Unlimited tax obligation in Poland
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 a centre of personal or economic interests in Poland (centre of vital interests).
The above rules are applied taking into account the provisions of relevant tax 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 is that person’s actual place of residence for tax purposes.
Sources of revenue subject to PIT:
- a labour-based relationship and an employment relationship, including a cooperative employment relationship, retirement or disability pension;
- personal services;
- non-agricultural business activity;
- special departments of agricultural production;
- lease, sublease, tenancy, sub tenancy and other similar agreements;
- monetary capital and property rights;
- paid disposal of, among other things, real property or parts thereof and real property interests, 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, defined as the total revenue minus tax deductible costs, earned in a given taxable year.
In 2013, personal income tax is calculated according to the following tax scale:
|Taxable base in PLN||Tax|
|more than||up to|
|85,528.00 PLN||18% minus tax-reducing amount of 556.02 PLN|
|85,528.00 PLN||14,839.02 PLN + 32% of the surplus over 85,528.00 PLN|
Natural persons conducting business activity are taxed according to the tax scale.
These individuals, at their request, may tax their income with the 19% flat-rate tax, taking into account restrictions on services for former/current employers and management service benefits.
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 deducting tax-deductible costs);
- a flat rate tax (tax determined by the tax office depending on the type of business).
Tax rates – special types of revenue
The following income (revenue) categories are taxed in accordance with separate rules:
- private lease (at the taxpayer’s request – 8.5% tax on registered income);
- dividends (19% flat tax);
- interest on savings (19% flat tax);
- gains from the sale of securities (19% income tax);
- selling private properties (as a 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 benefits;
- legal and advisory services;
- advertising services;
- licence fees, know-how, or copyrights.
In the case of non-residents, tax rates resulting from a tax treaty may be applied and withholding tax may be exempted if the non-resident furnishes a certificate confirming its 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%.
In 2013, personal income tax payers may take advantage of a number of tax credits, such as:
- deduction of mandatory social security contributions paid in Poland or abroad;
- Internet tax credit (with significant limitations for taxpayers claiming Internet tax credit in previous tax years);
- a credit for charitable donations;
- tax credit for an individual retirement security account;
- deduction of mandatory health insurance contributions paid in Poland or abroad;
- a child tax credit.
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 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 European Economic Area Member State or Switzerland;
- spouses of whom one is subject to an unlimited tax obligation in Poland and the other has a place of residence outside Poland, but in another EU or EEA Member State or in Switzerland,
– if (in both 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 as single parents.
Social security contributions
Poland’s social security system comprises retirement and disability insurance, accident insurance and illness insurance. Insurance covers, among others, employees, the self-employed and contractors. These individuals are also subject to mandatory health insurance.
Mandatory contributions on the employer and employee’s side, in force in 2013, are set forth below:
|Contribution % of total monthly salary||Total||Employee||Employer|
|Disability pension insurance||8.00%***||1.50%||6.50%|
|Bridging Pension Fund****||1.5%||–||1.5%|
|Employee Benefit Fund||0.10%||–||0.10%|
* Partly deducted from the monthly tax withholding
** 1.93% payable in the first year of the employer’s activity
*** In 2013, the cap on the basis for the calculation of retirement and disability contributions is 111,390.00 PLN
**** The premium payable for employees born after 31 December 1948 and performing work in harmful conditions
Social security contributions should be paid by the 15th day of each month.
Compensation for the duration of inability to work
The employer and the Social Security Office must pay compensation for the duration of an employee’s inability to work on the terms set out below:
|Duration of inability to work Paid by the employer||Paid by the Social Security Office (ZUS)|
|1-14 days of illness for employees over 50 years of age||80% of average remuneration **|
|1-33 days of illness for other employees||80% of average remuneration **|
|more than 14 or more than 33 days of illness||80% of average remuneration *|
* Sickness benefit paid by the ZUS, reduced to 70% of average remuneration in the case of hospitalisation.
** Average remuneration for the previous twelve months
In the event of inability to work as a result of a work-related accident, illness during pregnancy or maternity leave or in connection with donating tissue or organs, employees are entitled to receive 100% of their remuneration.
Tax on inheritance and charitable donations
Scope of taxation
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, us 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:
- Tax group 1 includes: The spouse, descendants, ascendants, son-in-law, daughter-in-law, siblings, stepfather, stepmother and parents in-law;
- Tax group 2 includes: parents’ siblings, siblings’ descendants and siblings’ spouses;
- Tax group 3: other acquiring parties.
Special rules apply to acquisition of assets or property rights through close relatives of the donor/testator, who include the spouse, descendants, ascendants, stepson, siblings and step-parents. In such cases, the acquisition of assets or property rights will be exempt from tax if:
- the acquisition of assets or property rights is reported to the relevant tax office within six months from the establishment of the tax obligation, and;
- in the case of cash donations – the taxpayer documents the receipt with a proof of transfer to a bank account or their account maintained by a credit union or postal order.
Currently, tax-exempt amounts are as follows:
- for acquirers from tax group 1 – 9,637.00 PLN;
- for group 2 – 7,276.00 PLN;
- for group 3 – 4,902.00 PLN.
The tax scale is set out as follows:
|Taxable base in PLN||Tax scale|
|more than||up to|
|from acquirers from tax group 3|
|10,278.00||20,556.00||308.30 PLN + 5% of the surplus over 10,278.00 PLN|
|20,556.00||822.20 PLN + 7% of the surplus over 20,556.00 PLN|
|from acquirers from tax group 2|
|10,278.00||20,556.00||719.50 PLN + 9% of the surplus over 10,278.00 PLN|
|20,556.00||1,644.00 PLN + 12% of the surplus over 20,556.00 PLN|
|from acquirers from tax group 3|
|10,278.00||20,556.00||1,233.40 PLN + 16% of the surplus over 10,278.00 PLN|
|20,556.00||2,877.90 PLN + 20% of the surplus over PLN 20,556.00 PLN|
Taxpayers must file tax returns, save for instances where tax is withheld by a withholding agent (for agreements concluded in the form of a notarial deed). The deadline for filing tax returns is one month from the date of establishment of the tax obligation. Documents affecting the determination of the tax base to be attached to the tax returns.
Residency and its implications
In 2008 a Polish PIT resident is defined as a person who: 1) has a centre of personal or business interests (a life interest centre) within the territory of Poland, or 2) spends in Poland more than 183 days in a 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).