Sunday , August 1 2021

An important change in PIT is already in force: December 6, 2020. Working abroad again have to pay double income tax

From January 1, 2021, Poles working in countries such as Belgium, the USA, Denmark or the Netherlands will no longer be able to take advantage of the abolition relief, which allowed for tax deduction for earnings abroad. It was applicable if the tax due in a foreign country was lower than in Poland.

This is of colossal importance for people earning in some countries in Europe and the USA, with which Poland still has disadvantageous taxpayers’ double taxation avoidance agreements with a structure that allows them to pay tax in the country of earnings, and on the surplus – additionally in Poland, according to Polish tax rates . The abolition quota was introduced precisely to eliminate these unfavorable rules without the need to renegotiate international agreements, but now we will practically return to paying two income taxes.
This is very bad news for many Poles who regularly work abroad. They will have to pay PIT according to the Polish tax table, and most of them earn more than approx. 20,000. euro, some of them will cover the rate of 38 percent. – much higher than e.g. in the Netherlands, Austria or the USA, with which Poland has signed agreements on the avoidance of double taxation using the proportional deduction method.
The abolition allowance is available to people who earn income abroad and who are also a Polish tax resident, i.e. they have a center of life in Poland. To prevent double taxation, countries agree on how and in which country income will be taxed.

Depending on the concluded agreement, Poland uses two methods of avoiding double taxation. The method of exclusion with progression and the method of proportional credit. The method of exemption with progression is more favorable for taxpayers because it does not require taxation of income earned abroad in Poland. They are included in the annual tax return for the sole purpose of determining the tax rate.

The proportional credit method requires the calculation of tax on total income earned in Poland and abroad, with the possibility of deducting foreign tax. But if the tax paid in another country is lower than the Polish tax, the taxpayer must pay the difference.

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Abolition relief relieves taxpayers from the need to pay this difference and at the same time equalizes the situation of taxpayers who would find themselves in a worse situation due to the fact that Poland has concluded a less favorable double taxation avoidance agreement with the country in which they work.

The method of proportional deduction is provided for, among others, in agreements concluded with: Austria, the Netherlands, Kazakhstan, Russia, Slovenia and the United States.

The government by limiting the so-called abolition relief up to PLN 1,360, it actually eliminates it – experts believe

From 2021, the tax relief will be practically abolished (in practice, subsidies, which are now redeemed as the so-called abolition thanks to the relief, go into thousands and tens of thousands of zlotys), which is justified by the government by the fact that currently the differences in the rules of settlement are widely known from foreign income and taxpayers who have such knowledge can freely choose in which country they want to earn income.

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The act amending the act on personal income tax, the act on corporate income tax, the act on flat-rate income tax on certain revenues earned by natural persons and some other acts is already in force.
The Ministry of Finance believes that this is a form of tightening personal income tax and argues as follows: “As a result of the abolition relief, we often deal with double non-taxation. People earning money abroad pay no tax at all – neither in their place of residence or there, where they earn money. The relief is often used by dishonest companies to minimize the tax paid in Poland by their owners. This is a phenomenon that is strongly opposed by the OECD. In 2017, by signing the MLI convention, Poland undertook to introduce appropriate regulations that will curb situations like these.
Poland will introduce a special free quota for persons operating abroad. As long as the income earned outside Poland does not exceed the amount of PLN 8,000. PLN, they will be settled according to the current rules. According to the Ministry of Finance data, approx. 67 thousand people use the abolition relief. Of this group, almost 2/3 (41,000) have income below the threshold set by the Ministry of Finance. Their tax situation will not change. “

They will pay extra, i.e. in practice they will pay the second PIT

InFakt experts indicate that under the amended act it will be necessary to pay in Poland the difference between the tax applicable in our country and the tax paid abroad.
– Currently, in accordance with the regulations, a Polish resident who will go to work, e.g. to the Netherlands and receive his only income there in a year, will also pay income tax there. In Poland, in such a situation, he does not have to pay tax on this account – explains Piotra Juszczyk, tax advisor at inFakt. And he adds: – The abolition of the abolition allowance will most strongly affect people earning money abroad and at the same time having a center of life interests in Poland. Such taxpayers will have to share their earnings with the tax office. It is also easy to see that there will be significant inequality. A person working in Germany will not be required to pay tax in Poland, but jwell, the one who works in Belgium will have to do it. Abolition relief eliminated these inequalities

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Currently, the relief can be applied even when the tax was not paid abroad at all, e.g. due to a much higher tax-free amount. For example, in Belgium it is currently € 8,860 or more if the taxpayer has children. Additionally, other deductions can be made – points out Piotr Juszczyk. – After the change of regulations, if an employee earned PLN 30,000 in Belgium, he will not pay tax there, but in Poland he will have to pay approx. PLN 4,550, unless he is able to apply any deductions.

Meanwhile, the only exemption provided for by the legislator applies to situations where earnings do not exceed PLN 8,000. Then it will not be necessary to pay the tax in Poland, so the limit of this tax will be PLN 1,360. The abolition of the abolition allowance will in many cases increase the tax burden for some people working abroad.

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Poles do not know tax regulations

According to Anna Misiak, vice-president of the CIT / PIT Group of the Tax Council of the Lewiatan Confederation and Partner at MDDP, when formulating such a thesis, the designer does not seem to want to notice that the issues of methods of avoiding double taxation between individual countries are secondary for taxpayers taking up employment abroad. In this case, for example, the knowledge of the language of the target country, the amount of earnings or simply the availability of job offers are much more important.

During the period of the abolition allowance, taxpayers did not have to worry about thoroughly understanding the intricacies of individual methods – it was enough that they knew that when earning income from work outside Poland and paying taxes abroad, they would, as a rule, not be obliged to make additional tax subsidies in Poland.

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GOOD TO KNOW. Click and read!


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