Back in 2014, Polish authorities declined to accept cryptocurrencies e.g. Bitcoin as valid currency that could be used during transactions. However, Poland stipulated that the contracts based on the crypto basic index would be considered as valid financial instruments, which would be subjected to general rules.
Over the years, many Eastern European countries began accepting cryptocurrencies as a legally recognized method of payment, and in 2018, Poland joined the team. The (KNF) Polish Financial Supervision Authority released an official statement where it announced that the Polish system did not have any regulations in place that prohibited trading in cryptocurrencies. As a result, the Polish authorities established that it was legal for businesses to carry out transactions using crypto.
In November 2020, a new personal income taxation form (PIT-38) was released by Polish authorities to assist Polish residents in reporting their cryptocurrency taxes. Polish residents are required to provide their financial statements from any cryptocurrency platform they may have used to buy and sell crypto.
The statements allow the Polish residents to accurately report the profits they made when trading. Although the residents are allowed to deduct the investment costs they may have incurred in consecutive years, they are not allowed to deduct additional sources of income e.g. share sales.
The government of Poland does not consider cryptocurrency as electronic money, payment instrument, or currency unit. As a result, the crypto based tax regime focuses on corporate and personal income taxes. Below are some of the ways which Polish authorities tax the crypto earnings of Polish residents. They include:
Personal income taxes
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Under personal income taxes, the Polish authorities tax the profits made from the crypto transactions. The crypto profits are taxed in the same way earnings from cash capital are usually taxed.
If the crypto earnings were gained from private transactions, the Polish tax authorities regulate the revenue as though it was income earned from property rights. The profits are then progressively taxed at rates ranging between 18 and 32 percent.
Corporate income taxes
Any profits generated from business activities are subjected to a flat tax rate of 19 percent. The crypto profits earned by corporate institutions are considered capital gains by the Polish tax authorities. As a result, large corporate enterprises are taxed as a flat rate of 19 percent.
Smaller business enterprises are subjected to a preferential flat tax rate of 15 percent. Corporate entities which report revenues below € 2 million Polish zloties, that is, $320000, are subjected to a 9 percent taxation rate, provided they meet specific conditions.
The KNF (Polish Financial Supervision Authority) also granted two licenses to Bitclude and Coinquista to operate as crypto payment providers. These two companies which are both crypto startups are now permitted by the Polish government to carry out the following functions:
- Transfer funds
- Process transaction payments
- Execute direct debits
The licenses issued to both Bitclude and Coinquista by the Polish Financial Supervision Authority allow the crypto companies to provide payment instruments and use the payment cards.