|
- Introduction
- Subject of taxation
- Object of taxation
- Scope of tax liability (unlimited and limited tax liability)
- Sources of revenue
- Tax exemptions regarding object of taxation
- Tax deductible costs
- Tax base and calculation of the tax pursuant to the scale
- Tax computed pursuant to the scale
- Lump-sum taxation of certain kinds of revenue (income)
- Flat-rate tax
- Collection of tax
1. Introduction
As a rule, natural persons in Poland are subject to income tax calculated in compliance with a progressive tax scale, differentiating following income thresholds, i.e., 18%and 32%.
However, there are exceptions to this rule. Under certain conditions natural persons conducting business activity can tax their income with a flat 19% tax rate or according to provisions regulating lump-sum taxation included in a separate tax act.
Flat tax rates are also envisaged in case of certain incomes in a form of capital gains and lump-sum taxation is applicable to certain incomes obtained by non-residents and other privileged groups of taxpayers.
Back...
2. Subject of taxation
Natural persons subject to personal income tax (PIT) are considered to be taxpayers with reference to their income [1], including income from participation in partnerships, i.e.:
-
a partnership in the meaning of the Polish Civil Code,
-
a registered partnership,
-
a professional partnership,
-
a limited partnership,
-
a limited joint-stock partnership.
Income from participation in the above-mentioned partnerships, as well as income from joint ownership, joint enterprise, joint possession or joint use of things or property rights are taxed separately by each taxpayer, in proportion to his share in the partnership. The PIT Act is also applicable to natural persons being shareholders in the companies having legal personality, i.e., limited liability companies or joint stock companies, with reference to income from the participation in the companies’ profit.
Back...
3. Object of taxation
Personal income tax is levied on all kinds of income, except for income exempt from taxation under provisions of the PIT Act and income on which collection of taxes has been abandoned under provisions of the Tax Ordinance Act.
According to the PIT Act provisions, income can be derived from several specific. Such an assignment of an income to a source results in application of a specific method of its taxation.
An income from a given source of revenue is defined as the excess of total revenue from that source over its tax deductible costs, generated in a given tax year. If a taxpayer receives incomes from more than one source, subject to certain exceptions, a sum of the incomes from all sources is subject to taxation. The said exceptions refer to the following:
-
revenue (income), which is subject to lump-sum taxation [2], -
income which is subject to flat-rate tax [3].
The aforementioned kinds of income are not accumulated with income earned by taxpayers from other sources (taxed pursuant to the tax scale). Furthermore, the income subject to the flat-rate tax is disclosed in separate tax returns: on income from capital gains and income from business activity respectively.
Provisions of the PIT Act do not apply to the following:
-
revenues from agricultural activities (except for revenue from so-called „special branches of agricultural production”) and from forestry,
-
revenues falling under the provisions of the Act on Inheritance and Donation Tax,
-
revenues resulting from activities which cannot be subject to legally effective contract (e.g. theft or drug dealing); it should be stressed that it does not refer to actions made without observing of legal standards provided by law (e.g. sale of real estate made in other form than a notary deed),
-
ship owner’s revenues taxed with a tonnage tax,
-
revenues resulting from division of a property co-owned by spouses due to the cessation or limitation of their property co-owned as well as revenues from equalising the properties following either cessation of division of marital property or death of a spouse,
-
allowances for satisfying family’s needs within framework of property co-owned by spouses.
Back...
4. Scope of tax liability (unlimited and limited tax liability)
A “global” nature of the personal income tax means inter alia that this tax is imposed on income of all natural persons provided that they gain income from the sources located in Poland. A scope of tax liability of these persons decides whether income from the sources located abroad is subject to taxation in Poland as well.
Taxpayers are subject to unlimited tax liability in Poland if they have place of residence in Poland i.e.
If a person has a residence in another country, a collision between tax jurisdictions shall be settled and consequently determination of the country where the person is a tax resident shall be done according to the regulations of an appropriate double tax treaty. Only then it is possible to determine the tax status of such a person in Poland.
Taxpayers with unlimited tax liability in Poland (Polish tax residents) are subject to taxation on their world-wide income. Natural persons without a place of residence for tax purposes, thereby with a limited tax liability, in Poland are subject to taxation in Poland only with respect to the Polish-sourced income.
Back...
5. Sources of revenue
There are following sources of revenue:
-
service relationship and employment relationship (including co-operative employment relationship), retirement or disability pensions,
-
activity carried on personally,
-
non-agricultural business activity,
-
special branches of agricultural production,
-
lease, sublease, tenancy, subtenancy and other contracts of a similar character,
-
capital gains and property rights,
-
transfer against payment of e.g. immovable property, parts thereof and shares in immovable property and of movable property,
-
Back...
6. Objective tax exemptions
There are certain exemptions envisaged regarding object of taxation. These exemptions in particular refer to the following:
-
revenue from certain indemnities and revenue resulting from insurance of property and persons,
-
the value of certain benefits resulting from the employment relationship, provided by employers to employees (e.g. the value of non-alcoholic beverages and meals provided for employees during working hours in accordance with the provisions on work safety and hygiene, including the value of vouchers and coupons etc. which entitle to obtain meals and beverages),
-
revenue from daily allowances (e.g. for the period of domestic and foreign business trips, received by both employees and non-employees and by persons who perform acts connected with their social and civic duties),
-
revenue of a donative nature, received from the State budget or territorial self-government units, from governmental agencies or from governments of foreign states, international organisations or international financial institutions, under governmental programmes,
-
revenue received as a result of an entity’s liquidation up to the value of the contribution to a partnership or of the cost of purchase or taking up of shares (stock) in a limited liability company (joint stock company) and revenue resulting from the refund of additional payments to the capital of limited liability or joint stock companies,
-
prizes (up to the specified limit), in particular in: gambling casinos, games on machines and contests organised and broadcast by mass media.
Back...
7. Tax deductible costs
The tax deductible costs are all costs incurred with the purpose of generating revenue, retaining or protecting sources of revenue [5], except for the costs which are explicitly listed in the PIT Act as not deductible.
The costs are divided into direct and other costs.
As a rule, direct costs are deductible in the tax year in which the related revenue was earned. Other costs are deductible on the date they were incurred.
If tax deductible costs were incurred in foreign currencies, these should be converted into PLN at the average exchange rates announced by the National Bank of Poland valid for the last working day preceding the day the costs were incurred.
The exchange rate differences shall respectively increase the revenues as foreign exchange gains or increase the tax deductible costs as foreign exchange losses.
8. Tax base and calculation of the tax pursuant to the scale
Generally, income calculated as the excess of revenue over tax deductible costs constitutes the tax base for PIT purposes [6].
The income may be then reduced by the taxpayer by:
-
the amount of obligatory social security premiums paid during the tax year in Poland or in another EU country,
-
the expenses incurred for the use of Internet,
-
the expenses incurred for the purpose of the public utility, for religious purposes and the expenses incurred for the purpose of rehabilitation of disabled persons,
-
the expenses borne by the taxpayer with regard to the purchase of new technologies.
As a rule, the taxpayers who carry out business activity are obliged to calculate their income on the basis of accounting books. If it is not possible to calculate income on the basis of accounting books kept by the taxpayer, the income should be assessed [7].
Back...
8. Tax computed pursuant to the scale
The income is subject, as a rule, to income tax calculated in compliance with the following progressive scale, using tax rates amounting to, i.e., 18% and 32% depending on income thresholds. When calculating the income, the so-called tax-free amount is taken into account (in 2010 – PLN 3.091,00).
|
Tax base in PLN |
Tax |
| over |
up to |
|
|
PLN 85.528 |
18 % minus amount decreasing
the tax PLN 556,02 |
| PLN 85.528 |
|
PLN 14.839,02 + 32 % of surplus
over PLN 85.528 |
The tax calculated in compliance with the tax scale may be reduced by the part of the obligatory health insurance premiums paid in Poland or in another EU country. The taxpayers may reduce their tax by the payments made to the account of public utility organisations. However the reduction of the tax cannot exceed the amount of 1% of the tax as shown in the annual tax return.
Back...
9. Lump-sum taxation of certain kinds of revenue (income)
In certain cases, this is a revenue (and not an income) which is subject to taxation; in such cases, no tax deductible costs may be taken into account. The tax is imposed then in a lump-sum form [8]. As a rule, the revenues, which are subject to the lump-sum tax, are not revealed in the annual tax statements submitted to the tax office by taxpayers.
Back...
10. Flat-rate tax
Taxpayers running business activity may tax their income with 19% flat tax [9].
Income is considered to be a tax base for calculating the 19% tax from business activity. This means that the institution of a flat-rate tax does not deprive taxpayers of the right to deduct tax deductible costs from the earned revenue [10].
A decision on a flat-rate taxation method deprives the taxpayer of the possibility to take advantage from the majority of the tax allowances and deductions. However, the taxpayer who has chosen this method of taxation is entitled to deduct the following:
-
from the income – the loss incurred in the previous tax years (incurred as a result of conducting business activity),
-
from the income – the amount of the retirement, disability, sickness and accident obligatory insurance premiums paid by the taxpayer,
-
from the tax – the amount of obligatory health insurance premiums paid in the tax year.
The 19% flat-rate tax applies also to certain incomes from money capitals [11].
The settlement of certain incomes in the form of capital gains taxed with a flat rate tax is not subject to advance payments during the year. The taxpayer who earns the income from the above-mentioned sources is obliged to make a settlement once a year up to April 30 of the following year – in the tax settlements submitted independently from the anual tax settlement regarding income subject to taxation according to the general rules (e.g. income from employment relationship).
Back...
11. Collection of tax
During a tax year the taxpayers are obliged, as a rule to make monthly advance tax payments (by the 20th day of the following month for the preceding month) and, after the end of a given tax year, pay the tax due in a final amount (i.e., not later than April 30 of the following year). This rule does not apply to the lump-sum tax, calculated and collected with reference to certain categories of revenue earned during the tax year and not accumulated with income earned from other sources after the end of the given year.
The so-called “small entrepreneurs” and the taxpayers who launch their business activity may pay tax advances quarterly.
As a rule, a PIT taxpayer is obliged to calculate and transfer by his own both tax advance payments and the tax. There are some exceptions to this rule, according to which, with respect to certain categories of revenue, the monthly tax advance payments or the tax itself are collected by tax remitters. First and foremost, the remitters calculate and collect the tax advance payments with reference to income from service relationship, employment relationship and similar relationships, retirement and disability pensions, and social security allowances. Furthermore, tax remitters calculate and collect the lump-sum taxes in most cases.
The taxpayers who receive income from business activity, lease and tenancy, employment relationship received from abroad, retirement and disability pensions received from abroad and other income with respect to which the remitters are not obliged to calculate the advance payments for income tax, are obliged to calculate and pay tax advances without summons during the year.
A self-calculation of tax applies also in case of establishing the income tax due for the entire tax year, provided that the remitter of tax has not been designated to calculate the tax. When submitting annual tax statements, taxpayers who keep accounting books are obliged to attach the financial statements which should include at least the balance sheet and the profit and loss account.
The taxpayers who decided to apply a flat-rate tax (19%) to their income from business activity, are subject to the general rules concerning submission of the annual tax statements. However, for the purposes of calculating the tax, these taxpayers are not entitled to aggregate their income subject to the flat-rate tax with the income subject to taxation according to the general rules.
Furthermore, the PIT Act provides for a simplified form of calculation and payment of tax advances i.e. in the amount of 1/12 of the tax amount shown in the tax return submitted to the tax office in the tax year preceding a given tax year or in the tax year preceding a given tax year by two years.
The so-called “small entrepreneurs” who launch their business activities may benefit from the so-called tax credit. This is a relief consisting in deferral of payment regarding tax on income generated in the first tax year. The taxpayer is also relieved from filing tax returns for that year. The tax due with reference to such income should be paid by the taxpayers in instalments within the next 5 consecutive years.
Back...
Glossary:
[1] The institution of tax accumulation, i.e., summing up of tax bases of two or more entities which as a rule act separately, with certain exceptions provided by law, is permitted in case of income of spouses and persons who bring up alone minor children.
Back...
[2] The revenues (incomes) subject to lump-sum taxation are not taken into account in the annual tax return. In particular, it concerns: revenues from royalty payments received by persons with limited tax liability in Poland, dividends and other revenues from participation in profits of legal persons, interest on funds accumulated in a given form of saving, holding or investment, and incomes subject to net taxation in a lump-sum form (from liquidation of a business activity).
Back...
[3] A 19% flat-rate tax has been introduced with reference to certain kinds of incomes. This form of taxation applies to the following incomes:
-
from non-agricultural business activity, if it is not taxed in another form,
-
from the transfer against payment of securities and financial derivatives and from execution of the rights resulting from these derivatives,
-
from the transfer against payment of shares in companies having legal personality,
-
from taking up the shares in the companies having legal personality or contributions in co-operatives in exchange for a contribution in kind in a form other than an enterprise or an organised part thereof.
Back...
[4] It should be noted that the above list is not exhaustive due to the fact that the sources of revenues include also “other sources”, which are considered inter alia to be: cash allowances from social insurance, scholarships, alimonies (except for children’s maintenance), as well as revenue not covered by the sources revealed by a taxpayer.
Back...
[5] There are some exceptions to the general rule of recognising tax deductible costs. With respect to certain categories of revenue earned by persons with unlimited tax liability in Poland the lump-sum tax deductible costs apply. In certain cases, however, a taxpayer has an option to resign from lump-sum tax deductible costs, if actual tax deductible costs were higher than the lump sum costs applicable. The lump-sum tax deductible costs apply among others to the following revenues:
-
from employment relationship and related relationships,
-
from performing services on the basis of a mandatory contract or a specific work contract, received only from entities carrying out business activities or owners (possessors, managers, administrators) of an immovable property, in which premises are rented,
-
received by members of management boards, supervisory boards, commissions and other decision-making bodies of legal persons, regardless of mode of appointment,
-
received under the agreements on managing of enterprises, management agreements or agreements of a similar nature (including those concluded in the framework of non-agricultural business activity conducted by the taxpayer),
-
from making use of copyrights by authors, and similar rights by artists-performers, or from exercising of those rights by them,
-
payment for the transfer of ownership of the following property rights: invention, topography of integrated circuits, utility design, industrial design, trademark or design patent,
-
from the royalties for transfer of the rights to use invention, topography of integrated circuits, utility design, industrial design, trademark or design pattern, received during the first year the licence lasts from the first entity that concluded the licence agreement,
-
from the following activities performed personally: artistic, literary, scientific, coaching, educational and journalist, as well as revenue from practising sports, sport grants awarded by virtue of separate provisions of law and revenue earned by referees for controlling sport games.
Back...
[6] However in case of the liquidation of a business activity, the income from the liquidation is notcalculated according to the general rules. It is calculated by application of a percentage rate resulting from the share of income in the revenue during the period of last three months preceding the month during which the liquidation took place, to the amount determined based on purchase prices of remaining, on the day of liquidation, stock and tangible assets not being fixed assets.
Back...
[7] The income is also assessed if, as a result of relations between taxpayers as specified in the PIT Act, the conditions agreed on by them or imposed by one of them substantially differ from those which would have been agreed between independent entities and, as a result thereof, one of these entities does not disclose any income or discloses income smaller than might be expected, if such relations did not exist.
Back...
[8] The lump-sum taxation is applicable inter alia to the following revenues:
-
earned by persons with limited tax liability in Poland from membership in management boards, supervisory boards, commissions and other decision-making bodies of legal persons – in the amount of 20% of the earned revenue,
-
earned by persons with limited tax liability in Poland from advisory services, accounting services, market research services, legal services, advertising, management and control, data processing, employee recruitment and head-hunting services, guarantees and services of similar nature – in the amount of 20% of the revenue,
-
from interest on loans, except for granting loans within the scope of one’s business activity and from interest or discounts on securities – in the amount of 19% of the earned revenue,
-
from dividends and other revenue from participation in profits of legal persons – in the amount of 19% of the earned revenue,
-
from interest and other revenue from funds accumulated in the taxpayer’s account or in other forms of saving, holding or investmenting, run by the entitled entity, except the funds accumulated in connection with the business activity conducted – in the amount of 19% of the earned revenue.
In addition, in certain cases it is income earned by the taxpayer that is subject to taxation, instead of revenue. This happens in the following cases inter alia:
-
income from participation in capital funds (such income is subject to 19% tax);
-
income of members of the employees’ retirement pension funds earned from transfer of shares deposited on quantity accounts into assets of those funds (such income is subject to 19% tax);
income earned from unrevealed sources of revenue or not justified by the revealed sources (such income is subject to 75% tax).
Back...
[9] Choosing this method is not obligatory and it may be applied by both taxpayers conducting business activity independently and those conducting business activity in a form of partnership without legal personality. Nevertheless, it is necessary that these taxpayers fulfil the conditions specified in the PIT Act. One of the conditions is prohibition of earning revenues from performing the services within the framework of business activity for the benefit of a former or present employer of the taxpayer, if the scope of such services corresponds to the activities performed by the taxpayer pursuant to employment relationship in the tax year or in the year preceding the given tax year.
Back...
[10] When calculating the tax base, like in the case of calculating the tax base for the purposes of income tax calculated pursuant to the tax scale, the income exempt from the taxation and income from which collection of taxes has been abandoned, are not taken into account. If the tax deductible costs exceed the amount of revenue, the difference constitutes tax loss, which may be deducted from the income earned by the taxpayer within 5 years immediately following the given tax year.
Back...
[11] In this case following incomes are in question:
-
from the transfer against payment of securities and financial derivatives;
-
from the execution of financial derivatives whose price directly or indirectly depends on the price of securities,
-
from the transfer against payment of shares in companies having legal personality;
-
nominal value of shares in a company having legal personality or contributions in a co-operative in exchange for a contribution in kind in the form other than an enterprise or an organised part thereof.
Back...
Last update: January, 2010
Prepared for the Polish Information and Foreign Investment Agency by:
Marciniuk i Wspólnicy Sp. z o. o. - Tax Advisers
|
