PIT settlements for 2024. Taxation of non-resident income

As a rule, the income of non-resident taxpayers in Poland, in the case of management or mandate contracts, is in most cases subject to 20% flat-rate income tax. However, it is worth remembering that in certain cases foreigners may settle according to the tax scale, i.e. according to the same rules as Polish tax residents.

When does a non-resident pay 20% PIT in Poland?

According to the PIT Act, non-Polish tax residents pay a 20% flat tax on, among others, the following types of income:

• personally performed activities (e.g. mandate contracts, contracts for specific work, management contracts);
• copyrights or related rights;
• fees for performance, entertainment and sports services;
• consultancy, accounting, market research, legal services, advertising, management and control, data processing, employee recruitment and acquisition services, guarantees and warranties and benefits of a similar nature.

This tax is levied on the revenues (i.e. the gross amount, without deducting costs) and withheld by the entity paying the remuneration.

In practice, it may happen that certain income is exempt from taxation in Poland or subject to a preferential rate under a double tax treaty. However, these agreements do not always provide for an exemption or a lower tax rate. It may also turn out that a lower taxation, i.e. according to the tax scale, is possible based on the provisions of the PIT Act.

When can a non-resident take advantage of the tax scale?

A non-resident taxpayer may opt for taxation under the progressive tax scale (12% and 32%) if they meet the following conditions:

1. is resident for tax purposes in an EU or EEA country or in Switzerland;
2. will present a certificate of tax residence to the Polish tax office;
3. he/she submits an annual tax return with an application for taxation using the tax scale;
4. there is a double taxation treaty between Poland and their country of residence allowing the exchange of tax information.

Pursuant to the PIT Act, the 20% lump-sum tax collected in such a situation is treated as an advance PIT payment. Taxation according to the scale may therefore mean that there is an overpayment of tax to be recovered.

When to consider scale taxation?

Settlement according to the tax scale allows you to benefit from:

• the tax-free amount (PLN 30,000),
• tax-deductible costs,
• a lower PIT rate calculated on income (12% for income up to PLN 120 thousand; only above that amount, 32% is applicable).

The transition to the tax scale may, however, be disadvantageous for persons with very high incomes (approx. PLN 230,000 per year and more), where these incomes will be subject to the 32% PIT rate.

We would like to point out that in many cases preferential provisions, resulting from double taxation treaties, may eliminate taxation in Poland altogether. Each case requires individual analysis.

Example

A German tax resident was appointed to the management board of a Polish company. He received his remuneration in 2024 based on a resolution of the shareholders of that company. This was his only income from Poland. Based on a double tax treaty, this income may be taxed in Poland.

The lack of a preference in the treaty (indication that the income may be taxed in both countries) means that the remuneration is subject to 20% flat rate PIT in Poland. In this situation, it is worth considering settling on the tax scale. The profitability of such a solution will depend on the amount of the annual remuneration.

The following table illustrates example tax calculations under both methods:

Social security and health contributions – key considerations

According to social insurance regulations, non-residents providing services on Polish territory may be subject to the compulsory social insurance system in Poland. This involves additional fiscal burdens imposed on remuneration.

In the example presented, the German tax resident would additionally be charged with a health insurance contribution of 9% of income. The obligation to pay the contributions in Poland will, in principle, not arise if the foreign taxpayer provides the company paying the remuneration with a certificate confirming that he is subject to a mandatory social security system abroad. In the case of EU, EEA and Swiss countries, this is the A1 certificate.

Reminder: PIT returns for 2024 must be filed by 30 April 2025 at the latest.

Legal basis:

• Article 29(1) and (4) and (5) of the Personal Income Tax Act of 26 July 1991.
• Article 16 of the Agreement between the Republic of Poland and the Federal Republic of Germany for the Avoidance of Double Taxation with Respect to Taxes on Income and on Capital, signed in Berlin on 14 May 2003.