Introduction
Hello, my name is Stas, and I have been living in Poland for 8 years. In this video, we will go over how to legally run a business in Poland on a simplified tax system by opening a sole proprietorship (individual business). Your goal is to understand how to pay taxes and what amounts you should expect during the process. Watch this video until the end, and you will get important answers to questions about how much and where you will pay in the first six months, as well as in the next two years. We will also look at how much you will need to pay after two years of running a business in Poland. Let’s get started!
Taxation in Poland
Poland offers several forms of taxation, one of which is the simplified taxation system — recout. Unlike Ukraine, in Poland, the tax rate is not fixed but floating, and it depends on the type of activity. This rate can vary from 2% to 17%, making the system complicated yet flexible.
Frequently Asked Question: How can I understand what I am doing from the state’s perspective? This is determined by the types of activities you indicate when registering your individual business. It is important to note that these activities can be changed in the future.
Tax Rates by Type of Activity
In Poland, different types of activities have different tax rates. For example, for construction work, the tax is 5.5%, for a coffee shop, it’s also 5.5%, while for e-commerce (internet sales), the tax is only 3%, which is very beneficial.
However, for consulting services, the tax rate reaches 17%, and for educational services, it’s 8.5%. Interestingly, the rate for photographers is 15%, which is much higher than many other categories. This highlights that in Poland, taxation is more oriented towards services than goods.
How to Determine How Much You Will Pay?
Initially, it’s important to set your future profit tax (PIT) rate, which you will pay. You also need to consider contributions to ZUS, the social insurance fund.
Poland has two types of ZUS contributions. The first is called “Polish VAT” and has its thresholds. For your individual business, there are three main thresholds: up to 60,000 PLN per year, up to 300,000 PLN per year, and everything above. If your annual turnover is up to 60,000 PLN, the monthly ZUS contribution will be around 335-350 PLN. However, most entrepreneurs in Poland earn more, so it’s important to consider the next thresholds.
Conditions for New Entrepreneurs
For the first six months, you can avoid paying ZUS contributions thanks to the “ulga na start” program. This means that when registering, you need to declare your desire to use this privilege.
After the first six months, for the next year and a half, you will pay a reduced contribution, which currently amounts to about 500-600 PLN per month. After two years of operating as a sole proprietor, you will pay contributions based on the minimum wage, which in 2023 will be around 3,600 PLN, and you will pay half of this amount — about 1,700 PLN.
Calculation After Two Years
So, if you open a business in Poland and plan to earn about 300,000 PLN per year, you will pay at least 2,260 PLN (1,700 PLN for ZUS and 560 PLN for another contribution). When converted to euros, this is about 480 EUR per month, which leads many to the fair question of why there are so many complaints about ZUS, as such contributions can account for a large portion of your liabilities.
Conclusion
In conclusion, it is important to understand that ZUS can take more funds than the profit tax. Moreover, it is expected that ZUS contributions will only rise over time. However, business in Poland has its advantages — you can engage in various types of activities and improve your cash flows by combining different tax rates.
