A specific group of taxable persons are non-residents, i.e. people whose place of residence is not Poland, yet they earn their income here. Taxation applied to such income will be governed by double taxation conventions. In many situations, non-residents' income will be subject to taxation in the “source country”, i.e. in the country where income is earned.

In the case of certain income, taxation of a non-resident in Poland does not differ from taxation of residents, i.e. persons whose place of residence is Poland. Hence, there are no special differences between residents and non-residents with regard to taxation of income from employment or a business activity.

On the other hand, some fundamental differences apply in the first place to income derived from contractual professional services (e.g. under civil law agreements or management contracts) or related to copyright or interest. Such revenue earned by non-residents is taxed with 20% lump-sum income tax.

Provisions relating to the lump-sum tax are applied taking into account double taxation conventions. In order to be able to apply a tax rate resulting from a relevant double taxation convention and thus not collect (not pay) the tax under such convention, a taxpayer must obtain a taxable person's tax certificate of residence.

Since no revenue expenditure is deducted from such revenue, the lump-sum tax is calculated on the revenue.

Non-residents who earn the said revenue without taxpayers' intermediation are obliged, with no prior notice, to pay the lump-sum income tax for the months in which such revenue was obtained, by the 20th day of the month for the preceding month.

If such revenue is earned with taxpayer's intermediation, it is the taxpayer that is obliged to calculate, collect and pay the due amount of the lump-sum tax. A taxpayer pays the tax by the 20th day of the month following the month in which the tax was transferred to the bank account of a tax office managed by the head competent for the taxpayer's domicile or registered office.

A taxpayer does not collect the lump-sum tax if a non-resident carries out a business activity in Poland through an establishment located here. However, for the tax not to be levied, a taxpayer must obtain from a taxable person a certificate confirming the existence of a foreign establishment in Poland issued by a competent tax authority of the state in which the taxable person is domiciled, or by a tax office in Poland competent for such establishment. In addition, the taxpayer must obtain a written statement from a taxable person that the dues concerned are related to the establishment's operation.

Taxpayers who discharge such performances for a person not residing in Poland are obliged to send to a taxable person concerned and a competent tax office, by the end of February following the tax year concerned, a personal notification of revenue (income) earned by individuals whose place of residence is not Poland (IFT-1R). If a taxpayer closes their business down before the end of February, they should prepare and send such notification for the relevant period and by the business closing date.

Following a foreign person's written request – within 14 days of its submission – a taxpayer is obliged to prepare IFT-1 notification and send it to the taxable person and a competent tax office. Submission of such notification does not relieve the taxpayer from the obligation of submitting the IFT-1R notification by the end of February.

The right to file an annual tax return by a foreigner whose lump-sum income tax was collected by a taxpayer

As we can infer from the above-described rules governing lump-sum personal income tax of non-residents, the PIT Act differentiates the tax treatment of income earned by persons residing and not residing in Poland.

Revenue that for non-residents is taxed at the lump-sum rate of 20%, for persons residing in Poland is taxed according to the taxable bands (18% and 32%).

What is more, the latter group is entitled to reduce their revenue with expenditure (usually at the lump-sum percentage of 20% or 50%).

As a result, Polish residents and non-residents pay different taxes on income from the same source.

Example:

A person residing in Poland earning gross revenue of 1000 PLN under a specific-task contract will pay tax of 144 PLN (18% of 800 PLN, i.e. revenue of 1000 PLN reduced by revenue expenditure of 20%, i.e. 200 PLN).

In contrast, a non-resident in Poland will pay for the same specific-task contract performed in Poland the tax of 200 PLN (20% of 1000 PLN).

This discrimination has been pointed out to Poland by the European Commission, which takes care that national laws in the Community do not contain regulations that may be considered discriminatory against citizens of other Member States of the EU. As a result, the discrimination was eliminated with effect from 1 January 2009. Now, each non-resident living in the EU or within the EEA has the right to recover the overpayment resulting from a taxpayer's withholding of the lump-sum income tax (which is usually higher than the tax calculated according to the taxable bands).

In order to recover the overpaid amount, a taxable person must file with a tax office an annual tax return with an attached tax certificate of residence from their country of residence. In their return, the taxable person will disclose their revenue earned in Poland, reduce it by the lump-sum expenditure that is provided for by legal regulations, and then apply to the resulting income a tax rate from a relevant taxable band. The lump-sum tax of 20% collected before will be thus treated by the taxable person as an advance tax, and so they will be able to recover the overpayment.