Personal Income Tax in Poland
Taxpayers of PIT are natural persons. Polish-residents are taxed on their worldwide income (unlimited tax liability), whereas non-residents only on the Polish-source income (limited tax liability). An individual is considered Polish-resident if the center of his personal or economic interests (centre of vital interests) is located in Poland or if he stays in the territory of Poland for more than 183 days in a tax (i.e. calendar) year. Spouses are taxed separately. However, they may opt for joint taxation, upon filing a joint tax return (if some further conditions are met). Taxpayers of PIT include individuals – partners in partnerships without legal personality, i.e. civil-law partnerships and commercial law partnerships: general (registered) partnership, professional partnership, limited partnership, limited joint-stock partnership. Partners are taxed separately on their share of profits. The same applies to co-owners of tangible and intangible property.
Taxable object is income of all types (also capital gains), except for excluded and exempted income. PITA does not cover e.g. income (revenue) derived from activities which may not constitute an object of legally binding contact (illegal drugs dealing), from most agricultural activities (with the exception of so-called special sectors of agricultural production) and forestry activities, income (revenue) subjected to tonnage tax or inheritance and gift tax. Exempted income encompasses among others (usually under further conditions): some subsidies received from the State or units of self-government, value of benefits received by employees under health and safety regulations, reimbursement of business travel expenses up to a limit, certain categories of indemnities, including payments from insurance of property and persons (except e.g. indemnities for business property).
Taxable base is income (i.e. net income), reduced by allowances and deductions provided for by the law. Income from a source is the excess of revenues (i.e. gross income) from this source over tax deductible costs generated in a tax (i.e. calendar) year. If deductible costs exceed the revenues – a loss from a given source is generated. Loss may be deducted from income generated by a given source during 5 following years (up to 50 % per a year). As a rule revenues are payments received or put at taxpayer’s disposal during a calendar year, as well as received non-cash performances and other free of charge performances. Business revenues are however amounts due, including amounts not actually received, reduced by the value of returned goods, rebates and discounts, as well as output tax on goods and services. Deductible costs are expenses incurred for the purpose of earning taxable income, retaining or assuring the source of income, except for costs expressly listed as non-deductible (e.g. penal, fiscal and administrative fines, representation expenses including purchase of gastronomic services, foodstuffs and beverages, especially alcoholic). Regarding some categories of revenues deductible costs are expressly set in PITA as a given amount (e.g. standard costs for employment income) or as a percentage of revenues (e.g. 50% in case of royalties from transfer of inventions and copyrights).
Allowances and deductions reducing income to produce taxable amount include e.g. social security contributions (retirement, disability, sickness and accident), costs of Internet-use at taxpayer’s place of residence up to 760 PLN per year, donations to public benefit organizations and for the purposes of religious cult up to a limit of 6% of income, expenses incurred on the purchase of new technologies. National health insurance contributions (up to 7,75 % of their calculation base) and a family allowance of a given amount per year per a child is deductible from the tax due (tax reductions).
Generally, PIT is imposed on the aggregate income from all sources (reduced by allowances and deductions) at progressive rates of 19 %, 30 % and 40 % (see rates table below). An important element of the calculation of tax is tax-free amount of 3089 PLN, the 19% of which is 586.85 PLN and is deducted from tax. But business income may (upon application) be taxed separately at a flat-rate of 19 % (equal to CIT). Besides, income (rather revenue) from some other sources is taxed separately at flat rates, e.g. interests and dividends (final withholding tax of 19 %). Income (not revenue) from sale of securities and financial instruments is taxed at 19 %.
Progressive rates table (2008)
Taxable income (PLN) Tax (PLN)
Over Up to
44490 19 % minus 586.85
44 490 85528 7866.25 plus 30 % of excess over 44490
85 528 20177.65 plus 40 % of excess over 85528
Personal income tax is levied on a yearly basis, but monthly advance payments must be made (by the 20th of the following month) in respect of many types of income (e.g. employment, business, rental). Advance payments are deducted from the annual tax. Quarterly advance payments on business income are available to small-taxpayers (with annual business revenues not exceeding 800000 EUR) and taxpayers beginning business activities. Advance payments do not apply to e.g. income from financial investments, sale of immovable property. Advance payments are either paid by the taxpayer (e.g. business income, rental income) or withheld by the withholding agent (e.g. employment income). Annual tax return must be filed and final tax must be paid by 30 April of the following year.
Foundation Centre of Tax Documentation and Studies in Lodz