In general terms, a natural person residing in Poland (usually it means a stay of at least 183 days of the calendar year) is a taxpayer in Poland and is liable on their globally-earned income regardless of the place where remuneration is received. In case of temporary residence, only the income coming from the Polish sources, irrespective of where it is received, is subject to taxation in Poland. The detailed regulation is included in international agreements for the avoidance of double taxation signed by Poland with over 80 countries.
Double Taxation Agreements (DTAs) are contracts between two states aimed at avoiding double taxation. It applies to income which derives from a territory of one country and may be taxable in another. It occurs if you are a resident of one country whilst you get income from the territory of another. At that time you may be obliged to pay income taxes in both states. In order to avoid negative results of such situations, Poland signed a number of DTAs. The list of the agreements is available on the Polish Ministry of Foreign Affairs' website (the website itself is in Polish) and here (in English).
If your place of residence is Poland, you have the obligation to pay taxes on its territory. It means that you have ‘unlimited tax liability’. According to the treaties and under the Polish law, having the place of residence in Poland means:
- Staying on its territory for more than 183 days annually or
- Having there the centre of your vital interests.
If you do not have the place of residence in Poland, but you obtain some income on its territory, you should pay taxes only on this income. This is called ‘limited tax liability’.
The above-mentioned treaties include two main methods to calculate the tax:
- exemption method (exemption with progression)
- credit method
Please familiarize yourself with the right agreement to choose the appropriate method.
According to the Polish law, an employer, regardless of the type of a work contract or fellowship, is obliged to calculate and make advancement of monthly tax payments for income earned by a physical person due to employment or service relationship. In general terms, the gross remuneration is subject to the following obligatory labour cost charges (some of them are shared between the employer and employee): healthcare, disease, accident charges, and disability and old-age pensions.
Depending on the type of a contract individual personal income can be subject to one of the following forms of taxation:
1. by general terms (regular employment contract) - the taxpayer pays a tax on the actual income earned in accordance with the progressive tax scale which includes the following income thresholds:
- up to PLN 3 091 - tax-free annual income
- up to 85 528 PLN - 17 % minus amount decreasing the tax PLN 556,02
- above 85 528 PLN - PLN 14 839, 02 + 32 % of surplus over PLN 85 528
2. by lump sum - in case of other forms of employment 19% of revenue is taxed
Each year between February and April 30th, all employees who worked in Poland in the previous year, have to submit their annual Personal Income Tax declarations (PIT) to the fiscal authorities. There are various PIT forms marked with different numbers but the most common form is PIT-37 for employees not running their own business.
In order to submit your tax declaration, first before end of February your employer has to provide you with the PIT-11 form which includes information on paid taxes.
The annual tax declaration can be submitted to the tax authorities in four main ways:
- on-line via the e-pit official government system,
- on-line using the e-declaration tool of the Ministry of Finance,
- on paper submitted in person to the relevant Tax Office competent for your place of residence (address),
- if you are currently outside of Poland, you can also file your tax declaration to a Polish consulate.
Please note that the forms and on-line systems are in the Polish language.
If you are planning to set up a foundation, research institute, an association, etc., you should know that this kind of organizations are defined in the Polish law as legal persons. That is why they are subject to the Corporate Income Tax Act which imposes a tax on them. Though, if their statutory purpose is scientific or scientific and technical activity, they are exempted from the tax.
The most important (common) of the indirect taxes is the Value-Added Tax (VAT). It applies to:
- supply of goods and services within the territory of Poland,
- exportation and importation of the goods,
- intra-Community acquisition of goods for consideration within the territory of the country,
- intra-Community supply of goods.
The tax rate amounts to 23% for most goods and services. Other, reduced rates are listed below:
- 8% - applies to specific goods and services, e.g. goods related to health protection, groceries, hotels services, folk art commodities,
- 5% - applies to supply of some farm produce supply, books,
- 0% - applies to intra-Community supply of goods and to their export.
Polish tax provisions also provide for some exemptions from VAT. Among the activities subject to such exemptions are financial, educational, health and cultural services. However, the exemption excludes the deduction of input VAT related to the exempt transactions.
Remember: zero – rated VAT and the above-mentioned exemptions are not analogous.
VAT payers are often exempted from TCLC, although there are numerous situations when this tax must be paid. So, if you are thinking about buying a car, flat, taking out a loan etc., remember about the tax on civil law transactions. The tax rate fluctuates around 2% depending on the type of transaction.