The approaching tax settlement period is raising a lot of concern among the majority of migrants in Poland. Indeed, completing tax returns correctly is a real challenge for everyone. To help with the process, we have invited a tax expert, Mr Jan Pietrzak, to bring the most common tax-related issues closer to foreign nationals. We encourage you to read this article to find out more about the topic. This article aims to show foreigners what taxes they may have to deal with in Poland and what potential obligations they may have to meet.
Tax residence
Whether you will be taxed in Poland depends on your residence in the territory of the Republic of Poland. You will be classed as resident in Poland if you:
– have your centre of personal or economic interests (the so-called centre of vital interests, i.e. the country where you work or where your closest family resides, etc.) in Poland, or
– have spent 183 days or more in Poland in the tax year.
Foreigners with their place of residence in Poland are taxed on all their income, whether it’s from Poland or abroad.
If your place of residence is outside Poland, you will be taxed only on income earned in Poland.
Tax returns
Foreigners who pay taxes in Poland have to file tax returns. Individuals with their place of residence in Poland file returns with the tax office competent for their address of residence, while foreigners with an address abroad should file their returns with the tax office competent for taxation of foreign nationals. In practice, since 2019, returns may be filed by logging on to the “Twój E-PIT” portal.
Every foreign national who takes up gainful employment in Poland has to file a tax return to account for their income. To do so, you have to specify the type of work provided (employment contract, contract of mandate, contract for specific work) and, most importantly, the duration of your stay in Poland. Also, you need to submit your certificate of residence, which gives you the right to adopt the tax rules provided for in relevant laws on double taxation.
What is a certificate of residence?
A certificate of residence is a document on the foreign national’s residence for tax purposes issued by the competent tax administration authority. The number of days your spend in the country and residence status will determine whether you will be subject to limited or unlimited tax liability in Poland, i.e. which tax authority will be competent for the settlement of your total income (revenue): only the Polish tax authority, only the tax authority of your home country, or both.
What determines where you will pay income tax?
The time you spend in Poland determines which country will tax you. If you have spent at least 184 days in Poland in the tax year, you will be classed as a tax resident in Poland. If you have entered into an employment contract, you will also be classed as a Polish citizen.
However, there is yet another issue to be considered. It should be determined where your centre of personal or economic interests (centre of vital interests) is. To do so, it is taken into account, for example, whether you move to another country with your family for work purposes and, if you are single, it is determined where your social ties, membership of organisations or hobbies are. On the other hand, your centre of economic interest naturally indicates the place where you are engaged in a profit-making activity. If your centre of vital interest is also determined in Poland, your tax will be settled under Polish law.
It is your task to confirm that you meet one of the above criteria so that the national tax settlement rules could be applied to you.
What about remote work for a Polish employer from the foreigner’s home country?
In this case, two situations should be distinguished:
- a) remote work performed by a foreign national under an employment contract;
- b) remote work performed by a foreign national under a civil law contract.
Income earned in Poland by non-residents is considered income (revenue) from work performed in Poland under service relationship, employment or outwork relationship, and co-operative employment relationship, regardless of the country where you are paid your salary.
In the case of remote work under an employment contract, an important issue to be considered is whether Poland has entered into a treaty for the avoidance of double taxation with your country.
The general rule is that the resident’s remuneration is taxable only in that country unless the work is carried out in the other country. The remuneration may then be taxed in the other country. The country of residence will then apply the appropriate method to avoid double taxation.
If your permanent place of work (the centre of vital interests) is outside Poland or if you work outside Poland for 183 days or more in the tax year, then your tax will be settled in the country of residence. However, it should be emphasised that each insurance- and tax-related issue is examined individually.
What if your permanent home is in Poland and, for example, you have moved for a few months (up to 6 months during the year) to your home country and work remotely from there?
In this case, the Polish employer is obliged to levy advance income tax on your earnings and pay it to the account of the tax office; file the summary annual PIT-4R statement with the tax office by the end of January of the year following the reference tax year and prepare PIT-11 information on your income and paid advance tax and forward it to you and the tax office by the end of February of the following year.
In the case of contracts of mandate or contracts for specific work, work performed by a foreigner is treated as an activity carried out personally. Income from this type of activity earned in Poland by non-residents is taxed as a fixed sum of 20% of the income (income generation costs and social security contributions are not deducted in this case).
This provision should be applied in keeping with relevant double tax agreements.
What cases can such agreements be applied to?
You can apply tax rate resulting from the relevant agreement or have an option not to pay tax under such an agreement provided that you submit your certificate of residence to prove your place of residence for tax purposes.
Therefore, if you provide services under a civil law agreement and present your ordering party with a certificate of residence of your home country, and if it results from the relevant double tax agreement that the income you earn is taxed only abroad, then the Polish client (ordering party) is not obliged to levy the flat-rate tax of 20% on your income. Their only obligation is to provide you with the personal IFT-1R statement by the end of February of the following year and also file it with the tax office competent for taxation of foreign individuals.
Is the PIT the only tax foreigners have to pay?
In addition to income tax, foreigners may most often have to deal with tax on civil law transactions [PCC] and tax on inheritance and donations [PSD].
PCC is a tax that must be paid by anyone who has made a legal transaction (purchase) and has not paid VAT in the process. This is most often the case when you buy a second-hand car, works of art or immovable property from the secondary market.
PSD is a tax that applies to people who come into an inheritance or a gift. If the enrichment comes from the immediate family then you may be exempted from paying tax.
However, you have to remember to report the inheritance/gift to the relevant tax office on the form provided for this purpose within 6 months.
What is the sanction for not paying taxes?
Every taxpayer (regardless of their nationality) is obliged to pay taxes within the required time limit and in the correct amount. And where there are obligations, there are also sanctions for failing to meet them. In this case, however, sanctions can be really serious. If you persistently fail to meet tax-related obligations, you can be held criminally and fiscally responsible and be fined.
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This article was written within the framework of the reSTART project, which is co-financed by the National Asylum, Migration and Integration Fund Programme and the state budget.
