Poland - Income Tax :-Taxation of international executives

Tax returns and compliance

When are tax returns due? That is, what is the tax return due date? 

30 April.

What is the tax year-end?

31 December.

What are the compliance requirements for tax returns in Poland?

Poland operates a monthly tax payment system.

The Polish tax system requires individuals to pay 11 monthly tax advances from foreign employment relationships, (expatriates included). The tax advance for December is declared at the time of lodging the annual tax return by 30 April of the following year. No tax declarations need to be filed during the tax year. The tax payment for December should be paid at the same time as the annual declaration is filed. The annual tax declaration should be submitted by 30 April of the following year. The payment of the tax due is transferred to the Treasury Office bank account on the same date.

In the case of local employment contracts, the Polish employer should withhold the tax advance payments from the employee’s pay each month.

Residents

Where residents work under an employment contract with a Polish company and perform the work in a territory of Poland, the employer (tax remitter) withholds tax at progressive tax rates of 18 percent and 32 percent of the taxable base. These rates are applied if the employee’s remuneration exceeds the respective income tax threshold. The tax withheld by the employer must be paid to the tax office by the 20th of the month following the month in which the tax was withheld. Residents are obliged to tax their worldwide income in the annual tax return with consideration of appropriate double tax agreements.

Where individuals perform work in Poland as employees of a foreign (non-Polish company) the foreign employer does not have a withholding tax obligation, and the employees themselves should pay the tax advances not later than the 20th of the month following the month in which the income is derived.

There are specific detailed provisions concerning the joint taxation of married taxpayers.

Non-residents

Where non-residents work under an employment contract with a Polish company and perform the work on territory of Poland, the employer (tax remitter) withholds tax at progressive tax rates of 18 percent and 32 percent of the taxable base. These rates are applied if the employee’s remuneration exceeds the respective income tax threshold. The tax withheld by the employer must be paid to the tax office by the 20th of the month following the month in which the tax was withheld. Non-residents are only taxable on Polish source income (this includes income for work performed in Poland, wherever paid).

Where individuals perform work in Poland as employees of a foreign (non-Polish company) the foreign employer does not have a withholding tax obligation, and the employees themselves should pay the tax advances not later than the 20th of the month following the month in which the income is derived.

There are specific detailed provisions concerning income from personal activity (such as, personal service contract, revenues earned under the contracts of management, revenues received by persons who sit on boards of management, supervisory boards, commissions, and other decision-making bodies of legal persons). In the case of non-residents, such income is subject to a 20 percent flat rate final tax, which is paid by the 20th of the following month.

Tax rates

What are the current income tax rates for residents and non-residents in Poland?

In 2019, Poland applies a progressive income tax scale to individuals; these rates are set out below.

The official currency of Poland is the Poland Zloty (PLN) –1 US dollar (USD) is approximately PLN3.6 and 1 Euro (EUR) is approximately PLN4.3.

Income tax table for 2019

Taxable income over (PLN)	Taxable income up to (PLN)	Tax applicable
0	85,528.00	18 percent
85,528.00	Over	15395,04 plus 32 percent of excess over 85,528.00

2019
Taxable Income (PLN)
Over	But not over	Tax credit (PLN)
0	8,000	1440
8,000	13,000	between 1440 and 556.02
13,000	85,528	556.02
85,528	127,000	between 556.02 and 0
127,000	No limit	0

The statutory deductible cost of earning income stands at PLN111.25 per month.

In certain cases, for lower earners, a small personal allowance (tax free amount) can be claimed.

Residents

Residents as a rule pay tax on the basis of the aforementioned progressive rate scale.

Non-residents

Non-residents, similarly to residents, pay tax on the basis of the progressive tax rate scale if they work under an employment contract. Specific income sources (for example, personal service contract, or management contract) are subject to 20 percent flat rate final tax.

Please note that capital gains and investment income are taxed under a separate tax regime of 19 percent.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Poland?

Polish income tax law provides that an individual whose place of residence lies within Poland shall be liable to Polish income tax on their worldwide income. In these circumstances, the individual is considered to have an unlimited tax liability.

Conversely, if an individual whose place of residence is not Poland, the individual has a limited Polish tax liability. That is, the individual is only liable to Polish income tax in respect of Polish-sourced income.

An individual is defined as resident of Poland, if at least one below-mentioned condition is fulfilled:

• the individual has closer personal or economic relations with Poland (center of vital interests)
• the individual stays on the territory of Poland longer than 183 days in a given fiscal year.

Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country/territory for more than 10 days after their assignment is over and they repatriate.

If the individual remains in Poland more than 183 days in a given fiscal year they generally should be considered a Polish tax resident for that year, regardless of the location of their centre of vital interests. The 183 days is counted over the course of the whole year and does not depend on the start or end date of assignments.

Split year treatment, although not specifically mentioned in Polish tax legislation, is generally accepted in practice where an individual first arrives in Poland or leaves permanently or for an extended period of time.

What if the assignee enters the country/territory before their assignment begins?

The entering of the host country/territory before the assignment begins does not result in any special procedures related to personal income tax for the assignee. However, for computation of the number of days an assignee stays in Poland, the days before the assignment begins are counted and when the period exceeds 183 days, the assignee acquires an unlimited tax liability. If the assignee is a resident of another country/territory as well, the appropriate double tax agreement should be applied.

Termination of residence

Are there any tax compliance requirements when leaving Poland?

The termination of an expatriate’s residence in Poland does not result in any special procedures related to personal income tax. However, a registration update form should be lodged indicating a change of address. In the case of non-residents, then strictly speaking, the individual would also be obliged to file an annual tax return for the year of departure prior to their departure.

What if the assignee comes back for a trip after residency has terminated?

Any presence in Poland is taken into account when determining the 183 day period of tax residency. Hence such visits should be taken into consideration when determining the 183 day period for tax residency. 

Communication between immigration and taxation authorities

Do the immigration authorities in Poland provide information to the local taxation authorities regarding when a person enters or leaves Poland?

The immigration and tax authorities are separate bodies and generally do not communicate between each other with regard to persons entering or leaving the country/territory.

Economic employer approach

Do the taxation authorities in Poland adopt the economic employer approach1 to interpreting Article 15 of the Organisation for Economic Co-operation and Development (OECD) treaty? If no, are the taxation authorities in Poland considering the adoption of this interpretation of economic employer in the future?

The concept of economic employer is not formalized in Polish tax law, however, in practice the authorities should as a rule apply the principles set down by the OECD.

De minimus number of days

Are there a de minimus number of days2 before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

Not applicable. 

Source ;-KPMG June 1 2019

All information contained in this document is summarized by KPMG Tax M.Michna sp.k., the Polish member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the Polish Personal Income Tax Act of 26 July 1991 and subsequent amendments; the Web site of the federal fiscal administrations; the Polish Social Security Act of 13 October 1998; the Web site of the Polish Social Security administration; the Polish Tax Ordinance Act of 29 August 1997.