The state has implemented a 50% income tax-free for artists‘ provision (1991) which allows creative artists to deduct 50% of their income from their creative work as expenses for income tax purposes. According to amendments to the Tax Law (2012), the privilege has been severely reduced as of the 2013 fiscal year. Firstly, tax-payers whose income from creative work exceeds the so called first tax threshold (85 528 PLN of income, after deduction of premiums paid to the pension scheme and health insurance) will not be able to benefit from the 50% deduction. Secondly, individuals with lower income will be able to benefit from it, but on changed conditions. The employers will not take this provision into account while paying salaries, which means that individuals will be forced to pay higher tax-advances. The deduction will be possible only during the yearly tax returns and therefore it will work as kind of a tax allowance.
According to amendments made to the Income Tax Act (1993, amendments 2003), deductions of up to 10% are available on donations made by legal persons (organisations, foundations etc.) for “public good purposes”. In the case of private persons / individuals, a ceiling of 6% of income has been introduced.
Since 1991, state cultural institutions are allowed to receive private donations from individuals or legal persons.
The following tax exemptions are made available for NGO’s – including both foundations and associations: goods and services tax (1993); the tax on increase of remuneration within the framework of statutory activities (1992); property tax which exists within the framework of statutory activities (1991). Foundations are also exempt from paying court fees when registering.
According to Annex 2, of the Act on Goods and Services Tax (1993) and the Act on Toll Tax, the sale of services connected with recreation, culture and sport is exempt from tax with some exceptions, for example:
- cultural institutions are not exempt from VAT (status: end of 2003). They are obliged to pay VAT from the sale of goods and services and on advertising (which is subject to a rate of 22% – the standard rate);
- there is either a reduced 0% VAT or 7% VAT on the sale of books, periodicals and music scores in Poland with the ISSN or ISBN symbol and in the Braille language; and
- a 22% VAT is applicable to the sale of CD’s, audio and video cassettes and DVD’s.
According to widespread opinion, the tax changes in Poland do not encourage sponsors and donors to adequately support culture. Transparency and new solutions / measures are being called for.
Some changes were introduced to the Law on Income Tax on Individuals, which allows an individual to deduct 1% of their income tax as a donation for a chosen public organisation. Starting from the tax year of 2007, tax-payers do not transfer the donations directly to the beneficiaries, but instead pay through the tax revenue offices. The change simplifies the procedure.
In 2007, the Ministry of Culture strived to maintain the preferential VAT rate on books and special periodicals. A decision was taken by the ECOFIN in December 2007 allowing Poland to keep the 0% VAT rate on books and special periodicals for the next 3 years (until 2010). It was not possible to maintain the 0% VAT rate; therefore from 2011 the VAT rate increased to 5%.