Certain payments made by a Polish entity to a foreign company are subject to withholding tax of 20%. This is collected and paid to the Fiscal Authorities by the payer. If the recipient of the payment is resident in a country with which Poland has concluded a Treaty for the Avoidance of Double Taxation, this tax is usually reduced.

The following represents selected data from double tax agreements between Poland and other countries, relating to withholding tax.

Country        Withholding Tax Rates For Double Tax Treaty Relief

                       Dividends        Interest        Licence fees 
               Preferential   Normal               Copyright    Other
Belgium                       10           10      10           10
Canada                        15           15      0            10
France         10/5           15           0       0            10
Germany        25/5           15           0       0            0
Japan                         10           10      0            10
Netherlands    25/0           15           0       0            10
South Korea    10/5           10           10      10           10
Spain          25/5           15           0       0            10
Switzerland    25/5           15           10      10           10
UK             10/5           15           0       10           10
US             10/5           15           0       10           10

a)First percentage: not less than ...% of the company's capital second percentage: tax rate
b) Excluding interest on government bonds and loans by state banks, which are free of withholding tax
The first percentage relates to percentage of votes (not of capital)
d) As long as Switzerland does not levy a tax at source on royalties paid to non-residents the withholding tax on licence fees is 0%

2. INVESTMENT RELIEF

Investment relief of up to a maximum of 20% (40% if the export criteria are met) of taxable income, is available in respect of expenditure incurred on the purchase of most types of machinery and equipment, including for example:
  • modes of transport (excluding passenger cars);
  • licences, patents, know how rights;
  • purchases of state owned enterprises or integrated parts thereof.

Certain conditions must be met in order to qualify for the relief, for instance the company must either:

  • achieve a profit rate of 8% (4% for the construction and food processing industries); or
  • export 50% plus of its turnover; or
  • earn income from exporting in excess of 8,000,000 ECU; or
  • incur pre-trading investment expenditure of 2,000,000 ECU or more.

3. CUSTOMS DUTIES

Customs duties are levied on many imported goods. Duties are calculated on the basis of the value of goods, which is understood as the price paid or due (the acquisition price) inclusive of all costs borne by the buyer and not included in the price, e.g. transportation and insurance expenses to the Polish border, commissions, packaging and various licence fees relating to the purchase of the goods, etc.

The customs value of a product, expressed in foreign currency, is then converted into Polish zloty at the exchange rate published by the NBP and applicable on the day the customs control is carried out.

However, the acquisition value may not always correspond with the customs value. This may occur when, for instance, the required documentation was not submitted, when the documentation's authenticity is questioned by the customs officers or when the buyers and sellers are connected. In those situations the customs office itself defines the customs value of the goods, for example, on the basis of the acquisition price or sales price of similar or identical goods, using the GATT valuation provisions.

The rates of duty are set out in the customs tariff. The tariff uses the same international numerical classification system adapted in the GATT Combined Classification. This comprises nine digit codes for products. The commodity code is required in order to access the correct duty rate. A lower or nil rate may be applied depending on the country of origin of the product. Countries are divided into four categories for this purpose:

  • under-developed nations,
  • members of GATT,
  • countries with which Poland has a bilateral or multilateral customs agreement
  • others

Custom duty rates vary from 0% to 75% (certain kinds of alcohol), but the majority fall within 4.3% - 18%. To give a few examples (in % of the customs value):

  • raw materials and components 4.3%-18%
  • clothes 26.6%
  • agro-industrial products 15%-35%
  • electronic products 13.7%-27.4%
  • cars 21%

For cars, racing cars and delivery vans, the customs duty may not be lower than ECU 1,250; and for cars older than four years, the equivalent of ECU 2,500.

The following, inter alia, are exempted from customs duties:

  • models, samples, designs and other effects of no commercial value, brought into Poland by businesses for publicity;
  • effects brought by the organisers and participants of fairs, expositions and contests related to such events, i.e. advertising and publicity items, as well as food and beverages to be used for marketing purposes;
  • goods brought into Poland for a limited period. Should such items remain in the country longer than the declared period, import duty is levied, with an additional handling fee.

Certain goods imported from EU member countries enjoy privileged customs duty rates & in most cases the rate is set at 0%. Preferential (0.7 of the base rate) rates are applied to goods originating from certain non-European undeveloped countries; certain tropical goods from these countries have a 0% customs duty rate. Preferential (0%) rates are also applied to goods originating from defined lesser developed countries and regions.

From 1 March 1993, a free trade zone amongst the so-called Visegrad Group (Poland, Hungary, the Czech Republic, Slovakia and now Slovenia) was established. Not all customs duties are being removed immediately, but where this is not the case, the intention is to reduce customs duties progressively over a period of years, depending on the nature of the goods or materials concerned.

In all cases, certificates of origin complying with GATT standards must be submitted, otherwise preferential customs duty rates cannot be applied.

In order to guarantee the payment of import customs duties, customs officials have the right to seize goods or accept various guarantees: bills of exchange, bank guarantees, government bonds, etc.

Customs offices should refund, within a period of 30 days, all customs duties levied on raw materials, semi-finished goods and cooperational products used in the manufacture of exported goods, provided that documents certifying previous payment of customs duties for such items are submitted.

Polish companies, including those with foreign capital participation, which possess adequately equipped facilities may, with the consent of the General Customs Agency, establish and manage duty free bonded warehouses. In such situations customs duties and import VAT is paid after the goods are removed to be traded in Poland and not at their importation.

Duty free bonded warehouses are obliged to deposit money corresponding with the amount of customs duty and import tax from imported goods.

According to the GATT negotiations Poland was obliged to ratify the new GATT conventions by 1 July 1995 and join the newly established World Trade Organisation (WTO). Most of Poland's international obligations in this area will be satisfied by the new Customs Law which will take effect on 1 July 1997.

Tax laws and practise are constantly being revised and, whilst every effort is made to ensure that the information in this tax newsletter is accurate and timely, no decision should be taken on the basis of the information herein without first consulting with KPMG Polska.

Should you have any questions in relation to the above issues, please contact:

Oliver Sinton
KPMG Polska
LIM Center - Marriott Hotel - IX floor
Al. Jerozolimskie 65/79
00-697 Warsaw, Poland
Tel: +48 (22) 630 7236
Fax: +48 (22) 8300 796

This information was correct as of 18 April 1996.