A Polish tax resident is obliged to settle in Poland on all his/her income/revenue, regardles of the location of the sources of revenue. This means that the tax payer should also include income/revenue obtained abroad in the annual return. The PIT/ZG annex “Information on the amount of income/revenue from abroad and tax paid for the tax year” will be helpful in fulfilling this obligation.
1. When does the obligation to submit a PIT/ZG arise?
The obligation to submit a PIT/ZG depends on two factors: the country in which the income is obtained and the fact that the taxpayer has earned income in Poland.
The taxpayer should determine whether the State in which he/she has obtained income has concluded the double taxation convention with Poland and what method of avoiding double taxation is provided for in this agreement: the method of exemption with progression or proportional deduction method. The method of exemption with progression requires summing up income obtained in Poland and abroad. The interest rate of tax is set on the sum of this income. This rate applies exclusively to income taxable in Poland. The proportional deduction method consists in subtracting the tax paid abroad from that one calculated on the sum of income obtained in Poland and abroad. The deduction is limited. It can’t be greater than that part of the tax calculated before making the deduction which proportionally falls on income earned in a foreign country.
The obligation to submit a PIT/ZG arises in the event that the method of exemption with progression applies to the taxation of income obtained abroad and, at the same time, the taxpayer has earned income in Poland. If the taxpayer doesn’t obtain income in Poland, the obligation to submit a PIT/ZG doesn’t arise.
In the event that, in accordance with the double taxation convention, the proportional deduction method applies to income earned abroad, the taxpayer is always obliged to submit a PIT/ZG. It also exists when the taxpayer didn’t receive any income in Poland.
2. Annex, not separate declaration
PIT/ZG doesn’t constitute a stand-alone tax declaration. It’s an annex to tax returns. However, it’s attached to precisely specified types of declarations:
- PIT-36 – the return in question allows to settle income taxed according to the tax scale and obtained, among others, by employees, contractors, retirees, pensioners, persons conducting an economic activity;
- PIT-36S – this declaration is submitted by the taxpayer being the inherited enterprise;
- PIT-36L – this type of return is intended for taxpayers receiving revenues from non-agricultural economic activity which are subject to a flat tax;
- PIT-36LS – the declaration should be used by taxpayers who are inherited enterprises and whose economic activity has been subject to a flat tax;
- PIT-38 – this return is presented by taxpayers who
- have earned revenues:
- from the transfer for valuable consideration of: securities, securities loaned (short sale), derivative financial instruments, shares (stocks) in companies, including all rights and obligations in a company without legal personality, which is an income tax payer, or shares in a cooperative,
- from taking up shares (stocks) in companies or contributions in cooperatives in exchange for an in-kind contribution,
- from the exercise of rights arising from securities or from derivative financial instruments,
- have earned revenues or incurred tax deductible costs from the transfer for valuable consideration of virtual currencies.
- have earned revenues:
- PIT-39 – the declaration in question is intended for taxpayers who obtained revenues from the transfer for valuable consideration of real properties in a tax year.
The PIT/ZG annex shall be attached to the tax return for the tax year in which the taxpayer earned income abroad. The documents must be submitted to the Tax Office by 30 April of the year following the tax year to which the settlement relates.
3. Separate annexes
The taxpayer is obliged to submit a separate PIT/ZG annex for each country in which he/she has obtained income. For example: in the event that, in addition to income in Poland, the taxpayer has earned income in Germany and France, he/she should complete and present a separate attachment for income received in France and a separate annex for income obtained in Germany.
Spouses also submit separate PIT/ZG annexes. It doesn’t matter whether spouses settle their taxes individually or together.
4. Filling in the PIT/ZG annex
The PIT/ZG attachment is divided into several parts. Each of them contains a different type of information:
- Part A – the taxpayer’s identification details are entered here – surname, first name and his/her date of birth;
- Part B – this part indicates the country in which the income/revenue is obtained, as well as the code of this State (two-letter country code);
- Part C.1 – this part of the form is completed by the person submitting PIT36 or PIT36S
Part C.1 takes the form of a table. Lines of the table indicate the sources of revenues and its columns contain the types of information necessary to settle the tax:- column B indicates the revenue referred to in Article 27(8) of the Personal Income Tax Act of 26 July 1991 (i.e. Official Journal of 2022, item 2647, as amended), i.e. revenue obtained in a country with which the double taxation convetion provides for the application of the method of exemption with progression;
- in column C, it’s necessary to enter the income referred to in Article 27(8) of the Act, i.e. income obtained in a country with which the double taxation convention provides for the settlement using the method of exemption with progression;
- column D shall contain the income referred to in Article 27(9) and (9a) of the Act, it’s, therefore, a matter of income earned in countries with which double taxation conventions provide for the application of the proportional deduction method;
- in column E, it’s necessary to enter the tax paid abroad on income to which the proportional deduction method was applied;
- Part C.2 – it’s completed by the taxpayer settling the tax using PIT-36L or PIT-36LS
- Part C.3 – it should be completed by a person who settles his/her tax with PIT-38
- Part C.4 – it includes information concerning income and tax settled in the tax return PIT-39.
5. How to convert income and taxes obtained abroad into PLN?
Revenue/Income can’t be entered in the PIT/ZG annex in the currency applicable in the country in which it was earned. It’s necessary to convert the amounts into PLN. The conversion should be made according to the average exchange rate of foreign currencies, announced by the National Bank of Poland on the last working day preceding the day of obtaining the revenue (Article 11a(1) of the Act).
The value of taxes paid abroad should also be converted into PLN. The conversion into zlotys should occur according to the average exchange rate of foreign currencies, announced by the National Bank of Poland on the last working day preceding the day on which the expense was incurred or the tax was paid (Article 11a(3) of the Act).
6. Legal notice
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