When do you have to pay taxes in Poland?
According to the Personal Income Tax Act of 26 July 1991 (Journal of Laws 2021.1128, hereafter referred to as the PIT Act), the extent of tax liability depends on the place of residence. The type of taxation depends on the source of income.
In other words, if you work in Poland, your income is taxable here, just as Polish employees are. Ukraine and Poland have a double taxation treaty – you will only pay tax once as long as you comply with all the formalities.
Whether or not you have to pay taxes in Poland does not depend on the form of your contract – the same obligation applies to employment on a contract of employment, commission, work or self-employment (B2B contracts). Instead, it depends on where you live permanently and where you (physically) work. Legally, work based on a contract other than an employment contract is called “activity carried out personally in the territory of Poland”.
Non-resident status – I work in Poland and live in Ukraine daily.
If you work in Poland but are here for less than 183 days a year, you are subject to “limited tax liability” – you pay taxes in Poland only for income earned on the territory of this country. This provision applies, for example, to seasonal or temporary employees who work in Poland for less than six months a year. You generally provide information on your tax residency by completing a declaration for tax purposes with your employer.
By the end of February (or at any other time upon your written request), your employer must send you personal tax information for non-residents IFT-1/IFT1R (unless you work exclusively under an employment contract – then you will receive the tax information as a PIT-11 form).
Tax resident status – I live and work in Poland
If you permanently live in Poland, you have to pay taxes here, even if, for example, you work remotely for a Ukrainian employer. This situation is called “unlimited tax liability”. It occurs when you live in Poland for more than six months (or less if this is where the centre of your life interests is – for example, apart from work, this is where your children go to school).
In such a situation, you have to pay taxes in Poland on what you earn here and your earnings outside Poland. You will not pay tax in Ukraine (thanks to the double taxation agreement). You submit such information in your declaration for tax purposes. You should correct your statement if you have lived in Poland for over six months.
If you have tax resident status, your employer prepares tax information for you on a PIT-11 form.
If you have left Poland but are employed here – remote workers
The situation is slightly different if you are employed by a company based in Poland but have returned to Ukraine and are working remotely. In this situation, you will only pay taxes in Ukraine to avoid double taxation.
To do so, you must provide your Polish employer with a certificate of residence. Such a certificate will be issued to you by your local tax office.
By the end of February (or at any time upon your written request), your employer must send you personal tax information for non-residents IFT-1/IFT1R.
In summary, if you work while located in Poland, you have to pay taxes here, regardless of whether you work for a Polish or Ukrainian company. This also applies to temporary or seasonal workers. If you are employed by a Polish company and live in Ukraine, you should pay taxes there. You must present your employer with a residence certificate to avoid double taxation.
It does not matter by what title you are paid (employment contract, commission, department, B2B). Which country you owe tax to depends on where you (physically) work and where you permanently reside.
Taxation amounts in Poland
Article 32 of the PIT Act describes the basis for calculating the tax. If you work as an individual (i.e. on all contracts except B2B), you pay PIT, i.e. personal income tax.
The basis for income tax is income, which you can calculate by subtracting deductible costs and social security contributions from your gross wage. Your take-home pay (net pay) is the income after deducting the advance income tax payments.
Revenue (gross pay) – Social security contributions (pension, disability, health, sickness*) – Deductible costs = income
Income – advance income tax/lump sum = net pay (take-home pay)
- The tax-free income amount is PLN 30,000. You will not pay tax if you earn less than this amount. If your income is higher, you only pay tax on your earnings above this amount. For example, if you made a total of PLN 35,000, you only pay tax on PLN 5,000.
- You can make a statement to your employer about the monthly tax-reducing amount. Then, every month, you will get PLN 300 more on hand instead of receiving a single refund of the tax paid on the free amount.
- The basic tax-deductible costs amount to PLN 250 per month on an employment contract and 20% of income, less social security contributions, on a contract of mandate and a contract for specific work.
- If you commute to work from another location, you may file a declaration with your employer stating that you have higher deductible costs, in which case they amount to PLN 300 per month.
- Your tax is 12% or 32% of your income, respectively, depending on your income threshold. The lower rate applies to those who have earned less than PLN 120,000 in a year.
- If you are under 26, your tax is PLN 0. If you have the status of a pupil/student, you do not pay any contributions, and your take-home pay equals the gross amount.
- Your tax advance payment can be reduced by an amount equal to 1/12 of the tax-reducing amount if you complete a PIT-2 (i.e. an employee declaration to calculate monthly advances on personal income, applicable, among other things, to employees employed under an employment contract).
- Sickness contribution is voluntary for civil law contracts.
How do we settle the tax?
After the end of the tax year, your employer must prepare tax information – PIT-11 – for you. You must receive it by the end of February (by post or by e-mail if you have agreed to do so). The tax information also goes to the relevant tax office. If you become redundant, your employer must still send your PIT-11 to you and the tax office. In addition, your written request must compile and forward your PIT-11 to you within 14 days.
Those working under employment or civil law contracts (contract of mandate, contract of specific work) must settle with the Tax Office by the end of April at the latest. How do you do this?
You have resident status and/or work under an employment contract
1. On the part of the employer
Each month of work, the employer collects an advance payment of income tax and remits it to the tax office.
Then, at the end of the year, it must prepare tax information on a PIT-11 form. This information considers the amount of income earned during the year, the costs of obtaining income, the amount of advance payments collected for income tax and the amount of social insurance contributions (pension, disability and sickness insurance) and health insurance.
By the end of February, the employer must send the PIT-11, i.e. the tax information, to you and the relevant tax office. Returns and information concerning the income of foreigners should be submitted to the appropriate tax office. In each voivodship, this is dealt with by one branch of the Tax Office.
2. On your side
When you receive the PIT-11 from your employer, check that all the data and amounts match. After that, you do not need to do anything if you have tax resident status. For several years, declarations from your employer(s) and principals have been sufficient to settle your PIT. The National Tax Administration (KAS) will prepare your PIT-37 automatically.
You can correct the return prepared by KAS. This gives you the chance to pay less tax. If you complete the return yourself, you can consider tax allowances or the so-called preferential settlement, e.g. for single parents. As a result, you may receive a higher tax refund.
The easiest way to set your income tax is to send your PIT via the e-Tax Office website: https://www.podatki.gov.pl/pit/twoj-e-pit/. The declaration must be completed by the end of April (and if the last day of April falls on a holiday, you have until 2 May).
Foreigners’ income returns and information should be submitted to the relevant tax office. This information on the PIT-11 should be provided by the employer.
You do not have the tax resident status, and you worked on a contract of mandate/ contract for specific work.
As a rule, people who do not have tax resident status and are employed based on a civil law contract (contract of mandate, contract for specific work) settle in a lump sum. There are two disadvantages to paying in a lump sum. Firstly, the flat rate is 20%, higher than the first tax threshold (12%). Secondly, persons who settle at a flat rate cannot deduct costs, which on an ordinary contract of mandate or contract for specific work amount to 20%. With a flat-rate settlement, less will be left in your pocket.
Fortunately, even without tax residency status, you can settle on the PIT-37 form, provided you take care of a few formalities.
1. On the part of the principal
The principal collects a lump-sum advance payment of income tax on your income. This amounts to 20%.
Then, by the end of February, it sends you and the tax office annual tax information on form IFT-1R. It includes the amount of income earned during the year, the costs of obtaining income, the amount of advance payments collected for income tax and the amount of contributions to social insurance (pension, disability and sickness) and health insurance.
2. On your side
You can file your tax declaration once you have received your tax information. You are entitled to do this in the same way as those who have resident status. In many cases, filing a return will make you pay less tax (12 instead of 20%) and benefit from allowances (e.g. for a child).
To do this, you must obtain a tax residence certificate. This certificate is issued by your local tax office.
The easiest way to submit your tax return is to send your PIT via the e-Tax Office website: https://www.podatki.gov.pl/pit/twoj-e-pit/. You must attach your tax residency certificate.
The declaration must be completed by the end of April (and if the last day of April falls on a holiday, you have until 2 May). If you complete the declaration on time, you can expect a reasonably high tax refund.
Persons up to the age of 26
If you are under 26 years of age, you have to file a so-called nil tax return. If you are under 26, you are completely exempt from paying tax on employment contracts, commissions and contracts for specific work. You only pay tax on income that exceeds the annual limit of PLN 85,528.
If you have pupil/student status, you also do not pay compulsory insurance contributions. This makes you get a so-called gross=net payout.
Other persons with reduced taxation rules:
- Parents or persons raising four or more children
- Working pensioners – This applies to pensioners who, despite having reached retirement age, continue to work
The groups mentioned above will benefit from the corresponding tax reliefs for income not exceeding PLN 85 528 annually.
What tax reliefs and deductions can be used in PIT-37?
Individuals who settle on PIT-37 may benefit from tax reliefs, such as joint taxation with a spouse or as a single parent. There is also a catalogue of reliefs entitling to a reduced tax due amount. Among the most popular are:
- allowance for children (pro-family),
- Internet allowance,
- rehabilitation relief,
- relief on medicines,
- relief for blood donors.