Income in personal income tax
The Act on Personal Income Tax, as a legal act regulating the principles of taxation with this tax, defines, inter alia, the subject of this tax, the subject of taxation, as well as the sources of income subject to taxation.
All natural persons who earn an income are subject to personal income tax. In this case, it is important to distinguish between limited and unlimited tax liability.
Unlimited tax liability applies to natural persons residing in the territory of the Republic of Poland. Having a place of residence in the territory of the Republic of Poland means that a given natural person:
- has a center of personal or economic interests in the territory of the Republic of Poland (center of vital interests), or
- stays on the territory of the Republic of Poland for more than 183 days in a tax year.
With unlimited tax obligation, taxation covers all income earned by a natural person, regardless of the location of the sources of income (Article 3 (1)).
Limited tax liability applies to natural persons who do not have their place of residence in the territory of the Republic of Poland. Therefore, in their case, only income (revenue) achieved in the territory of the Republic of Poland is subject to tax.
The personal nature of income taxation also applies to spouses in accordance with Art. 6 sec. 1 updof, however, they may, upon a joint application, be taxed jointly, provided that:
- there is joint property between them throughout the tax year and
- remain married for the entire tax year.
In this case, it does not matter if in the tax year one of the spouses did not obtain income from sources from which the income is taxed, or if he earned income in the amount that does not result in the obligation to pay the tax.
The above principles and methods of taxation also apply to:
- spouses who are domiciled for tax purposes in a Member State of the European Union other than the Republic of Poland or in another country belonging to the European Economic Area or in the Swiss Confederation,
- spouses, one of whom is subject to unlimited tax liability in the Republic of Poland and the other is domiciled for tax purposes in a Member State of the European Union other than the Republic of Poland or in another country belonging to the European Economic Area or in the Swiss Confederation
- if they have achieved taxable income in the territory of the Republic of Poland in the amount of at least 75% of the total income earned by both spouses in a given tax year and have documented their place of residence for tax purposes with a certificate of residence.
The rules of joint taxation of spouses also apply in the same way to the taxation of single parents. Such a person is considered to be a parent or legal guardian subject to tax liability, who is:
- Miss / bachelor,
- widow / widower,
- divorcee / divorcee,
- a person who has been separated within the meaning of separate regulations,
- a married person, if their spouse has been deprived of parental rights or is serving a sentence of imprisonment.
In the case of a single parent in a given tax year, children:
- regardless of their age, for which, pursuant to separate regulations, the care allowance was collected;
- until the age of 25, studying in schools referred to in the regulations on the education system or in the regulations on higher education or in the regulations on higher vocational schools, if in the tax year these children did not receive any income, except for income tax-free, pensions family and income in the amount that does not require payment of tax,
income, as in the case of jointly taxed spouses, is divided into two and the tax due is determined from the tax base so determined.
Subject of taxation
Pursuant to Art. 9 sec. 1 updof, all types of income are subject to taxation with income tax, except for the income listed in art. 21, 52, 52a and 52c and the income from which the tax collection was abandoned pursuant to the provisions of the Tax Code. However, if a taxpayer obtains income from more than one source, the subject of taxation in a given tax year is the sum of income from all sources of income.
Income from a source of revenues within the meaning of the provisions of the Act is the surplus of the sum of revenues from this source over the costs of obtaining them, achieved in the tax year. If the tax deductible costs exceed the sum of revenues, the difference is a loss from the source of revenues.
Income from the source of revenues, unless specific regulations provide otherwise, is the surplus of the sum of revenues from this source over the costs of obtaining them achieved in the tax year. If the tax deductible costs exceed the sum of revenues, the difference is a loss from the source of revenues. The amount of this loss may reduce the income obtained from this source in the next five consecutive tax years, however the amount of reduction in any of these years may not exceed 50% of the amount of this loss.
To sum up, the subject of taxation, which consists of a number of different types of income or revenues, is closely related to the sources of income - places from which the taxpayer can achieve income / revenues.
Taxable sources of income
The catalog of sources of income that are subject to taxation is an open catalog. This means that it does not provide a detailed, exhaustive list of all sources subject to income tax. Thus, the lack of a given source in the catalog does not mean that it is not subject to taxation. Also sources not listed directly by the legislator in the legal act are subject to taxation, as evidenced by the last point "other sources" included in the catalog. However, only the following sources of income are not subject to taxation:
- which on the basis of art. 21 of the PIT Act were released,
- from which the tax collection was abandoned,
- to which the PIT Act does not apply (Article 2 (1)).
Income tax is currently subject to taxation pursuant to Art. 10 sec. 1 of the Personal Income Tax Act, such sources of income as:
- business relationship, employment relationship, including a cooperative employment relationship, membership in an agricultural production cooperative or other cooperative engaged in agricultural production, outwork, retirement or disability pension;
- activities performed in person;
- non-agricultural economic activity;
- special departments of agricultural production;
- rental, sublet, lease, sublease and other contracts of a similar nature, including the lease, sublease of special departments of agricultural production and a farm or its components for non-agricultural purposes or for running special departments of agricultural production, with the exception of assets related to economic activity;
- cash capitals and property rights, including the sale of property rights other than real estate against payment, cooperative ownership rights to a dwelling and the right of perpetual usufruct of land;
- sale of real estate or its part and share in real estate for consideration, cooperative ownership right to a flat or business premises and the right to a single-family house in a housing cooperative, perpetual usufruct right to land, other things, if the sale for consideration does not take place in the course of economic activity and was carried out in the case of sale of real estate and property rights for consideration - before the expiry of five years from the end of the calendar year in which the acquisition or construction took place, and other things - before the expiry of six months from the end of the month in which the acquisition took place;
- other sources.
The above classification is to make it possible to properly classify the revenue to one of the sources indicated by the legislator. This is very important not only for the selection of the appropriate tax declaration form, but most of all for determining the moment of income generation, as well as the amount of the costs of obtaining it, and, consequently, also the amount of income tax.