Let’s talk tax in Poland! Posted by Kasia on Jan 22, 2016 in Regulations
Tax return season is coming up…so let’s talk taxes! Taxes, deadlines, tax identification numbers…
Rental income from residential property situated in Poland is chargeable to tax, regardless of whether the owner is resident in Poland or not. Owners of rental properties in Poland, who are in receipt of rental income, have an obligation to declare this income by submitting a tax return to the Polish tax authorities each year.
The tax year in Poland is the calendar year, running from January 1st to December 31st. The deadline for filing a Polish tax return under the progressive scale method is 30th April of the year following the tax year to which the income relates (i.e. for 2015 the deadline will be April 30th of 2016).
Under Polish tax legislation, all individuals earning rental income in Poland are required to make monthly calculations and payments on account to the tax office by the 20th of the month following the month in which rent was received. Under the progressive scale method monthly payments are calculated on the rents received for the month less relevant expenses incurred for the month. Once the cumulative net amounts reach the tax free allowance for the year (current annual tax free allowance is PLN 3,091) the monthly net amount is multiplied by the applicable tax rate and tax payments are made on this basis. At the year end the annual tax return is submitted and the final tax position is determined. This may result in a refund due or a final balancing payment to be made depending on the payments on account made throughout the year.
One of the ways to calculate tax is to apply the so-called tax rate bands. In Poland there are two: If a taxpayer earns less than PLN 85,528 during the fiscal year, they are in the first tax band, and if more than PLN 85,528 they are in the second band. Tax rate bands apply primarily to individuals who perform work in Poland, receiving remuneration in return.
For individuals who conduct economic activity the so-called flat tax is applied, which is always the equivalent of 19% of the obtained income.
The principles of calculation for each tax rate band are different:
If the taxable income equals PLN 85,528 or less (i.e. if the person has earned up to PLN 85,528 in the year), then the tax equals 18% of this base minus PLN 556.02.
If the taxable income exceeds PLN 85,528, then the tax equals PLN 14,839 + 32% of the amount in excess of PLN 85,528.
In Poland joint taxation with one’s spouse or children is possible.
Joint taxation with a spouse is cost-effective if the spouses fall into different tax rate bands, e.g. wife – 32% and husband – 18%. It is also worthwhile if one of the spouses does not receive income or if their income is lower than the amount exempt from tax.
Joint taxation with a spouse or with a child is possible for individuals who do not conduct business activity (joint taxation may be applied only if neither of the spouses conducts business activity). Individuals who conduct business activity pay a flat tax at the rate of 19%.
In order to settle tax jointly with a spouse, the following conditions have to be fulfilled:
- both spouses must reside in Poland for at least 183 days in the given year;
- they must have a common marital estate;
- they must be married for the entire year for which the PIT form is filed;
- they must file a statement on the fulfilment of the conditions listed above – by placing their signatures on the PIT form.
Spouses must calculate their income separately and deduct applicable tax concessions separately from their respective incomes. Then they should add the incomes calculated in this manner, divide the joint income by two and calculate the tax for each of the spouses (it will be the same for each of them). Then the spouses have to add their taxes and deduct all tax deductions (information about tax deductions can be found below). If the tax calculated in such a way is lower than the total advance payments that have already been paid, the couple is entitled to a refund from the tax office.
In order to settle tax jointly with a child, the following conditions have to be fulfilled:
- one has to be single (unmarried, widow(er), divorced);
- and have custody of a child (as parent or legal guardian.
Joint taxation applies to children:
- under 18 years of age;
- under 25 years of age if they are still studying (provided that the child has not obtained any income or has obtained income exempt from tax in the given year).
In order to calculate the tax, the parent should calculate their income, deduct applicable deductions, calculate the tax for half of the income and then multiply it by 2. Then they should deduct the applicable deductions from this amount.
As a result, the calculated tax (joint taxation with child) will be lower than that calculated only for one person.
Any feedback from all of you about tax return in Poland is welcomed! Please share it with us in comments below:)
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HI Kasia, Thats a crisp and informative article.Just wanted to understand, can an expat working in Poland can apply for Joint Tax declaration with spouse if she is a housewife and not working.Can this is be declared at the beginning of the year to get some tax allowance.