I want to share our experience of legally withdrawing money from a Polish business. An important note – in this article, I will talk not only about our methods and techniques but also about those used by my friends and acquaintances. Let’s get started!
Understanding the Concept of Double Taxation
Most entrepreneurs in Poland face double taxation. That means they first pay tax on the company’s profits and then pay another tax to receive the earned money “in hand.” The percentage of tax depends on various factors such as the business niche, company age, method of withdrawal, etc. Conditions may vary, but in one way or another, almost every entrepreneur in Poland ends up paying two taxes.
But there is a legal way to reduce the tax burden for a business. Entrepreneurs in Poland try to include as many of their personal expenses as possible as “company expenses.” They aim to ensure that, at the end of the month, the company shows zero profit or even a small loss. Why? It’s simple – companies with zero profit don’t pay the 19% corporate income tax.
If a company shows a profit – it has to pay 19% tax on the income. If we’re talking about 1,000 PLN, it’s not that big of a deal. But for companies earning 50,000–100,000 PLN per month, paying this tax becomes much less appealing.
How Do We Optimize Expenses?
We aim to ensure that the company breaks even or operates at a slight loss. For many of us from Russian-speaking countries, this idea may sound a little crazy. I used to think that small business owners should always strive to make a profit and show results. But now I understand the importance of expense optimization. The things I used to buy as an individual, I now purchase through the company and categorize them as business expenses.
Another tip – plan where and how you spend your money and how you generate income. A friend of ours once said: “We’re currently investing in our business, putting effort into it, and showing zero profit. Our goal is to start showing profit at a much larger scale.” In other words – you’ll have to pay profit tax eventually, but for new entrepreneurs, there’s a chance to delay this moment until more favorable circumstances arise.
The “Leasing or Credit” Strategy
You can lease or take out a loan under the company’s name. The main idea is that you can spread the payments over several years or months, and each month pay a certain amount. This allows you to write off, for example, 500 PLN per month for a company car. It reduces your tax burden and allows you to avoid part of the 19% corporate tax.
Important – we are not talking about illegal schemes to trick the government. These recommendations are fully legal ways to optimize your taxes. But you need to use them wisely. For example, if you decide to buy a parrot, don’t list it as essential equipment for your IT company. You can include things like computers, lighting equipment, desks, headsets – but not items that have no connection to your business.
How to Legally Withdraw Money from a Company in Poland?
There are three main methods:
- Payments to company co-founders;
- One-time service for your company;
- Working for your own company.
Let’s look at each one in detail.
Payments to Company Co-founders
Essentially, this is a salary paid to the co-founders. When such payments are made, a tax of 18–19% must be paid. For example, if you want to withdraw 1,000 PLN from your company, you’ll have to pay 190 PLN in tax. You’ll be left with 810 PLN for personal use.
One-time Service for Your Company
There are two aspects to this. First – a contract stating that you, as an individual, are providing a specific service for the company. This task has clear boundaries and a defined scope. Here’s the interesting part – this work can be done by you (the company director). In fact, as the company president, you can sign a contract with your own company and hire yourself. Sounds strange, but in Poland, a legal entity is a separate entity with its own rules.
The second aspect is providing services that fall under copyright protection. For example, we create 100% original products and developments for our company. This can include writing books, music, art concepts, software development, or any other unique creative work. The advantage of this method is that you only pay a 10% tax. It’s a very convenient solution – but don’t misuse it. If the work isn’t creative or copyrightable, don’t try to classify it that way. Everything is subject to verification, so keep that in mind.
Working for Your Company
When you work for your own company as an employee, you have to pay for the pension fund and other social contributions. This results in roughly 40% of the amount being lost to taxes and fees. So, this is the most expensive way to withdraw money from a business in Poland. On the other hand, it comes with certain benefits: free health insurance for you and your family, pension savings, access to public kindergartens and schools, and more.
Final Thoughts
Most entrepreneurs in Poland do their best to reduce their tax burden. But unlike in some other countries, they don’t evade taxes – they optimize them. In other words, Poles use legal tools to save money. Any violation of Polish tax law will eventually be noticed by the tax authorities. Keep this in mind if you’re planning to start a business in Poland.
