Taxation of Polish Company
Polish Limited liability company is subject to tax in accordance with Polish tax regulations under the corporate income tax act of Poland. The act provides for a model of double taxation on profits allotted from the company. Polish Company's profits are subject to corporate income tax and - subsequently - to tax on dividends in Poland paid out to shareholders. A single-shareholder company whose sole owner (shareholder) is a natural person is taxed on an equal footing.
Corporate Income Tax in Poland
Capital companies, thus a limited liability company included, are subject to Polish corporate income tax (CIT) in the amount of 19%. CIT tax is paid on the basis of company profits, that is profits less the costs of obtaining profits, using the form CIT-2 by the 20th day of the following month. Next to the CIT tax, in case of paid out profits (dividends) to the shareholders, a lump-sum natural persons' income tax in the amount of 19% shall be paid. It is easy to calculate that in case of profits at the level of 100 thousand zl, the total tax amounts to 34,390 zl. It does not alter the fact that by generating small profits or even loss, the company might generate high returns for the shareholders who are also members of the Management Board and, on this ground, are additionally remunerated.
Dividends taxation in Poland
According to the Polish Company Law Act, the methods of disposing of sheer profits shall be regulated in the articles of association. Company's net profits may be applied to paying out dividends, to covering the losses from previous financial years, increasing share capital or for funds from the supplementary capital or reserve capitals. Distribution of profits in Polan is decided at the end of the financial year by a way of a special resolution. Only in case of adopting a resolution on dividends payment, the shareholders are entitled to a claim for dividend payment.
Adopting a resolution on the division of profits shall not yet create a tax obligation, such an obligation is only created through dividend payment (or placing at the disposal) to the shareholders or an increase of the share capital out of company funds in a form of supplementary capital or reserve capitals (so-called capitalization of funds). This applies both to the financial year net profits and profits allocated to these funds in previous years.
In case of allocating profits towards special funds, that is towards supplementary capital or reserve capitals, the Polish company shall pay the corporate income tax CIT only, and double taxation shall not be executed. To sum up, retention of profits in the company shall not create tax obligations for the shareholders with exception of an allocation of profits towards increasing share capital. In contrast, in case of an individual decision of one of the shareholders to withdraw receiving a due dividend amount, a benefit towards the company shall arise in a form of a non-taxable loan, thus it shall become a basis for calculating tax starting with the following day, after the so-called dividend day.
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