How the Taxation System Works in Poland
The taxation system in Poland is regulated by the Polish Tax Code, which defines the types of taxes that must be paid by individuals and businesses. The system is divided into two categories: direct taxes and indirect taxes. Direct taxes are paid on income and wealth, while indirect taxes are paid on the sale of goods and services.
Individuals who are employed in Poland are subject to personal income tax (PIT), which is calculated based on their income. PIT rates range from 17% to 32%, with higher rates applied to higher incomes. In addition to PIT, employees also pay social security contributions, which are deducted from their gross salary. The social security contributions are used to fund the Polish social security system, which provides benefits such as health insurance, disability benefits, and retirement pensions.
Companies operating in Poland are subject to corporate income tax (CIT), which is also calculated based on their income. The current CIT rate is 19%, which is lower than the average rate in the European Union. In addition to CIT, companies also pay social security contributions for their employees.
Double Taxation Agreements in Poland
Poland has signed double taxation agreements with more than 90 countries around the world. These agreements are designed to prevent individuals and companies from being taxed twice on the same income. They also provide rules for determining which country has the right to tax specific types of income.
For example, if a Polish resident is working in another country and earning income there, the double taxation agreement will determine whether the income should be taxed in Poland, in the country where the work is being performed, or both. In general, the agreement will provide a credit for taxes paid in the other country to avoid double taxation.
Main Taxes Expats Need to Be Aware Of
As an expat working in Poland, there are several taxes that you need to be aware of. The main ones are:
Personal Income Tax (PIT): As mentioned earlier, PIT is calculated based on your income and ranges from 17% to 32%. If you are employed in Poland, your employer will deduct PIT from your salary and pay it on your behalf.
Social Security Contributions: As an employee, you will also be required to pay social security contributions, which are used to fund the Polish social security system. The current rate is 13.71% of your gross salary.
Value Added Tax (VAT): If you are running a business in Poland, you will need to register for VAT and charge it on your goods and services. The current VAT rate is 23%.
Corporate Income Tax (CIT): If you are running a company in Poland, you will be subject to CIT on your income. The current rate is 19%.
There are also several tax breaks that could apply to expats, depending on their specific situation. For example, if you are a foreign specialist working in Poland, you may be eligible for a special tax regime that offers a lower tax rate. There are also tax deductions available for certain expenses, such as business-related travel and training.
Filing a Tax Return in Poland as an Expat
As an expat working in Poland, you may be required to file a tax return each year. If you are an employee, your employer will deduct taxes from your salary and pay them on your behalf. However, if you have additional income or deductions, you may need to file a tax return to report them.
The deadline for filing a tax return in Poland is typically April 30th of the following year. If you are filing a tax return for the first time, you will need to register with the tax authorities and obtain a tax identification number.
Tax Exit Procedures for Leaving Poland
If you are planning to leave Poland and move abroad, there are certain tax exit procedures that you need to follow. The first step is to notify the tax authorities of your departure by submitting a form called a “PIT-ZG.” This form should be submitted at least 30 days before your departure.
Once you have submitted the PIT-ZG form, the tax authorities will calculate your final tax liability and issue a tax clearance certificate. This certificate confirms that you have no outstanding tax liabilities in Poland and can be used to prove your tax status to the authorities in your new country of residence.
It is important to note that if you own any property in Poland, you will still be subject to property taxes even if you are no longer a resident. You will also need to continue to file tax returns in Poland if you have any income from Polish sources.
In conclusion, the taxation system in Poland is similar to other European countries, with personal and corporate income taxes, social security contributions, and value-added tax. Expats working in Poland should be aware of their tax obligations and potential tax breaks. When leaving Poland, it is important to follow the tax exit procedures to avoid any potential tax liabilities.