• Unlimited tax obligation in Poland
• Business activity
• Tax rates – special types of revenue
• Tax credits
• Tax returns
• Social security contributions
• Compensation for the duration of inability to work
• Tax on inheritance and charitable donations
  • Scope of taxation
  • Taxpayer categories
  • Tax rates
• Tax returns

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 the Republic of 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 the Republic of 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, subtenancy 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.

Tax scale

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:

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Business activity

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

These individuals, at their request, may tax their income with the 19-per cent flat-rate tax, taking into account restrictions on services for fomer/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). 

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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 per cent tax on registered income);
• dividends (19 per cent flat tax),
• interest on savings (19 per cent flat tax),
• gains from the sale of securities (19 per cent income tax);
• selling private properties (as a rule, 19 per cent income tax). 

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

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Tax credits

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. 

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Tax returns

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 per cent 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.

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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:

* 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 PLN 111,390.
**** 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.

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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:

* Sickness benefit paid by the ZUS, reduced to 70 per cent 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 per cent of their remuneration.

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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 the Republic of Poland or property rights exercised in the Republic of Poland by way of inheritance, bequest, further bequest, specific bequest, testamentary instruction, charitable donation, donor’s instruction, usucaption, 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 the Republic of Poland.

Taxpayer categories

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, parents in-law
• Tax group 2 includes: parents’ siblings, siblings’ descendants, 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, 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.

   

Tax rates

Currently, tax-exempt amounts are as follows:

• for acquirers from tax group 1 – PLN 9,637.
• for group two – PLN 7,276.
• for group three – PLN 4,902. 

The tax scale is set out as follows:

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Tax returns

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.

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