Polish limited company with the lowest CIT rate in Europe! Only 9%!

Błażej Sarzalski        14 January 2019        Please comment!

9% CIT rate in Poland from the beginning of 2019

Although the 19% corporate income tax is the basic corporate income tax rate in Poland, the reduced rate of 9% is available for taxpayers with income in the current tax year lower than PLN equivalent of EUR 1 200 000.

It means that foreign enterpreneurs who are selling goods and services with low deductible cost ratio can benefit from changing its structure to Polish limited liability company.

The reduced rate does not apply to revenue from capital gains – dividends and other revenues actually derived from participation in profits of legal persons and a limited joint stock person, the value of property received as a result of the liquidation of a legal entity or a limited joint stock person, revenues from the sale of shares of companies, revenues from the sale of receivables previously acquired by the taxpayer, revenues from property rights such as copyrights or related property rights, licenses, trademarks and know-how, revenue from securities, derivative financial instruments.

In such case 19% rate applies.

Taxation of dividends from Polish companies

Dividends disbursed by Polish limited companies are subject to withholding tax at the 19% rate and the tax is collected by the company making the disbursement). Exemptions and deductions shall apply on condition that legal grounds exist, whether resulting from an agreement for the avoidance of double taxation or a different ratified international treaty to which the Republic of Poland is party.

The parent-subsidiary directive exempting dividends from tax applies, when entity receiving income (revenue) from dividends, as well as other revenues qualified as dividends, is a company which is subject to taxation on the entire of its income in the Republic of Poland or in a European Union member state other than the Republic of Poland, or the Swiss Confederation or in another state of the European Economic Area, regardless of where it is earned. The condition of the exemption is continuous, two-year holding period by the company receiving the dividends required 10% (in the case of Swiss – 25%) of shares in the capital of the company paying the charge. The prerequisite is also met, if this period has elapsed after the date of receiving the dividend.

 

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