Employment of foreigners and PIT

Service

On an entrepreneur employing foreigners, the Personal Income Tax Act imposed a number of obligations related to the performance of the function of a payer. Currently, the use of foreign labor is becoming more and more popular on the Polish market, therefore it seems necessary to clarify the issue of employing foreigners in the light of tax law.

Tax obligation of foreigners

First of all, the issue of the place of tax residence of foreigners should be addressed. This will make it possible to determine whether a given foreigner has unlimited or limited tax liability in Poland. Pursuant to the provisions of the Personal Income Tax Act, persons residing in the territory of the Republic of Poland are subject to taxation on all their income, regardless of the location of the sources of income. This is called unlimited tax liability. It consists in making all taxpayer's income subject to the obligation to settle the tax - regardless of where they were actually achieved. On the other hand, natural persons who do not have a place of residence in the territory of the Republic of Poland are subject to tax only on income generated in the territory of the Republic of Poland. Such a situation is defined in the regulations as a limited tax obligation.

Pursuant to Art. 3 sec. 1a of the Personal Income Tax Act, a person residing in the territory of the Republic of Poland is a natural person who:

  1. has a center of personal or economic interests (center of vital interests) in the territory of the Republic of Poland, or

  2. stays on the territory of the Republic of Poland for more than 183 days in a tax year.

The income earned on the territory of the Republic of Poland is considered, inter alia, to: income from work performed in the territory of the Republic of Poland on the basis of a business relationship, employment relationship, homework and a cooperative employment relationship, regardless of the place of payment of remuneration, activities performed personally on the territory of the Republic of Poland or economic activity conducted in the territory of the Republic of Poland.

The scope of the limited tax obligation in the personal income tax applies to those persons who do not reside in Poland and have obtained income in the territory of the Republic of Poland, even if the actual payment was made abroad.

As can be seen from the above, the issue of nationality is not of primary importance in determining tax residence. First of all, the place of residence of a given person is taken into account.

Example 1.

A German citizen moved permanently to Poland in 2017 and started working under a contract of mandate. The foreigner lives permanently in Poland, so he is a Polish resident. Therefore, on the income obtained by him under the contract of mandate, the Polish employer as a payer should collect monthly advances for income tax, calculated according to the same rules as for a Polish employee. The contractor is obliged to submit a PIT-37 tax return to the competent tax office by April 30, 2018 and show the income obtained in Poland and abroad. If a German citizen did not have Polish residence, then his income from the contract of mandate would be taxed in the form of a flat-rate tax. In such a situation, the employer would be obliged to submit the IFT-1R to the appropriate tax office.

Tax obligations and employment of foreigners

If the Polish employer employs foreigners, he is obliged to calculate and pay an advance income tax payment by the 20th day of the month following the payment month. Another obligation of the employer is to submit a PIT-8AR or PIT-4R return to the competent tax office by the end of January of the next tax year. By the end of February of the following year, the employer submits the annual information on income and PIT-11 advances collected and submits it to the non-resident and the tax office competent for the settlement of non-residents.

The same settlement rules apply to a foreigner as to a Polish taxpayer as far as the obligations of the payer are concerned. In the case of foreigners employed in civil law forms, the lump sum tax amounts are not shown in annual documents. In this case, however, the companies employing them have one more obligation - they should submit the IFT-1 form. These data are provided to foreigners and tax offices, with the help of which the heads of tax offices competent in matters of taxation of foreign persons perform their tasks by the end of February of the year following the tax year, and if the payer ceases to conduct business before the end of February of the year following the tax year. , the payer shall provide the information by the date of cessation of activity.

Moreover, the provisions indicate that upon a written request of a foreigner, the payer is obliged to prepare and send to the taxpayer and the tax office managed by the head of the tax office competent for taxation of foreign persons, personal IFT-1 information within 14 days from the date of submitting the application.

Until the end of April of the following year, a non-resident earning income from an employment contract must be accounted for on the PIT-37 form. The non-resident has a limited tax liability, which means that he only settles income earned in Poland in his tax return.