Wednesday , October 20 2021

Important changes to the PIT are already in force: 6 December 2020. Once again, working abroad is subject to double income tax



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From 1 January 2021, Poles working in countries such as Belgium, the United States, Denmark or the Netherlands will no longer be able to benefit from the cancellation benefits that allowed taxes to be deducted on income abroad. It was applied if the tax payable abroad was lower than in Poland.

This is of great importance to people who earn in some European countries and the United States, with whom Poland still has a disadvantageous double taxation agreement with a structure that allows taxes to be paid in the country of income, but with a surplus in addition to Poland, at Polish tax rates. The abolition quota was introduced precisely to overcome these unfavorable conditions 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 about 20,000 euros, some of which will cover 38 percent. – much higher than e.g. In the Netherlands, Austria or the United States, with which Poland has signed double taxation agreements using the proportional deduction method.
The cancellation allowance is available to people who earn income abroad and are also Polish tax residents, ie they have a center of residence in Poland. To avoid double taxation, countries agree on how and in which country income will be taxed.

Depending on the agreement concluded, Poland uses two methods to avoid double taxation. Progression exclusion method and proportional credit method. The progressive exemption method is more favorable to taxpayers because it does not require the taxation of foreign income 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 less than the Polish tax, the difference must be paid by the taxpayer.

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The repeal frees taxpayers from having to pay the difference and at the same time compensates for the disadvantages of taxpayers, as Poland has concluded a less favorable double taxation agreement with the country in which they work.

The proportional deduction method is provided for, inter alia, in agreements with: Austria, the Netherlands, Kazakhstan, Russia, Slovenia and the United States.

The government, by limiting the so-called cancellation relief to 1,360 PLN, it actually eliminates it – experts say

From 2021, tax breaks will be virtually abolished (in practice, subsidies that are now repurchased through so-called abolition to thousands and tens of thousands of zlotys), which the government bases on the fact that differences in settlement rules are now widely known from abroad. income and taxpayers with such knowledge are free to choose in which country they want to earn income.

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An act amending the law on personal income tax, the law on income tax from legal persons, the law on flat-rate income tax on certain income earned by natural persons and some other acts are already in force.
The Ministry of Finance sees this as a way to tighten personal income tax, and it says: “As a result of the abolition relief, we often engage in double non – taxation. People who make money abroad do not pay taxes at all – neither at home nor there; Where they make money Incentives are often used by rogue companies to reduce the tax paid by their owners in Poland, a phenomenon strongly opposed by the OECD In 2017, when signing the MLI Convention, Poland committed itself to introducing appropriate rules to limit such situations.
Poland will introduce a special free quota for persons operating abroad. As long as the income earned outside Poland does not exceed PLN 8000. PLN, it will be settled under the current rules. According to the Ministry of Finance, about 67 thousand people use cancellation benefits. Almost 2/3 (41,000) of this group’s income is below the threshold set by the Ministry of Finance. Their tax situation will not change. “

They will pay extra, ie in practice they will pay the second PIT

InFakt experts point out that according to the amended law, Poland will have to pay the difference between the tax applicable in our country and the tax paid abroad.
– At present, according to the rules, a Polish citizen who goes to work, for example, in the Netherlands and receives his only income there for 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, inFakt tax consultant. And he adds: – The abolition of the cancellation allowance will have the strongest impact on people who make money abroad and at the same time have a center of interest in Polish life. Such taxpayers will have to share their income with the tax office. It is also easy to see that there are significant inequalities. A person working in Germany will not have to pay taxes in Poland, but jeither will have to be done by someone who works in Belgium. Facilitating repeal has eliminated this inequality

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At present, the exemption can be applied even if the tax has not been paid abroad at all, for example due to a much higher tax-free amount. In Belgium, for example, it is currently € 8,860 or more if the taxpayer has children. In addition, other deductions can be made, says Pyotr Yushchik. – Following the change of rules, if a worker earned PLN 30 000 in Belgium, he will not pay tax there, but in Poland he will have to pay around PLN 4550, unless he can apply any deductions.

In the meantime, the only exemption provided for by the legislator concerns situations where the revenue does not exceed PLN 8000. Poland will then not have to pay tax, so the limit of this tax will be PLN 1 360. The abolition of the cancellation benefit will in many cases increase the tax burden for some people working abroad.

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Poles do not know the tax rules

According to Anna Misiak, Vice President of the CIT / PIT Group of the Tax Council of the Lewiatan Confederation and a partner of the MDDP, in formulating such a thesis, the project promoter does not seem to want to notice that double taxation between countries is secondary to taxpayers starting work abroad. In this case, for example, knowledge of the target country’s language, the amount of earnings or the availability of job offers are more important.

At the time of the cancellation allowance, taxpayers did not have to worry about a thorough understanding of the complexity of certain methods – it was enough that they knew that earning income from work outside Poland and paying taxes abroad would not normally be subject to additional tax subsidies. Poland.

GOOD TO KNOW. Click and read!

GOOD TO KNOW. Click and read!

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