Poland: Living There - Tax Issues

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Living There

INDIVIDUAL TAXATION

There are no distinctions between resident and non-resident taxpayers, except that non-resident taxpayers pay tax on Polish-sourced income only. Married couples are taxed separately.

INCOME TAX

All income is aggregated and then taxed at progressive rates. Taxable income is generally calculated by deducting income-generating expenses from the gross income.

There are no personal and family allowances in Poland. However, some deductions and tax credits are available to residents.

Deduction

• Donations for purposes relating to religion and donations to public utility organizations are deductible up to 6% of the taxable income. However, deduction is not allowed if the donation is made to an individual or entity that engages in certain activities (e.g. production of electric equipment, fuel, tobacco, or alcohol).
• Interests on mortgage loan not exceeding PLN189,000 (€50,431) are deductible if taken as of 01 January 2002 to build or purchase a residential property in Poland. To qualify for the deduction, the construction must be completed within the 3 years of the end of the calendar year the building permit was issued.
• Cost of Internet access in the taxpayer’s home up to PLN760 (€203) per annum is deductible.
• The following are standard deductions in relation to employment income. If transportation expenses (for commuting by bus, railway, ferry, or municipal transport) incurred by the taxpayer exceeds these standard deductions, actual expenses can be deducted provided that it is documented by season tickets.
  • PLN1,277 (€341) for income derived from one employer
  • PLN1,840.77 (€491) for income derived from more than one employers
  • PLN1,533 (€409) if the taxpayer resides outside where the employer’s seat is located
  • Maximum of PLN2,300.94 (€614) if the taxpayer resides outside where the employer’s seat is located and derives income from more than one employer

Tax Credits

• Standard tax credit of PLN530.08 (€141) for medical costs
• Contributions to the obligatory health insurance up to 7.75% of the tax base. An obligatory health insurance (covering medical expenses) is payable by all employees at the rate of 8.75%.
• Donations to public utility organizations. The credit may not exceed 1% of the amount of tax due.

Rental Income Tax

Rental income is generally taxed at the progressive rates. But individual taxpayers can elect to consider their income as business income and are then taxed at flat rates. The applicable tax rate is 8.5% for taxable income up to €4,000. Taxable income exceeding €4,000 are taxed at 20%. The taxable income is still computed by deducting income-generating expenses from the gross rent.

Capital Gains Tax

Capital gains from the sale of real estate are tax-exempt if the real estate was sold more than five years after the end of the year in which the acquisition was made.

Capital gains incurred for properties sold within five years of acquisition are taxed at a 10% flat rate. The acquisition price and transaction costs are deductible from the selling price to arrive at the taxable gain.

But this capital gain can also be exempted from tax if a statement is filed with the tax office within 14 days from the date of sale and if the income from the sale will be invested on other housing properties located in Poland within two years of the date of sale.

Poland - more data and information

• Lawyers (attorneys) with property law practices in Poland

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