Personal Taxation in Poland (PIT)

Individuals with their place of residence in Poland are taxed on their total income, regardless of where the income is earned (unlimited tax obligation in Poland). Individuals who do not have a place of residence in Poland are taxed solely on income earned in Poland (limited tax obligation in Poland).

An individual with a place of residence in Poland is a person who:

• is physically present in the Republic of Poland for more than 183 days during a tax year, or;
• has his center of personal or economic interests in Poland (center of vital interests).

The above rules are applied taking into account the provisions of relevant double taxation treaties. Therefore, even if, in the light of Poland’s national legislation, a person passes the residence test for Poland, the appropriate criteria contained in an international treaty must be applied to determine what country answers for that person’s actual place of residence for tax purposes.

Sources of revenue subject to PIT:

• a labor-based and an employment relationship, including a cooperative employment relationship, retirement or disability pension;
• personal services;
• non-agricultural business activity;
• special sectors of agricultural production;
• lease, sublease, tenancy, sub tenancy and other similar agreements;
• monetary capital and property rights;
• paid disposal of, among other things, real estate property or parts thereof and shares in properties and movables;
• other sources.

The Personal Income Tax Act does not apply to revenue subject to the provisions on tax on inheritance and donations, actions that cannot be the subject of a legally binding agreement, or revenue subject to tonnage tax.

Natural persons in Poland are subject to personal income tax calculated, as a rule, according to a progressive tax scale. Tax rates vary depending on the income earned, that is total income, minus tax deductible costs, earned in a given taxable year.

In 2022, we settle the PIT for 2021 still according to the old tax thresholds.

In 2022, the new tax thresholds already apply. However, following further changes related to the so-called Polish Deal reform, from 1 July 2022 modified regulations will come into force, according to which personal income tax will be calculated according to the following tax scale:

Changes to the tax system under the Polish Deal also include an increase of the tax-free amount up to PLN 30,000. This means that income amounting to more than PLN 2,500 per month will be taxed.

The draft legislation also introduces regulations intending to eliminate the middle class relief. However, the middle class relief will be available to taxpayers for whom its abolition might not be beneficial.

Natural persons conducting business activity are taxed according to the tax scale.

These individuals, at their request, may tax their income with a flat rate of 19% or a lump sum on registered income.

Depending on the scale of business conducted, upon meeting specific criteria, the taxpayer may request the application of simplified taxation forms, i.e.:

• tax on registered income (tax calculated without application of tax-deductible costs);
• a flat rate tax (tax determined by the tax office depending on the type of business).

The fourth form of taxation is the tax card, but as of 2022, only taxpayers who were previously taxed in this form can further use it. It is not possible to switch to this form first time in 2022.

The following income (revenue) categories are taxed in accordance with separate rules:

• private lease (at the taxpayer’s request – 8.5% tax on evidenced income);
• dividends (19% flat tax);
• interest on savings (19% flat tax);
• capital gains from the sale of securities (19% income tax);
• selling private properties (as a general rule, 19% income tax).

Some revenue categories disbursed by Polish withholding agents to non-residents are subject to a flat-rate tax of 20% of the revenue.

These include proceeds from:

• serving on management or supervisory boards;
• civil law agreements;
• entertainment or sports activity;
• accounting activity;
• legal and advisory services;
• advertising services;
• licence fees, know-how, or copyrights.

In the case of non-residents, tax rates resulting from a double tax treaty may be applied and withholding tax may be exempted from if the non-resident furnishes a certificate confirming the place of residence for tax purposes.

In the case of taxpayers who do not disclose their sources of revenue, income determined by the tax authorities is taxed at the penalty rate of 75%.

Personal income tax payers may take advantage of a number of tax credits, such as:

• child tax credit;
• thermo-modernization relief;
• rehabilitation relief;
• the Internet connection relief;
• relief for young people;
• abolition relief;
• R&D tax relief;
• tax relief of savings in rental system;
• e-TOLL relief;
• donation for charity;
• blood donation;
• donation for religious institutions;
• donation for vocational training;
• COVID-19 donation;
• donation of laptops;
• donation for restoration of historic buildings;
• donations under other laws;
• social security contributions;
• health insurance contributions.

The deadline for filing an annual tax return is 30 April of the year following the reference tax year. This rule does not apply to revenue subject to tax on registered income or a flat rate tax.

As a rule, taxpayers file their declarations separately. Spouses who are tax residents in Poland may, upon meeting certain requirements, file a joint tax return on taxable income according to the tax scale.

The following individuals are also permitted to file jointly:

• spouses with a place of residence in an EU Member State or within a Member State of the European Economic Area or Switzerland;
• spouses of whom one is subject to an unlimited tax obligation in Poland and the other having a place of residence outside Poland, but in another EU or EEA Member State or in Switzerland,

– provided that (in both aforementioned cases) they have reached the revenue threshold taxable in Poland in a total amount of at least 75% of the total revenue earned by both spouses in a given taxable year and have documented, with a certificate of residence, their place of residence for tax purposes.

Special rules of taxation apply also to individuals filing declarations as single parents.

Tax on inheritance and charitable donations applies to the acquisition of ownership of assets located in Poland or property rights exercised in Poland by way of inheritance, bequest, further bequest, specific bequest, testamentary instruction, charitable donation, donor’s instruction, self-caption, or unpaid removal of shared ownership.

Tax is also applied to acquisitions of ownership of items located abroad or property rights exercised abroad if at the time of opening the inheritance or concluding a donation agreement, the acquiring party was a Polish citizen or had a permanent place of residence in Poland.

Payers of tax on inheritance and charitable donations are grouped into three categories depending on the relationship with the donor/testator:

• group I: spouse, ascendants (parents, grandparents, great-grandparents), descendants (children, grandchildren, great-grandchildren), stepchildren, stepfather, stepmother, siblings, parents-in-law, son-in-law, daughter-in-law;
• group II: descendants of siblings (e.g. children of a brother), siblings of parents (e.g. uncles), descendants and spouses of stepchildren, spouses of siblings and siblings of spouses, spouses of siblings of spouses, spouses of other descendants (e.g. wife of a grandchild);
• group III: other entitled persons.

When acquiring assets or property rights through inheritance by a spouse, descendants, ascendants, stepchildren, siblings, stepfather and stepmother, the acquirer may benefit from a total exemption from inheritance and donation tax (does not apply to inheritances where the death of the testator occurred before 1 January 2007), if the acquisition of assets or property rights is reported, separately by each acquirer, to the relevant tax office within six months from the date when the tax obligation arose.

Currently, tax-exempt amounts are as follows:

• for acquirers from tax group 1 – PLN 9,637.00;
• for group 2 – PLN 7,276.00;
• for group 3 – PLN 4,902.00.

The tax scale is set out as follows:

A Polish PIT resident is defined as a person who: 1) has a center of personal or economic interests (a life interest center) within the territory of Poland, or 2) spends in Poland more than 183 days in a tax year. It is enough to satisfy one of these conditions to become a Polish resident.

Polish tax residents pay Polish personal income tax on their worldwide income. Double taxation issues are resolved based on the relevant Double Tax Treaty; if no Treaty applies to a particular case double taxation is avoided based on domestic provisions (generally, income tax paid abroad can be proportionally credited against Polish PIT liability).

Non-residents are subject to Polish tax on their Polish-sourced income only. Furthermore, in numerous cases, non-residents can benefit from a 20% flat tax rate calculated on their revenues (i.e. with no deduction of costs). The above flat tax applies to various sources of income, including management fees (but not to employment contracts).