tax rate to single digits. I've purchased real estate in 3 different countries and have done dozens of fix and flip real estate deals. I've built out my own high-yield rental real estate portfolio, check it out here. |