PIT settlements for 2024 and investments through foreign banks

The approaching deadline for PIT settlements for 2024 poses a serious challenge for many taxpayers regarding how to correctly settle their income, especially foreign income when it comes from investments through foreign banks.

This topic becomes particularly important for people who have investments in foreign banks (e.g. Switzerland, Germany, Austria, France, USA) and invest through banks in securities, various funds (e.g. bond funds, equity funds, private funds, exchange trade funds, discount certificates, units), bonds, derivative financial instruments, FX spots and receive income from distribution, interest, dividends, coupons, liquidation of investment positions.

PIT settlements and the diversity of investment assets

The diversity of investment assets calls into question the issues of taxation abroad and in Poland and, due to the type of capital income, almost always requires a different tax approach. Tax regulations in Poland define income from monetary capital as, among others: interest, dividends, shares in the profits of legal persons, redemption of units in funds, sale of securities or derivative financial instruments. However, some income can be offset against costs, while others cannot, and moreover, they cannot be offset against losses from other sources. In addition, it is the taxpayer’s responsibility to declare income or loss from foreign income in the annual tax return after the end of the tax year. Foreign banks do not send PIT 8C declarations.

Foreign brokers who do not operate in Poland as a branch, do not issue PIT-8C, but in order to support their clients in tax settlements, they provide individual tax reports (Tax report or Gains / Losses report). They are often written in foreign languages and contain complicated statements of transactions. These reports differ significantly from PIT8C and require a thorough analysis of the type of investment, income, revenue, loss, currency exchange rate, and tax collected abroad. In principle, reports provide information on which transactions have taken place and what the income or losses are. Above all, the reports sum up the investor’s overall profit on the invested funds. The summary of transactions (e.g second page of reports) cannot, therefore, be the sole basis for tax settlement in Poland.

PIT settlements of foreign investments and the position of tax authorities

The subject of tax settlements of foreign investments is a constant focus of interest for tax authorities, for example in connection with the exchange of tax information and the receipt by tax authorities of information about income earned by Polish citizens in foreign accounts in the frame of mandatory exchange of tax information (e.g. CRS, AEOI, FACTA).  It is also the subject of many inquiries to the Director of the National Revenue Information Service for a tax ruling on the rules for settling investments in foreign accounts.

An example is the ruling of 11 December 2024[1], in which the taxpayer/investor indicated that:

• he earned income/revenue from interest on bank deposits and bonds, i.e. monetary capital taxed according to the rules specified in Article 30a of the Personal Income Tax Act (flat-rate income tax of 19%),
• as well as income from derivative financial instruments, i.e. also from capital gains, but taxed according to the rules set out in Article 30b of the Personal Income Tax Act (income tax at 19%)
• and recorded a loss.

The taxpayer wanted to confirm which sources of income he could use to reduce the loss.

The tax authority confirmed that different taxation rules apply to the various revenues (income) earned by the Applicant from the aforementioned capital investments, as regulated in different provisions of the Personal Income Tax Act. ‘Subjecting a given revenue or income to the regulation of one provision of the act excludes subjecting them simultaneously to the regulation of another provision of the same act. With regard to the income specified in Article 30a(1) of the Act, the legislator has provided for taxation at a flat rate of 19%, which, by its very nature, is levied on each specific payment, regardless of any current or previous tax losses from this source of income. This type of taxation is not global, where the tax is calculated on the tax base determined for the entire tax year and where the income can be reduced by possible losses from this source. This fact clearly shows that it is not possible to compensate losses from income (revenues) from these sources. However, the rules are different for income specified and taxed according to the principles set out in Article 30b of the Personal Income Tax Act. The income tax on the income listed in this provision is 19% of the income obtained.

This means that the excess of the income obtained over the costs of obtaining it is subject to taxation. This means that a loss incurred from this income stream, i.e. from the income specified in Article 30b(1) of the PIT Act, can only reduce the income referred to in Article 30b(1) of the PIT Act. Therefore, if the Applicant recorded a loss in 2022 from income indicated and taxed according to the principles specified in Article 30b(1) of the Personal Income Tax Act (the loss was incurred on the sale of derivative financial instruments for consideration and the exercise of the rights arising therefrom), this loss – under the rules set out in Article 9(3) in conjunction with Article 9(6) of the Act on personal income tax – may be deducted from future income earned from this source (provided that this income was earned from the same stream, i.e. it is income from Article 30b(1) of the Personal Income Tax Act).

The tax authority has confirmed that in order to make a correct settlement, it is crucial to have information on the income earned and the costs incurred in earning it, or possibly the tax paid abroad. This data should be collected based on information prepared and provided to the taxpayer by the entities through which he or she earns income.

Investments in foreign banks and PIT settlements – summary

In summary, the taxation of income from foreign capital investments is a challenge for many Polish tax residents, especially in the context of changing regulations and the variety of available financial instruments.

Although the regulations on capital taxation in the PIT Act are precisely defined, the reality of investing abroad can be more complicated. It is also worth noting that foreign investments may involve the necessity to pay tax in another country, which may affect the amount to be settled in Poland. In such cases, double taxation is an important factor, which can be partially mitigated by international double taxation treaties.

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[1] Individual interpretation of 11 December 2024, ref. 0115-KDIT1.4011.645.2024.2.MST.