Poland’s Tax Benefits: A Magnet for IT Companies and Tech Startups
April 17, 2023
The flourishing of tech businesses in Poland can be attributed to not only its skilled workforce but also its appealing tax environment. Here’s a closer look at the tax benefits that make Poland an attractive destination for IT companies:
1. Competitive 9% Corporate Income Tax (CIT)
Poland boasts one of the lowest CIT rates globally at 9% (with certain limitations). This competitive tax rate encourages the establishment of tech firms within the country.
2. 12% Personal Income Tax (PIT) for IT Services
Self-employment is the preferred method for IT specialists in Poland, primarily due to the special reduced PIT rate of 12%. Many IT companies in Poland opt for a semi-employment model where they engage IT professionals through civil contracts, allowing the specialists to provide work and invoice the IT company monthly.
3. IP BOX 5% Tax Rate Reduction
IP BOX is a tax incentive that lowers the tax rate on income generated from intellectual property rights to just 5%. This tax break is available to businesses that commercialize IP rights derived from their research and development (R&D) activities or third-party acquisitions, provided the taxpayer holds the patent. Eligible IP rights include patents, utility model protection rights, industrial design registration rights, integrated circuit topography registration rights, registered medicinal and veterinary products, and copyrights for computer programs, among others.
4. Participation Exemption
Poland does not impose withholding tax on dividends and capital gains paid to parent companies located in Poland or other EU member states.
5. Tax Incentives for R&D Activities
Companies may be eligible to deduct up to 200% of their R&D expenses from their taxable income. The deduction varies depending on the type of eligible costs, which include:
- Employee wages and social contributions
- Raw material costs
- Scientific expertise, research, and opinion costs
- Research equipment costs
- Amortization of intangible property and fixed assets (with exceptions)
- Intellectual property protection costs
To qualify for this tax incentive, a company must engage in R&D activities and maintain records of eligible expenses related to R&D projects. The tax break applies regardless of the project’s success or the level of innovation achieved.