Is it possible to avoid the solidarity levy?

obniżona 8% stawka VAT

Table of contents:

  1. What is the solidarity levy?
  2. Who is exempt from paying the solidarity levy?

A limited liability company (Spółka z o.o.) or limited partnership (spółka komandytowa) can be an attractive model for restructuring businesses facing high public-law burdens (especially referring to the solidarity levy). Particularly, a Spółka z o.o. allows for limited legal liability and efficient preparation for the succession of family businesses. The effective level of tax burdens will depend on the company’s revenue – whether it qualifies as a “small taxpayer” taxed at the lower 9% CIT (Corporate Income Tax) rate and whether it can benefit from an attractive tax form like Estonian CIT.

What is the solidarity levy?

The solidarity levy is a form of taxation for individuals whose annual income exceeds 1,000,000 Polish złoty. The solidarity levy rate is 4% of the established taxable base, with the payment deadline set for April 30. It should be emphasized that the levy is calculated only on the excess amount over 1,000,000 zł. The solidarity levy is sometimes referred to as the “third tax threshold.” However, it’s important to note that income considered for the solidarity levy calculation is aggregated differently from the tax scale applied to most incomes in Poland, as it includes earnings from multiple income sources that do not affect the first two tax thresholds.

Individuals subject to the solidarity levy include those earning income from various sources, including:

  • Income from business activities, also taxed under the flat-rate tax system – this applies to business activities conducted in the form of civil partnerships, general partnerships, and limited partnerships.
  • Income from employment contracts, contracts for specific work, managerial contracts, and performing functions as a member of the management board or supervisory board in a capital company.
  • Income from other sources, particularly recurring non-monetary benefits received by partners in a Spółka z o.o.
  • Income from the sale of shares or stocks.
  • Income from copyright and related rights.

Who is exempt from paying the solidarity levy?

Legal entities (e.g., Spółka z o.o., joint-stock companies) and limited partnerships (spółka komandytowa and spółka komandytowo-akcyjna) are not subject to the solidarity levy. The incomes of these entities are subject to Corporate Income Tax (CIT), with rates of 9% or 19%, and there is also an option for a different form of CIT settlement known as the Estonian CIT.

Moreover, partners of these entities may earn income that is not subject to the solidarity levy, such as dividends from Spółka z o.o. or profit distributions from limited partnerships (spółka komandytowa and spółka komandytowo-akcyjna). Advance payments on dividends are also not included in the calculation base for the solidarity levy. This means that even if dividends exceed the 1,000,000 zł threshold, the partner is not required to submit an DSF-1 declaration or pay the solidarity levy.

However, it’s worth noting that there are titles of earning income from companies subject to CIT that serve as the basis for calculating the solidarity levy – these include incomes from serving as a member of the management board or from recurring non-monetary benefits provided to a Spółka z o.o.

For individuals conducting sole proprietorships or partnerships (such as general partnerships or civil partnerships) whose income exceeds the 1,000,000 zł threshold, it may be advisable to consider transforming into a limited partnership (spółka komandytowa) or a Spółka z o.o. This transformation can particularly reduce social insurance contributions and allow for the use of Estonian CIT – a tax form under which the company does not pay income tax until actual profits are distributed to its owner.