The MLI Convention and the taxation of pensions from abroad in Poland

The MLI Convention changed the method of avoiding double taxation in some of the agreements concluded by Poland on the avoidance of double taxation (abbreviation: DTT). The exemption with progression method has been replaced by the credit method.

Consequences of the MLI Convention for pensions from abroad

How does the adoption of the new method affect the tax obligations of people receiving foreign pensions and what are the obligations of the bank as a payer in such a situation?

It should be noted that in order to avoid double taxation, most agreements concluded by Poland adopted the principle of applying the exemption with progression method. This means that if a given benefit is taxed in the other state (i.e. the given treaty allows for taxation of the benefit in the source state), then the amount of this benefit is tax exempt in Poland.

However, the notification of the application of …

Does Your tax residency change when You move to Poland?

This post is meant for people, who have doubts regarding their tax residency. The advice is based on a case of a person, who moved from the UK to Poland.
Let’s assume, that in the last years You had a tax residency in the UK, that the employer is based in the UK and that You moved to Poland in 2019.
You obtain income from employment and You aren’t an entrepreneur.
In order to answer the question whether Your tax residency changes when You moved to Poland in 2019, we have to look in the articles of the Double Taxation Convention between UK and Poland, signed in 2006.
You shall show in one country in the annual tax declaration Your worldwide income (earned in all countries in which You worked in a given year) and that means You have a tax residency in that country.
Article 12 ‘Income from employment’

Becoming a farmer in Poland – a possibility to optimize the tax burden?

Yes, it would be a good possibility to optimise the tax burden, but we have to check if you meet the conditions. Farmers in Poland don’t pay any income tax, they pay only agricultural tax, which is based only on the area of agricultural land – however, that’s the case if the size of activity is lower, than the sizes envisaged for the special departments of agricultural production – art. 2, paragraph 1 of the Natural Persons Income Tax Act:

“The provisions of the Income Tax Act do not apply to: 1) income from agricultural activities, with the exception of special departments of agricultural production”.

So first of all we have to check if you perform agricultural activities. The definition is in art. 2 paragraph 2 of the Natural Persons Income Tax Act:

“2. Agricultural activities, as defined in paragraph 1 point 1, is the activity consisting in the production …

Customers are not paying – uncollectable debts

As a general rule, debts written off as uncollectable cannot be considered as tax deductible. However, in certain situations, the provisions of Polish tax law provide some exceptions. According to these provisions, only strictly defined uncollectable debts (which based on the tax law were firstly booked as taxable revenues) may be considered by the taxpayer as a tax-deductible cost, provided that:

a) their uncollectability was properly documented (e.g. by a court decision),

b) their uncollectability may be considered probable (e.g. debtor’s death).

The difference between a) and b) is that in a) you can simply deduct the uncollectable debt from the tax revenues and forget about it, but in b) you can deduct the uncollectable debt from the tax revenues temporarily and if the uncollectability is not properly documented before the expiration of the right to claim this debt, the taxpayer must treat the debt as a taxable revenue at …

Employee becomes self-employed – conditions and restrictions

I receive questions about a problem returning like a boomerang: can employees go on self-employment and start their own business? The answer is the one that most often falls from the tax advisor’s lips: “Yes, but it is not that easy…” 🙂 or “It depends …” 🙂

So – it is possible, but…in this case it is important to know that a freelancer can not issue invoices for a former employer for the same activities that he has carried out under an employment contract.

Condition of this solution (so that no problems arise with the tax office and social insurance institution ZUS)

A freelancer can not have an agreement with his formal employer for the same activities that he has performed as an employee. So he should have a contract with another company and this contract must involve other activities than the employee has carried out for his formal employer.…

Changes of the corporate and personal income tax law in Poland in 2019

There are some revolutionary changes of the corporate and personal income tax law in Poland, which might influence Your business. The President of Poland signed a bill amending the income tax acts. Some regulations are valid as of the beginning of 2019.

The new regulations regard the following issues:

Transfer Prices

  • new thresholds for TP requirement – PLN 10 M for tangible and financial transactions, PLN 2 M for other transactions. The change was aimed at reducing documentary obligations, however, it may involve a documentary obligation for taxpayers who currently do not have such obligation due to revenues or costs below EUR 2 million. According to the regulations being changed, the taxpayer who concludes the above-mentioned types of transactions with the indicated values, are required to prepare local transfer pricing documentation, even if the sum of its revenues or costs does not exceed EUR 2 million;
  • no need to show
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