We are well aware of current standarts (national and international) , so for our foreign partners we gathered most of the important regulations for those entities whose registered offices or places of executive management are located on the territory of Poland.
What do you need to know about bookkeeping rules in Poland?
The Accounting Act of 29 September 1994 determines the basic rules regarding in particular:
Generally, the regulations of the Act shall apply to entities whose registered office or place of executive management are located on the territory of Poland.
In case of not covering certain issues by the Act, parties may apply National Accounting Standards issued by the Accounting Standards Committee. In the absence of relevant regulations in National Accounting Standards, International Accounting Standards (“IAS”) may be used. The possibility of applying IAS is specified in this guideline in section 3 below.
In matters not covered by the Act, entities can (this is their right, not obligation) use the National Accounting Standards (NAS) and statements of similar nature given by the Committee of the Accounting Standard. However, in the absence of regulations in NAS, the entities may apply IAS.
So far the following NAS have been issued by the Committee of the Accounting Standard:
Additionally, the Committee of National Accounting Standards has issued several statements regarding:
to adopt solutions tailored to their specific individual requirements and needs (depending on activity, legal form, size).
Although the interpretations in the form of NAS and the statements adopted by the Committee of National Accounting Standards are recommendations only, in practice they should be considered in the process of establishing the accounting policy. Accounting policy should be recorded in written form and updated by the entity manager. Application of the accounting policies in accordance with the Act helps to ensure the proper quality of the financial settlements (i.e. true and fair presentation of assets, financial situation, and results of the entity).
The Act also specifies basic rules governing bookkeeping (i.e. keeping accounting books and preparing the financial statements). Applying the principles helps to ensure the accuracy and clarity of the accounting data. One of the priority principles is an obligation to apply the Act in preparing the balance sheet and profit and loss statement in case of collision tax regulations.
At the same time in accordance with the Act provisions, once maintaining books of accounts and the preparation of financial statements, the entity shall apply the so-called “accrual rule”. The purpose of this rule is to book all the economic events that apply to a given year, regardless of the fact whether they have been notified or not to the entity by its contractors.
Given the above requirement to book all the economic events of the year in the fiscal year, entities also have an obligation to extract transactions that impact the outcome of the financial year. In this respect “matching principle rule” should be applied. Under this rule, the profit/loss generated in the fiscal year results from (i) revenues from the sale of products services, goods, and financial operations (ii) and relevant, necessary to achieve the revenue costs already incurred and the other cost (estimated, unpaid, or even not notified).
The Tax Code provides general provisions regarding tax issues. In the Polish tax system, we might distinguish a few taxes, among which the most common are:
Companies (joint-stock company, limited liability company) are subject to corporate income tax. Taxpayers that have their registered office or the management board in Poland are liable for CIT on their global income. If a corporate taxpayer does not have its registered office or effective place of management in Poland, the tax is levied only on the income derived in Poland, unless double taxation treaties state otherwise.
As to the rule, tax basis comprises all revenue earned in a tax year, both financial and operational (with some exemptions), net of deductible expenses (tax-deductible costs).
Individuals are subject to personal income tax. As to the general rule, progressive taxation rates should be applied (tax rates 18% and 32%).
|Tax assessment basis in PLN||Amount of tax:|
|up to 85.528||18% of assessment basis minus 556.02|
|above 85.525||14.839,02 plus 32% of any amount exceeding 85.528|
Simultaneously, individuals conducting business activities might choose under certain conditions a flat tax rate (19%) or other simplified methods of tax settlements with the authorities.
Generally VAT is imposed on supply of goods, the provision of services and the import of goods into Poland. Currently in Poland are 4 VAT rates. The basic rate is 23%, which is applied to majority of goods and services. The other rates are as follow:
Real estate tax is levied by the local authorities (municipal tax), with the rate depending on area of the building, land area or the value of a construction. According to the current regulations real estate tax should not exceed the following maximum rates:
Stamp duty is imposed on certain activities undertaken by public administrations, such as issuing certificates, permissions, powers of attorney and other documents issued by the central and local authorities. Rates vary from PLN 1 to PLN 12,750 (higher rates apply for financial institutions).
A tax on civil law transactions is levied on certain contracts (and amendments to such contracts if they result in an increase in the base of TCLT), such as sales, loan and donation contracts, mortgages, and the establishment of usufruct, and partnership or company deeds. However, a transaction is not subject to TCLT if at least one of the parties to the transaction is subject to or exempt from VAT. Although TCLT liability will arise in certain VAT exempt transactions (such as the sale of real estate exempt from VAT).
According to the Polish legislation, excise duty is payable on:
Excisable goods are subject to special rules in Polish legislation that are based on EC directives.
Transactions between VAT taxpayers must be documented by a VAT invoice. In general invoices should be issued within 7 days from the day of release of goods or carrying out a service. Simultaneously, according to the Regulation of Ministry of Finance dated 28 March 2011 a VAT invoice should contain at least the following items:
The amount of VAT due should be always presented in Polish currency (PLN) even if the amount of payment is presented in foreign currency.
According to Polish law, taxpayers have the opportunity to submit tax returns and issue invoices in electronic form. For the purposes of the electronic flow of both documents, the Polish Law provides specific provisions regarding requirements that must be met.
In the case of e -returns, apart from properly installed and setup software (Adobe Reader and Plugin), it is also necessary to have a qualified electronic signature (except for certain personal income tax returns submitted by individuals). Currently, at the local market, there are five firms authorized to grant electronic signatures accepted by the Polish tax authorities.
It is also important for the person authorized to sign e -returns to file (the onetime procedure only) a statement (UPL1 form) to the competent tax office in hardcopy. In addition, it should be noted that the person signing the e-returns must have a tax identification number (NIP) or PESEL. In practice, it may be more difficult for no -residents to meet the above condition.
Recently regulations regarding e-invoicing have been significantly simplified. The main conditions that need to be fulfilled in order to enjoy e-invoicing are as follows:
The former condition is met, in particular in the case of the use of electronic signatures or electronic data interchange (EDI). It should be noted that on the basis of individual tax rulings (unfortunately they are not binding for all taxpayers) sending invoices in PDF format may be acceptable by the tax authorities in the field of electronic invoicing as well.
The most important legal act regulating accounting in Poland is the Accounting Act of 29. September 1994 (hereinafter referred to as the Act).
The Act specifies entities that are obliged to maintain books of account. They include in particular:
In the case of natural persons, civil partnerships of natural persons, registered partnerships of natural persons, and professional partnerships may apply the accounting policies set out in this Act also from the beginning of the subsequent financial year if their net revenue from the sales of goods, products and from financial transactions for the preceding financial year amounted to less than the equivalent of EUR 1,200,000 in the Polish currency. In such an event, the said persons or partners shall be required to notify the tax office competent for income tax matters before the beginning of the financial year. That amount shall be translated into the Polish currency at the average rate of exchange announced by the National Bank of Poland, as of 30 September of the year preceding a given financial year.
In that case, persons or partners are obliged to notify this fact before the beginning of the financial year to the Tax Office relevant to income tax matters.
A foreign entrepreneur branch is one of the forms of conducting a business by a foreign company. Branches of foreign entrepreneurs are obliged to maintain books of account.
Books of accounts shall be maintained:
The branch is also obliged to prepare the financial statements to which general rules (section: reporting) and specific rules are applied. Specific rules concern in particular:
According to the branch taxation, special attention shall be paid to:
Personal Income Tax
Representation is another possible form of conducting business by foreign entrepreneurs. The representation is obliged to maintain the book of accounts.
Books of accounts shall be maintained:
The representations which bookkeep are obliged to use the Regulation of Ministry of Finance of 15 November 2001 concerning special principles of accounting for selected units which are not commercial companies, not conducting business (hereinafter referred to as „the Regulation”), which simplifies the use of accounting principles, in the particular valuation of assets and liabilities, financial result calculation and preparation of the ]financial statement. The main simplifications in respect to the accounting principles are presented below:
Income includes (among other things) cash received from foreign entrepreneurs for the purpose of financing the costs of representation (assets received free of charge and other income).
The costs of conducting business include (among other things) costs concerning the realization of statutory representation tasks, that is advertising, promotion, and administrative costs.
Representations may not use the principle of conservatism.
Representations calculate financial results as a difference between income and costs. This difference after the approval of the annual financial statement – increases income or cost in the next financial year. The positive difference may be allocated for increasing the statutory fund.
Representations are obliged to prepare the annual financial statement as at the day of ending the financial year and for every other balance sheet date. Financial Statement consists of:
According to the branch taxation, special attention shall be paid to:
Personal Income Tax
A decision in respect of the preparation of financial statements in accordance with IAS shall be taken by an approving body. Annual financial statements prepared in accordance with IAS are subject to annual audits. Entities that do not apply IAS for matters not regulated by the Act and domestic standards may apply IAS.
In practice, it means that all descriptions of transactions, account names, the reports automatically created by the computer system (e.g. balance sheet, trial balance, profit, and loss account) should be prepared in Polish. Nevertheless, the computer system used for keeping the books of accounts may be managed in any foreign language.
Simultaneously, books of accounts shall be kept in the Polish currency. It means that business transactions expressed in foreign currencies shall be booked in a manner allowing to determine the amount of the transaction in both Polish and foreign currency.
It should be emphasized that Polish tax regulations provide specific provisions in respect of the calculation of foreign exchange differences as well as valuation of the transactions conducted in foreign currency. In practice, transactions expressed in foreign currency should be entered into the system in a manner enabling their settlement both for tax purposes (mainly corporate income tax and VAT) and accounting purposes as well.
Generally, the books of accounts are maintained by the entity. However, the bookkeeping may be outsourced to a local business entity or the business entity from certain countries (including the EU and EFTA), which are licensed to provide such services.
The business entity is not limited in choosing the place of keeping the books of accounts (e.g. the registered office of an entity, a representative, or branch office of a legal person) located in Poland, as well as abroad. If the branch (business unit) – as a part of the business entity is not entitled to prepare the separate financial statement, it can be authorized (by the business entity) to keep the books of accounts for itself or for the whole business entity. This kind of authorization does not determine the obligation of preparing the financial statements for the branch (business unit) or for the whole business entity.
In practice, due to numerous additional requirements imposed by the Polish accounting law in respect of maintaining books of accounts as well as amendments of tax system, small and medium-sized enterprises outsource these services to professional accounting offices.
Computerized books of accounts, accounting information resources in the form of separate electronic data files, databases, or the individual separate components are regarded as the equivalent of the books of accounts, irrespective of the place of their origin and storage.
An entity may maintain the accounting system information resources in this form, providing that the entity is in the possession of software enabling to obtain readable information in respect of entries made in the books of accounts, by printing it out or transferring it into another data medium.
Books of accounts maintained by using a server located offsite the places of bookkeeping are considered as kept in the proper way when at least the following conditions are met:
This situation may happen if the place of keeping the books of accounts is not the same as the registered office of an entity. In other words, the tax office should be notified about the fact of keeping the books of accounts in the offices of the branches (business units), other offices (not the headquarters or places of management), or if it has been outsourced to a business entity licensed to provide such services.
The entity’s manager is responsible for the fulfillment of accounting obligations specified in the Act even if the place of bookkeeping is outsourced to an external entity.
Due to several discrepancies between the accounting regulations and the tax law as well as a number of duties of reporting to external bodies such as the Polish National Bank or the Central Statistical Office, the issue of bookkeeping is often outsourced to professional, full-service providers. In practice, the preparation of tax returns, financial statements, and a number of other reports in the Polish language is associated with numerous time-consuming administrative tasks. To meet the expectations of customers, accounting offices offer comprehensive services including tax compliance, bookkeeping, and other reporting services. Because of specialization and innovative IT solutions, outsourcing gives the possibility to:
In practice, more and more entities decide on the implementation of the electronic flow of documents both for external purposes (i.e. tax authorities and clients) as well as internally within the entity.
The financial report shall be prepared as at the day of closing the books, which means in particular:
Financial statements include:
Financial statements which are subject to annual audits also include:
Examination of the financial statements by the auditor is mandatory for:
Annual financial statements shall be prepared within three months from the balance sheet date. In the case of some entities, an annual report shall be prepared together with the annual financial statements. Financial statements and an annual report shall be prepared in the Polish language and the Polish currency.
The obligation to prepare consolidated financial statements relates to the parent holding companies. Consolidated financial statements include the following:
An annual report of the capital group shall be enclosed to the annual consolidated financial statements of the group.
The Act provides the possibility to exempt an entity from the preparation of consolidated financial statements. In particular, note the following condition relating to the level of employment, the balance sheet, and income. A parent company is not obliged to prepare consolidated financial statements if as at the balance sheet date of the financial year and as at the balance sheet date of the prior fiscal year, the total data of the parent company and all of its subsidiaries at every level (before consolidation eliminations) meet at least two of the following criteria: