Spring has sprung and so has another Polish tax deadline
It's getting close enough to April 30 to put readers worrying about when the annual Polish tax return column is coming out of their misery. Those who have already had their tax return prepared by their trusty tax adviser can skip straight to the features this week. The rest of us can read on.
To complete your 1999 tax return in Poland, first determine your tax status. Were you here for less than 183 days in 1999 and paid entirely from abroad, with the cost not recharged to Poland? If so, stop here. Assuming you stayed tax resident of that other country and it has a double tax agreement with Poland, then you are able to exclude this income from being taxed in Poland.
If you exceeded 183 days in Poland, read on. Were you employed by a Polish company formed with foreign participation? If so, please write the words "limited tax liability" in the margin somewhere, and carry on.
If you are Polish, or here only as a board member, or were only employed by a foreign company, or employed in some other way where you did not have a Polish employment contract, write the words "unlimited tax liability" somewhere. The tax situation for an expatriate with unlimited tax liability is exactly the same as for a Polish national.
If you received employment income from a Polish company, you will have received a PIT-11 form. If you were paid from abroad, but someone was preparing your monthly tax filings for you, you should have received an IFT-1 form. If you only received employment income from a Polish company, they can compute your annual tax adjustment in March or April, and make the adjustment against your tax for that month.
If you receive income that does not need to be included in the annual tax return, such as management board fees for people with limited tax liability, or non-taxable income for work performed abroad, you are not entitled to have the employer file the annual adjustment, even though this is the only income reportable. (See last column for details.) Like everyone else, you will need to file a return.
Employment income should be taxed at the rates in the table attached:
But first you get a "cost of earnings" deduction of zl. 74.06 (zl. 888.72 per year).
Management board fees and payments under civil code contracts (umowa zlecenie or umowa o dzielo) will have had tax withheld or paid at a flat 20% during the year.
If you've got limited tax liability (check to see what you wrote down earlier), copy the figures from the PIT-11 on to the PIT-30 tax form and calculate the tax. The monthly withholding will almost certainly show that the withholding was not quite the correct tax liability, so you may have a small underpayment.
For persons with limited tax liability, it is not necessary to include any income taxed at the 20% rate during the year in the annual return.
If you've got unlimited tax liability, you will also need to include the amounts taxed at 20% during the year in your annual return. For the civil code contracts (but not the management board fees) you can obtain a 20% cost of earnings deduction, meaning that only 80% of the income goes into your calculation. The top tax rate is effectively reduced to 32%.
For income other than salary or work income, other rules apply. Personal bank account interest is free of taxation, so that simplifies life. Profit made from trading on the exchange is also tax-free. If you have limited tax liability, any income received for work outside Poland, or foreign sources of income (e.g. from renting out your house back home) are also outside the scope of Polish taxes. If you have unlimited tax liability, these are taxable.
There are a few deductions that can be made, such as donations to scientific, cultural, educational or sporting organizations (up to 15% of income) or for charitable or religious purposes (up to 10% of income).
Additionally, deductions against your tax liability are allowed for various things. All of these are expressed as a deduction of up to 19% of the amount spent, with a limit to the total deduction.
The individual amounts are:
health care zl. 296.24
professional training zl. 500
children's school education
zl. 888.72
computer purchase zl. 285
house or apartment purchase
zl. 25,270
renovation expenses zl. 2,457 for a house or zl. 2,047.50 for an apartment (over three successive years)
Deductions cannot be taken against income being taxed at the 20% flat rate. Additionally, joint returns can only be filed where both spouses have unlimited tax liability.
The filing deadline is April 30, and just like the editor with late submission of "Tax Watch" columns, there are no extensions permitted under the law (although I've never known a tax office refuse the money if the interest is paid on the late tax payment).
Peter Ferrigno is a tax manager in the Warsaw office of Arthur Andersen.
