January is a crucial time for any employer, as it is time to fulfill tax obligations to the Internal Revenue Service. For Polish employees, the process is standard – employers issue them with a PIT-11 form. However, when hiring foreign workers, the situation requires additional attention.
Understanding a foreigner’s tax residency status is crucial and is the first step in the correct tax process. This status defines in which country income tax should be paid first.
Foreigner hired on an employment contract
If a foreigner is employed on the basis of an employment contract, regardless of tax residency in any case, he should be accounted for under the general rules and a PIT-11 should be issued at the end of the year.
Foreigner hired under a contract of mandate
If the foreigner (tax non-resident) has worked a maximum of 183 days, flat income tax must be paid and an IFT-1R must be issued at the end of the year.
The foreigner’s work from the 184th day should be settled on a general basis (advance tax payment) and a PIT-11 should be issued for this period.
IMPORTANT: If the foreigner is a tax resident, he or she should always be accounted for on a general basis and issued a PIT-11.
To which tax office to send the foreigner’s returns?
The choice of the appropriate tax office for a foreigner’s tax return depends on his residency status. For non-Polish residents, the tax return should be addressed to a specialized tax office that handles the taxation of foreigners. In this case, the foreign address of the taxpayer is indicated in the return.
Foreigners who are Polish tax residents, on the other hand, should file the return with the tax office having jurisdiction over their place of residence in Poland. If the foreigner no longer lives in Poland, his current foreign address should be indicated in the declaration. Regardless of the change of address, the competent tax office remains the same.
Can a foreigner take advantage of the tax credit?
Foreigners who file tax returns in Poland can take advantage of tax credits and deductions – regardless of their residency status. But under certain conditions!
For example, people who are not tax residents in Poland are entitled to an Internet tax credit or a family tax credit, provided they file their annual PIT-36 or PIT-37 return in Poland.
In turn, both Polish tax residents and tax residents of other European Union member states or European Economic Area countries can deduct social and health insurance contributions that are paid in Poland, as well as in the EU and EEA. The conditions for taking advantage of such deductions are strictly defined by applicable tax laws.