Can a foreign scholarship be exempt from PIT?


Polish students studying at foreign universities may apply for a foreign scholarship. As persons remaining Polish tax residents, they are obliged to settle the tax in the Republic of Poland. Therefore, a question arises about the method of settling the foreign scholarship under the Polish tax. First of all, we will consider whether it is possible to apply the PIT tax exemption in this case.

Foreign scholarship and tax obligation in Poland

First, let's start with determining where a given natural person is to settle the tax. This issue depends primarily on where he has his tax residence.

Referring to the provisions of Polish law, let us point out that pursuant to Art. 3 sec. 1a of the PIT 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) on 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.

If it is established that a given natural person is domiciled in the Republic of Poland, he or she will be considered a Polish tax resident subject to unlimited tax liability.

In such a situation, this person is obliged to settle tax in Poland on both foreign and domestic income.

Therefore, if we are dealing with a student whose center of life interests is in Poland, but who studies abroad, his place of residence will nevertheless be Poland.

Natural persons residing in Poland may be required to settle tax due to foreign scholarships as they are subject to unlimited tax liability.

The scholarship and the source of income

Before we move on to the issue of the possibility of taking advantage of the tax exemption, it is necessary to consider which source of income the taxpayer should include in the scholarship.

In this regard, let us recall the content of Art. 20 paragraph 1 of the PIT Act. In the light of this provision, for revenues from other sources referred to in Art. 10 sec. 1 point 9, in particular: amounts paid after the death of a member of an open-ended pension fund to a person or a member of his / her immediate family, within the meaning of the provisions on the organization and operation of pension funds, an individual retirement security account, including those made for the benefit of the person entitled in the event of the saver's death, cash benefits from social insurance, alimony, scholarships, benefits received under the contract on aid for harvest, subsidies (subsidies) other than those mentioned in art. 14, surcharges, awards and other free benefits not included in the revenues referred to in Art. 12-14 and art. 17.

The above enumeration lists, inter alia, scholarships. This means that the funds received on this account constitute the student's income from the so-called other sources referred to in art. 10 sec. 1 point 9 of the PIT Act.

The taxpayer settles this type of income on a one-off basis in the PIT-36 tax return submitted by April 30 of the year following the tax year. Therefore, there is no obligation to pay monthly tax advances. General rules and the tax scale apply to the taxation of the scholarship. The income from the scholarship is added to the other income of the taxpayer.

Under the PIT tax, the scholarship is income from other sources, which is taxed at the rate of 17% (if the tax base exceeds PLN 85,528, the rate is 32%).

Foreign scholarship and income tax exemption

The PIT Act explicitly provides for a special exemption for people who receive income from foreign scholarships.

Pursuant to Art. 21 sec. 1 point 23a lit. and the PIT Act, part of the income of persons referred to in art. 3 sec. 1, temporarily staying abroad and receiving income from scholarships - in the amount equal to the diet for business trips outside the country, specified in the provisions on the amount and conditions for determining the amounts due to an employee employed in a state or local government budgetary unit for a business trip abroad, for each day on which the scholarship was received.

The amount equal to the allowance for business trips abroad is specified in the Regulation of the Minister of Labor and Social Policy of January 29, 2013 on receivables due to an employee employed in a state or local government budgetary unit for a business trip for each day on which the scholarship was received. .

As a consequence, only the surplus of the scholarship over the amount covered by the exemption referred to in Art. 21 sec. 1 point 23a of the Act, is taxable income as income from other sources and is subject to disclosure in PIT-36.

Example 1.

A Polish student is studying in Brussels, where he receives a scholarship from the local university. The Belgian dietary allowance is € 48. The student was receiving a scholarship for 100 days. Consequently, the equivalent of a scholarship of up to EUR 4,800 is exempt from tax. Only the surplus of the scholarship over this amount will be taxable.

For persons receiving a foreign scholarship, there is a tax exemption specified in art. 21 sec. 1 point 23a of the PIT Act, according to which the value of the scholarship is tax-free, corresponding to the amount of the diet for each day of receiving a foreign scholarship. Start a free 30-day trial period with no strings attached!

Scope of the exemption of a foreign scholarship

We have already learned the rules under which the exemption applies to the foreign scholarship. Now it is necessary to consider its scope. It is about determining what is included in the concept of a scholarship in the light of tax law.

As indicated by the Director of KIS in the interpretation of January 22, 2020 (No. 0113-KDIPT2-2.4011.538.2019.3.EC), the provisions of the PIT Act do not define the term "scholarship". Therefore, in order to determine its meaning, it is necessary to use a linguistic interpretation. This term means periodic financial assistance from state, social or private funds - mainly for students, students and science workers. From a legal point of view, it is therefore a periodic benefit, mainly in cash, provided to a designated person and aimed at supporting their activities aimed at acquiring knowledge or scientific creativity.

This means that the term "scholarship" used in art. 21 sec. 1 point 23a of the Act should be understood as financial assistance in the form of a periodic benefit (mainly) in cash for a designated person for a specific purpose.

As a result, the scope of this concept will also include the scholarship recipient paid to cover the costs of living during the internship at a foreign university.

The content of the interpretations issued by the tax authorities shows that the scope of the exemption specified in Art. 21 sec. 1 point 23a of the PIT Act also includes those funds under the scholarship that are allocated to a natural person for its maintenance.

A foreign scholarship may benefit from PIT exemption, however, it should be remembered that this type of exemption is limited. On the other hand, the surplus over the tax-exempt amount will be taxed in the Republic of Poland as income from other sources.

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