PIT is levied on an individual’s overall income. The taxable base is calculated as the sum of income generated from all taxable sources, subject to a number of exceptions (i.e. some sources are taxed separately and left outside the overall income calculation).
Income from a particular source is defined as the surplus of revenue from such source over the tax-deductible costs related to the same source. If within one source of income tax-deductible costs exceed revenue, the result is a tax loss (see Losses in the Deductions section for more information).
Employee revenue includes basic pay, overtime pay, supplemental pay, awards and bonuses, compensation for unused holiday or vacation time, and all other monetary amounts and benefits in kind, as well as all other services obtained for free, from the employer.
Transfer of real property
Transfer of real property, if made within the scope of regular business activity, is taxed on general rules. Consequently, it is added to other business income and taxed based on the progressive scale or the 19% flat rate.
However, special rules apply if the transfer of property is made outside the scope of business activity. These rules vary according to the date on which real property had been acquired.
Generally, sale of real property shall not be taxed if the sale is made after the lapse of five years after the end of the tax year when the property in question was purchased (i.e. property acquired in 2011 or earlier can be sold free of tax in 2017).
If the above exemption is not applicable, real property disposal is taxed at a 19% rate calculated on income. The income equals the difference between the revenue on sale and the cost of earning that revenue, increased by the overall amount of depreciation allowances (if any) made on the property in question before the disposal. Revenues earned from the disposal of residential real estate can be exempt from taxation in some cases.
Transfer of shares
Transfer of shares is taxed at a separate 19% rate calculated on income (revenue less expenses on acquisition). The income is not added to income from other sources.
Dividend and interest income
Income from dividends paid by joint-stock companies and limited liability companies is not added to individual’s overall income. Instead, it is subject to 19% tax calculated on revenue (deductions are not available). The same rules apply to interest on loans and savings.
An exception concerns loans granted within the scope of regular business activities. If this is the case, the general PIT rules apply. Consequently, both the revenues and the costs associated with such loans are taken into account while calculating the taxable base. Subsequently, income from business activity is taxed according to the progressive scale or the 19% flat rate.
More than 130 types of income are tax exempt. The most important are the following:
- Damages received on the basis of administrative law, civil law, and other legal acts (subject to numerous exceptions).
- Receipts from property insurance and personal insurance claims (subject to some exceptions).
- Remuneration paid to individual businessmen out of the international aid funds established by foreign financial institutions or other countries based on agreements concluded between such institutions or countries and the Polish government.
- Cash equivalents provided to employees when they need to use their own tools, goods, and equipment to perform work.
- Reimbursement of an employee’s costs for relocation to another place of employment and reimbursement for the costs of settling in the new place (up to 200% of the monthly salary due to the employee in the month of transfer).
- Limited daily allowances and other amounts due to employees for the duration of business trips.
- Additional pay granted to employees temporarily transferred to work away from home and other benefits granted according to the principles and limits outlined in the rules for state employees.
- Value of accommodation rented by employer for employees (up to certain limit).
Special rules for non-residents
Specified types of income, if gained by non-residents, are subject to special treatment. Namely, they are taxed at a flat rate of 20% calculated on revenue (cost deductions are not allowed) unless a DTT between Poland and the individual’s country of residence provides otherwise. These types of earnings include the following:
- Revenue from copyrights and other intellectual property (IP), such as trademarks, patents, and designs (including revenue from sale of the rights in question).
- Income from transfer of technology and know-how.
- Remuneration for leasing industrial, commercial, or scientific equipment.
- Income from independent work in the fields of art, literature, science, education, journalism, and sport (including income from participation in artistic, scientific, and cultural competitions).
- Income from work commissioned by national or local authorities or administrative bodies, courts, prosecutors.
- Income received as fees for membership in boards of directors, supervisory boards, committees, and other decision-making bodies of legal entities.
- Income from rendering personal services based on the agreement with a legal person or other entity as long as these services are not rendered within the scope of independent business activity (i.e. they are not offered to the public).
- Income received from activities performed personally under management or similar contracts.