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PIT (personal income tax) is known to you. Every year you submit an annual tax return in which you state your revenues, including those from the employment relationship, civil-law contracts and others. As an entrepreneur registered in the CEIDG you are also liable to that tax.

The main difference is that as an entrepreneur you will also have to pay an advance on this tax (as does the employer or orderer).

Depending what form of PIT was selected in registration, you will have different rights and obligations, different mechanisms for calculating the amount which you must pay to the tax office, as the advance payment.

In the case of PIT you can choose one of the forms of taxation:

  • tax scale ( in the same manner income from employment relation is settled),
  • a flat rate tax 19% (so-called linear method),
  • a lump sum tax on registered income,
  • a tax card.

Each of these forms is set out in greater detail in separate sections.

As a PIT payer you will be now in a dual role. You can sell part of your private assets as a natural person (e.g. sell apartment or a car), you can also sell part of assets, which serve the performance of economic activities (fixed assets entered in the records, e.g. car, machinery). This is an important differentiation that affects the way the tax is settled.

Taxation of personal income tax is governed by two acts:

What do I need to know about personal income tax (PIT)

Who has to pay the tax

Personal income tax is a personal tax which means that a tax payer is any natural person obtaining income, including a natural person obtaining revenue from business activities. The exception is the possibility of settling PIT jointly with a spouse or child, however this privilege depends on the chosen form of taxation. Tax payer who pay tax in the flat rate, a lump sum tax on registered income, tax card ( except private rental) or tonnage tax cannot use it.

Due to a personal character of the tax, no one can pay it for you. Your tax liability will expire only provided that you pay the tax. Another entrepreneur or a family member cannot pay your tax.

When do I have to settle the tax in Poland?

The tax residence criterion enables to determine in which country and from which revenues the tax is payable. In case of persons residing throughout the tax year in one country and generating income only from sources in this country, there is no doubt as to the country of residence.

In the case of persons temporarily residing abroad, working abroad or having property there, often doubt arises in which country the income tax should be settled.

For the purpose of the correct settlement of the tax one can apply to the tax authorities of the country of residence for the issuance of the residence certificate. This is the document which states the seat of a taxpayer for tax purposes.

Unlimited tax liability rests with the natural persons residing in the territory of the Republic of Poland. These are persons who have in Poland the centre of personal or economic interests or reside in the country for more than 183 days in the tax year. Such persons are subject to tax in Poland on their entire income (revenues), irrespective of the location of the sources of their income (Article 3(1) PIT).

Limited tax liability applies to the individuals who do not fulfil the above mentioned criteria, they are subject to tax in Poland only on income (revenues) obtained in the territory of Poland (Article 3(2) PIT).

Object of the income tax

All types of income are subject to personal income tax, with the exception of those mentioned in Article 21, 52, 52a and 52c of the act on PIT and the revenue from which under the provisions of the Tax Ordinance the collection of the tax was waived.

Object of taxation in a given tax year is the sum of income from all sources of revenues.

Many sources of income are subject to taxation, including:

  • employment relationship, old-age pension or disability pension,
  • activity carried out personally,
  • non-agricultural economic activity,
  • special departments for agricultural production,
  • rental, lease, hire,
  • cash reserves and property rights, including sale of certain rights,
  • sale for consideration (subject to the conditions specified in Article 10(2) of the Act),
  • sale of property or parts thereof and interest in immovable property,
  • sale of other goods.

If the sale of land and property rights for consideration does not occur in the implementation of economic activities and is carried out after the expiry of five years from the end of the calendar year in which the acquisition or construction took place, revenue from sale is not subject to personal income tax.

In the case of sales of other goods, if it was completed before the expiry of six months from the end of the month during which the acquisition was made, then the revenue from sale is not subject to personal income tax.

Tax deductible costs

Tax costs are costs incurred to achieve revenues. Be careful as not every form of PIT taxation allows costs to be taken in account when settling tax.

Tax costs can be divided into direct and indirect. Direct are those which can be linked to the realised income, e.g. the purchase of the raw materials from which the goods for sale will be produced, staff remuneration for a given month.
Indirect costs are those that cannot be clearly linked to the realised income, e.g. advertising expenditure.

In the case of entrepreneurs tax deductible expense is every expense incurred in connection with the economic activities which serve to retain or secure sources of income.

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