Tax obligations related to the employment of employees

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Regardless of whether the entrepreneur employs employees on the basis of an employment contract or civil law contracts, he has specific tax obligations related to employment. What tax should be deducted from the salary and what declarations should be submitted to the Tax Office? Read on!

Payer and taxpayer

The tax obligation obliges the units specified in the act to pay tribute on the revenues received for the benefit of the state or other territorial unit (located in the territory of a given state).

Taxes are benefits of the following nature:

  • public law,
  • free of charge,
  • forced and
  • non-returnable.

The law determines who meets the conditions for being recognized as a taxpayer. Art. 7. § 1. of the Tax Ordinance Act
A taxpayer is a natural person, legal person or an organizational unit without legal personality, subject to tax obligation under tax laws..

A tax obligation is a common obligation to pay a levy, which is tax, in connection with the occurrence of a specific event (e.g. payment of remuneration, purchase of goods, etc.). The standards defining the scope of the tax obligation and the events causing it have been defined in tax laws and numerous regulations.

The payer is the entity obliged to calculate and collect tax on revenues generated by taxpayers. The payer acts as an intermediary between the taxpayer and the tax office. This means that the payer transfers to the tax office the advances collected on taxpayers' remuneration. Art. 8 of the Tax Ordinance Act
A payer is a natural person, a legal person or an organizational unit without legal personality, obliged under the provisions of tax law to calculate and collect tax from the taxpayer and pay it to the tax authority in due time.

Tax obligations related to the employment of employees

During the year, payers regularly calculate, collect and pay advances for income tax or lump-sum income tax for their employees to the tax office. However, there is no confirmation of the amount of payments made in any of the declarations. They are compiled at the end of the year to confirm and demonstrate that you have complied with all your employment related tax obligations over the past twelve months.

The employer is obliged to:

  • settle your own income tax,
  • settle the taxes paid for your employees.

PIT, or Personal Income Tax

The abbreviation commonly used in the Polish vocabulary of the English-language Personal Income Tax, i.e. PIT, means:

  • Personal - personal,
  • Income tax - income tax.

PIT belongs to the group of direct taxes, i.e. taxes imposed on a specific unit with a tax obligation on account of revenues obtained. PIT is collected from:

  • nationals of the country,
  • Polish tax residents and
  • tax non-residents (persons whose tax is levied only on income earned in Poland).

Acts and numerous tax regulations, including mainly the Personal Income Tax Act, define which groups of revenues are subject to tax obligation and which have been exempted from it. If a given unit achieves tax-exempt income, the tax payer does not have to submit a PIT declaration. Start a free 30-day trial period with no strings attached!

PIT-11 declaration

PIT-11 is information about income and collected advance payments for income tax, but it also contains information about the tax-deductible costs achieved by a given employee in a given accounting year. It is the duty of the tax payer to submit the PIT-11 declaration in electronic form to the tax office in a timely manner. PIT-11 should be delivered to the Tax Office by the payer in electronic form at the latest by the last day of January of a given year for the previous year!

Example 1.

The EventForYou company, employing only 3 employees, in 2021 wanted to submit PIT-11 for employees in paper form to the tax offices competent according to the place of residence of these people. In the first office addressed to the employer, he was informed that PIT-11 submitted in paper form will not be accepted and processed by the Tax Office.

In the event of termination of the contract with an employee, the taxpayer has the right to apply in writing to the payer for issuing PIT-11. The payer must issue such a declaration within 14 days from the date of the application. When the employee does not submit such an application, the PIT-11 declaration is issued within the statutory deadline. Also, when they cease conducting their activity before the deadline for submitting the information, payers are obliged to submit the PIT-11 information by the date of cessation of this activity.

PIT-11 as information about income and collected income tax advances should show actual data, i.e. the amounts of the collected advances (and not only those due to be collected) and the amount of income. This means that if the payer did not withhold income tax advances or did not pay remuneration for concluded contracts, he does not have to issue the so-called zero PIT-11 returns. However, if the payer transfers PIT-11 with zero amounts - it will not be considered an error by the Tax Office or a tax offense. The PIT-11 payer is also required to provide the taxpayer (employee) by the last day of February in a given calendar year for the previous year.

PIT-4R declaration

It provides information about the collected income tax advances, the obligation to settle it is for:

  • natural persons, legal persons and organizational units without legal personality,
  • organizational units of universities, research institutions,
  • employment authorities,
  • households employing helpers,
  • natural persons running a business, etc.

The full list of entities obliged to issue PIT-4R declarations and the dependencies that affect this obligation can be found in the Personal Income Tax Act.

PIT-4R applies to reporting income tax advances due for the given months of the previous tax year. This declaration must be submitted to the tax office in electronic form by the end of January for the previous year at the latest.

It is recommended that the payer leave the generated PIT-4R declaration for evidence purposes. The employer sends PIT-4R for all employees and is not obliged to inform them about the submitted declaration.

PIT-8AR declaration

It provides information about the collected flat-rate tax for a given year. This declaration must be submitted by those entrepreneurs who are required to collect a flat-rate income tax on revenues obtained by contractors, contractors or from the payment of dividends. In the above cases, the payer pays a flat tax at the rate of 17%, which does not include tax deductible costs. In order to benefit from the flat-rate tax, the contractor or contractor cannot be employed by the same payer additionally under an employment contract, and its receivables cannot exceed PLN 200. Should such a situation occur, the tax should be collected on general terms. The exception is also a civil law contract, the remuneration of which is determined by the hourly rate. In this case, the contribution payer is obliged to issue a PIT-4R declaration, and not a PIT-8AR declaration.

A flat-rate tax according to the 20% rate is collected on the remuneration of foreigners who do not have the status of a resident, even if the amount under the civil law agreement exceeds PLN 200 gross.

The client submits PIT-8AR (similar to PIT-4R or PIT-11) in electronic form by the end of January in a given year for the previous year. Only if the payer ceases to conduct business before this date, PIT-8AR (the same as PIT-4R and PIT-11) should be submitted by the date of ceasing to conduct this activity.

Failure to submit the declaration or sending incorrectly completed forms

In the light of the law, failure to submit PIT forms is a tax offense and is punishable by a fine. It can be avoided by submitting an active grief to the taxpayer orally or in writing. If, on the other hand, the payer has made mistakes in the forms consisting in accounting mistakes or incorrectly completed fields, he may re-submit the forms and attach a written explanation.

Employment-related tax obligations are one of the most important obligations for the employer. Failure to comply with these obligations may result in tangible consequences.