The CRS Act provides for a specific institutional client classification scheme (i.e. business entities, except for sole traders). Conditional upon determined classification accounts held by clients will be or will not be subject to reporting.

ACTIVE NON-FINANCIAL ENTITY (NFE)

Active NFE – means an entity meeting one of the criteria listed below:

• Less than 50% of gross income for the previous calendar year is a passive income* (described below), and less than 50% of assets held are assets generating passive income,
• Is a company in organisation (i.e. does not perform and did not perform any business activity earlier but invests its capital in order to carry out business operation other than that of a financial institution),
• Has not been a financial institution for the last five years and is under liquidation or re-organisation and will not perform financial institution business,
• Mainly deals in execution of financial or hedging transactions with affiliated entities which are not financial institutions or to their benefit and does not finance or does not execute such transactions for any entity which is not affiliated with it, provided that the group of these entities conducts business other than the business of financial institution,
• Is an entity which meets, jointly, all the criteria listed below:

• was established and is manager in its country of residence solely for the following purposes: religious, charity, scientific, artistic, cultural, sports or educational and, if operating as occupational organisation, organisation of entrepreneurs, chamber of commerce, agricultural or horticultural organization, civic organization or organization managed solely to support social care,
• is income tax exempt in its country of residence,
• has no shareholders or members who are owners or beneficiaries of its income or assets,
• relevant regulation of a country or its incorporation documents do not allow to transfer income or assets to any private person or entity who is not a charity entity unless, according to entity’s charity activities, it is a payment for acquired assets or compensation for services rendered,
• relevant regulation of a country or its incorporation documents require that in case of such entity’s liquidation or dissolution assets will be transferred to Government entity or public utility organization or will be assigned to the Government.

 
Passive income means:

• Income from dividend and share in profits of legal entities,
• Income from interest and benefits from all types of loans, sureties and guarantees,
• Income from disposal of securities, shares/equities, receivables,
• Income from copyright, industrial property rights including from disposal of such rights,
• Income from disposal and exercise of rights under financial instruments.

ACTIVE NFE NOT SUBJECT TO REPORTING

Active NFE not subject to reporting – means following and strictly defined entities:

• central bank,
• international organisation,
• government entity,
• stock exchange listed entity,
• entity affiliated with stock exchange listed entity.

PASSIVE NFE

Passive NFE - means any non-financial entity which is not an Active NFE.

PASSIVE NFE – INVESTING ENTITY WHICH IS NOT A FINANCIAL INSTITUTION FROM A PARTICIPATING STATE

Passive NFE - investing entity which is not a financial intitution from a participating state - means an entity which is an investing entity and not a financial institution from participating state whose gross income originate, primarily, from investments or re-investments of financial assets and from trading in such assets, provided that it is managed by another entity who is a financial institution i.e. deposit, custodial institution, insurance firm or investing entity.

FINANCIAL INSTITUTION

Financial institution means the following types of institution:

• custodial (entity whose significant part of activity incorporates safekeeping of financial assets on behalf of other persons i.e. activity generating gross revenue accounting for at least 20% of gross revenue of company within the period of three years ending on 31 December or the last accounting year (if not identical) preceding the year in which the said share is established or during the life of the entity whichever is shorter;
• depositary (entity accepting deposits within the framework of their banking or similar activity, including domestic bank, foreign bank, foreign branch of a domestic bank and branch of a foreign bank, credit institution, branch of credit institution, SKOK and National SKOK);
• investing entity (entity with core business – within business operation – involves at least one of the activities or operations listed below to the benefit or on behalf of other persons: trading in currency, trading in money market instruments, cheques, promissory notes, certificates of deposit, derivative instruments: FX, interest rate instruments and indexed derivative instruments, trading in marketable securities or commodity contracts of futures type, management of individual and collective asset portfolios, other forms of investing, administration or management of financial assets or monies on behalf of other persons or whose gross revenues are generated, primarily, from investing or re-investing of financial assets and trading in such assets provided that it is managed by other entity who is a financial institution: depositary, custodial, insurance firm or an investing entity);
• insurance firm (domestic insurance firm or foreign insurance firm in the meaning of the Act of 11.09.2015 on insurance and re-insurance activities, concluding monetary insurance agreements or annuity (pension) agreement or is obliged to make payments under such agreements).

Is income from redemption of participation units in foreign investment funds after 1 January 2024 subject to taxation in Poland and does a consumer client (domestic natural person) have any tax obligations related to this?

Income from redemption of participation units in foreign funds earned after 1 January 2024 is subject to disclosure by the investor in the annual PIT-38 return and is subject to 19% personal income tax (legal basis: Article 30b(1)(5) and Article 5a(14) of the Personal Income Tax Act of 26 July 1991 (PIT Act). Of course, income can also be reported in the e-PIT-38 electronic declaration as part of the Twój e-PIT service of the Ministry of Finance.

Income (tax base) and tax due are calculated in PLN. Income is the surplus of revenue (in the form of the redemption amount obtained) less the costs of obtaining it (the purchase amount increased by the fees paid). Revenue/expenses in foreign currency are converted into PLN at the average exchange rate of the National Bank of Poland as of the last business day preceding the date of receipt of revenue/incurring the cost.

From 1 January 2024, it is possible to offset losses from foreign funds against profits from funds (domestic and foreign) generated during a given tax year, including income from the sale of shares/bonds, the realisation of derivative financial instruments (e.g. futures contracts) and other income listed in Article 30b(1) of the PIT Act.

Is income from redemption of participation units in domestic investment funds also subject to similar taxation rules from 1 January 2024?

Yes, the taxation rules are analogous, except that domestic investment funds will issue annual PIT-8C information to the investor and the tax office competent for him, which will include data on the income (losses) earned from redemption of participation units in a given year. PIT-8C will also be available as part of the Twój e-PIT service of the Ministry of Finance (~15 February 2025 for 2024).

Unfortunately, foreign funds are not obliged to issue PIT-8C information – in practice, they issue dedicated annual reports in this respect or refer investors to the history of transactions on the register or received transaction confirmations.

Is the conversion of participation units in one sub-fund (e.g. equity) into units within another sub-fund (e.g. bond or mixed) within the same fund subject to tax?

Such conversion is not taxable if it takes place between sub-funds within the same fund (legal basis: Article 17(1c) of the PIT Act). If, on the other hand, the sub-funds are within two different funds, such a "conversion" (income) will be subject to a 19% tax. It does not matter whether the funds are domestic or foreign.

How do I determine from which investment fund participation units (domestic and foreign) I have generated revenues if I have purchased these units many times in the past?

If it is not possible to identify the redeemed units in investment funds, it is assumed that the revenue was earned from the units acquired the earliest (FIFO method). This rule applies separately to each register.

What does the settlement look like for minors?

In the case of underage Clients, the income from the PIT-8C information will be reported and taxed by their parent(s) or legal guardians in the PIT-38 return. Income from PIT-8C will be reported by parents in half. The parent/legal guardian pays the tax due into his/her individual tax account. The minor does not file a PIT-38 return or pay any tax.

How are spouses with joint records taxed?

Income from funds recorded in joint (marital) registers will be disclosed in half of the PIT-8C information and will be disclosed later in the annual PIT-38 returns (there is no possibility of joint taxation by spouses or according to the rules for single parents).

As an heir, do I have the right to recognize in the PIT-38 return the costs of purchasing participation units incurred by the deceased?

Yes, the heirs have the right to recognize tax-deductible costs in the form of the purchase price and fees incurred by the deceased in connection with the purchase of participation units. These costs should be included by the fund in the PIT-8C form. In addition, income from redemption of participation units will be exempt in the part corresponding to the amount of inheritance and gift tax paid on these units.

Is interest on structured (investment) deposits and bank securities taxable only by the Bank, or does a client who is a Polish tax resident have any tax obligations related to this?

Interest on investment deposits and bank securities is subject to taxation by the Bank as the remitter with the 19% tax on the same terms as interest on ordinary term deposits. The Bank pays the tax due to the account of the tax office, which closes the settlement of such income of the Client who is a Polish tax resident (the Client who is a Polish tax resident does not have any reporting obligations to the tax authorities). If bank securities are recorded in a brokerage account, the function of the payer is performed by the brokerage house or the custodian bank maintaining such an account.

Are profits from investments in World Investment Programs or Convenient Wallet (unit-linked life insurance) taxable and does the policyholder/investor (a natural person residing for tax purposes in Poland) have any tax liabilities?

Yes, such a profit constitutes "income from the investment of insurance premiums" referred to in Article 24(15) of the PIT Act. Income is the difference between the amount of the benefit paid and the sum of the premiums paid to the insurance company that were transferred to the capital fund. From 1 January 2024, as in the case of investment funds, such income is subject to self-disclosure by the investor in the PIT-38 return and taxation at 19% personal income tax. The insurance company will issue an annual PIT-8C information with respect to such income.

Is all interest accruing against Bank saving products subject to taxation by the so-called Belka tax (lump-sum personal income tax at 19%)?

Not all. In principle, interest gained by Clients who are natural persons on saving accounts and term deposits is subject to lump-sum personal income tax at the rate of 19% (except for non-residents who submit to the Bank a tax residence certificate – thus, such non-residents can take advantage of reduced tax rate under double taxation treaties concluded by Poland with countries of tax residence). Tax exemption, irrespective to tax residence of a Client, applies to IKE (individual retirement accounts) – legal basis: art. 21 sec. 1 pt. 58a of the Act of 26 July 1991 on personal income tax (the PIT Act). It is necessary to remember that in case of agreement termination and refund of accumulated funds, interest is subject to the lump-sum personal income tax at 19%. In addition, if more than one IKE is used for saving purposes, interest accruing on such IKE is subject to taxation at 75% (legal basis: art. 30 sec. 1 pt. 7a of the PIT Act).

Is opening of saving account or saving and settlement account (ROR) notified by the Bank to tax authorities?

It fact is not notified directly. According to art. 119zp § 1 pt. 3 of the Act – the Tax Law, banks and SKOK provide information, daily, to the clearing house (KIR S.A.), on opened saving accounts and RORs. Subsequently, in accordance with art. 119zq of the said Act, the clearing house delivers, daily, information on the total amounts credited and debited on accounts of qualified entities (in the meaning of art. 119zg pt. 4 of the Tax Law) regarding transactions crediting or debiting saving accounts and RORs.

Does the Bank disclose bank account balances and accumulated interest on accounts to tax authorities?

Yes. In case of Clients having reported accounts in the meaning of FATCA (link: https://www.bankmillennium.pl/o-banku/o-banku/fatca) and CRS account balance data and data on interest paid by the Bank is reported to the Head of the National Tax Administration annually by 30 June of the next year.

Data on interest gained by non-resident Clients is also reported by banks within IFT-1R information delivered under art. 42 sec. 2 of the Act of 26 July 1991 on personal income tax.

Furthermore, Bank has the duty to provide access to data on transactions and balances of Client bank accounts upon written demand from the Head of Tax Office or Director of Tax Administration Chamber under art. 182-183 of the Tax Law.

Are inflows from foreign benefits and pensions to personal accounts subject to taxation (mandatory contribution collection) by the Bank?

In principle, yes, inflows to personal accounts of Clients, who are Polish residents, for purpose of foreign benefits and pensions, are subject:
- duty to pay advances to personal income tax (accruing in accordance with generally applicable rules 12-32% PIT – legal basis: art. 35 sec. 1 pt. 1), sec. 3 in connection with art. 32 sec. 1-1e of the Act of 26 July 1991 on personal income tax, hereinafter: “the Law on PIT”);
- duty to pay contribution to mandatory health insurance at 9% (legal basis: art. 85 sec. 9 in connection with art. 79 of the Act of 27 August 2004 on health care benefits financed from public funds).

Since 1 January 2022 health insurance contribution does not deduct liable tax advance.

The Bank performs a remitter function i.e. deducts and remits tax/contribution to the Tax Office/Social Insurance Institution (ZUS).

Exceptions. Advances to PIT are withheld taking account of provisions of international double taxation treaties concluded by Poland and the country of benefit and pension origin. These treaties provide for different taxation principles (only in the country of benefit origin or only in the country of receiver’s residence or in both countries taking into account given methods of double taxation avoidance), including types of benefits. Furthermore, provisions of Polish tax laws stipulate various taxation rules applicable to different categories of benefits (e.g. war annuity or retirement pension from the so-called III pillar insurance). Depending upon country of origin or type of benefit they might not be subject to payment of advances to PIT.

In order to ensure due performance by the bank of tax remitter function in case of opening a personal account the advisor would ask you whether inflows to the account would also include foreign benefits (pensions) and in case positive response is given we collect a special declaration from Clients for purpose of calculation of monthly advances to income tax and contributions to mandatory health insurance.

In addition, according to sec. VI.31 of the General Rules Governing Provision of Banking Services to Natural Persons in Bank Millennium S.A. we require from accounts holders to notify the Bank on our form, in writing, on inflows that might be expected to occur and to submit, upon the bank’s demand, documents confirming nature of benefits. Notification should be submitted forthwith upon receipt of the first inflow of such benefit to the account. Transfers of foreign benefits or pension have no universal, globally adopted codes for banks to be able independently – i.e. without Client involvement – clearly establish whether a given inflow is definitely a benefit or a retirement pension subject to taxation (contribution payment).

After the end of year, the Bank issues PIT-11 information with regard to revenues generated by the Client, deducted advances and contributions to health insurance. PIT-11 is sent out to Clients and their relevant tax offices by end of February for the previous year (since 2019 PIT-11 shall be sent to Tax Authorities by the end of January). PIT-11 sent by the Bank is also available and reflected in the electronic annual return offered by the Ministry Finance’s Twój e-PIT service.

In case of benefits and pensions from EU/EFTA countries, according to art. 75 sec. 1a-1b of the Act of 27 August 2004 on health care benefits finances from public funds, the Bank submits enquiry to voivodship branch of NFZ (National Health Fund) relevant for the Client relative to the Polish benefits or pension received by the Client, subject to health insurance. If positive response is provided by NFZ, the bank has the duty to withhold a 9% contribution against the next inflows and notify such Client for health insurance coverage. If response is negative, the Bank will not withhold contributions to health insurance. In case of benefits and pensions from outside of the EU/EFTA countries, the Bank will withhold 9% contribution to health insurance without the obligation to submit the said enquiries to NFZ.

I did not inform the Bank at all about the fact of receiving a foreign pension and therefore I did not receive PIT-11 tax form for a given year. How do I file my taxes?

In the first place, you should go to the nearest branch of the Bank in order to submit the overdue statement for the purpose of calculating monthly advances for income tax and health insurance contributions. You can also take with you copies of the documents certifying the title of the benefit granted. On this basis, the Bank will classify the inflows and determine the rules of taxation and contributions to the nearest inflows.

Lack of PIT-11 does not exempt from the obligation to report revenues and pay due PIT in the annual PIT-36 tax return, provided that in accordance with the double tax treaty applicable in this case, the principle is to tax such a foreign pension in Poland.

PIT taxable income can be determined on your own based on the history of operations in your bank statement. In the case of revenues (transfers) expressed in foreign currencies, the conversion is made at the average exchange rate of the National Bank of Poland from the last working day preceding the day of generating the revenue (the account credit).

Income from foreign pensions is presented in the paper PIT-36 declaration in the line „Inne źródła, niewymienione w wierszach od 1 do 9 (w tym emerytury – renty z zagranicy)”. In e-PIT-36 (Twój e-PIT) they are added by editing "Przychody i koszty uzyskania przychodów" and adding them in the "Dochody uzyskane za granicą" section and marking the "Inne źródła" checkbox.

Does the Bank withhold advances or health insurance contributions from benefits and pension cheques?

According to individual interpretations provided by tax administration bodies and the NFZ, banks do not perform a function of personal tax advance remitters and remitters of contributions to the mandatory health insurance in case of benefit and pension cheques. Relevant revenues are reported by Clients (taxpayers) in annual tax returns and are subject to self-taxation.

Can the Bank, upon Client’s request, discontinue collecting PIT advances?

In principle, it is not possible, however, in practice there are two specific cases, where Bank can cease to collect PIT advances.

Firstly, since 1 January 2023, regulations will allow to request tax remitters to cease PIT advances collection. Client may authorize, in the written form, its tax remitter to discontinue collecting PIT advances, if Client assumes that the annual income subject to progressive taxation will not exceed PLN 30 thousands (legal basis: art. 31c of the Law on PIT).

Secondly, relevant for Client tax office, on his request, may release a tax remitter (here: Bank) from the obligation to collect PIT advances, if such collection would threaten his justified interest (np. social existence) or tax would be disproportionally high compared to tax liable for the entire year. Tax office may also, on the request of taxpayer (Client), decrease the amount of PIT advances (legal basis: art. art. 22 § 2-2a of the Act of 29 August 1997 – the Tax Ordinance).

What should I do, if I believe that the Bank has been collecting advances and health insurance contributions against foreign pensions improperly?

In the first place, we recommend submission of a complaint which will be considered for its substantive merits by specialist tax advisors.

In case of negative response, Client, as a taxpayer, has the right to submit:

• Application for a tax refund to the Tax Office under art. 75 of the Act of 29 August 1997 – the Tax Ordinance (samples of applications for tax refund are available at web sites of Tax Offices) or
• Application to the Director of the National Tax Administration for issue of individual interpretation of the tax law regulations under art. 14b of the Act of 29 August 1997 – the Tax Ordinance (detailed information on the rules governing submission of applications is available at www.kis.gov.pl)

In case of mandatory health insurance contributions Client, as the insured has the right to submit, to relevant Director of the Voivodship Branch of NFZ, application for consideration of case regarding coverage by health insurance under art. 109 of the Act of 27 August 2004 on health care benefits financed from public funds.

Additional information is available also through info-line of the National Tax Administration or the National Health Fund (NFZ)/ZUS or in the local Tax Office or NFZ/ZUS Branch.

Can PIT advances collected by the Bank against foreign pensions (retirement pensions and other benefits) be reduced by the amount of tax-free personal allowance as it is done by employers when disbursing compensation for work?

Yes. The Client may submit to the Bank a statement, in which they will indicate the amount by which the Bank shall reduce the advance payments for PIT (legal basis: Article 31b of the Polish Personal Income Tax Act).

The Client may indicate one of the following values as the reduction:

1. PLN 300 or
2. PLN 150 or
3.PLN 100.

The Bank will start to reduce the PIT advance payments no later than in the month following the month in which it received the statement.

The statement submitted once will be used by the Bank also in subsequent tax years, unless the Client withdraws or changes the previously submitted statement.

The statement on the application of the tax-free personal allowance may be submitted by the Client to no more than three tax remitters. Please note that the total amount of the reduction applied by all tax remitters may not exceed PLN 300.

Note to the Clients who simultaneously receive a pension from Polish Social Insurance Institution (ZUS) - ZUS by law applies 1/12 of the amount reducing tax (PLN 300). Therefore, there is no need to submit a statement to ZUS on the application of the reduction. However, in order to divide this amount into, for example, two tax remitters (for example, the Bank and ZUS), the Client will have to submit a statement to the pension authority (ZUS), indicating the right to reduce the advance payments by the amount of PLN 150. ZUS will apply this statement no later than from the second month after the month of its receipt. At the same time, the Client has to submit to the Bank a similar statement on reducing the advance payments by PLN 150. The Bank applies the reduction only at the Client's request, therefore it will reduce the PIT advance payments starting from the next month after receiving the statement. Additionally, If the Client expects their income from foreign benefit or pension to exceed the first threshold of the tax scale (from January 1, 2022 the amount of 120 000 PLN) and intends to tax their annual income jointly with their spouse or as stipulated for single parents, the Client will also have the right to submit to the Bank the "Statement for the purpose of a partial reduction of PIT advances" (you may be provided with a template of such statement in any of the Bank’s branches). On the basis of this statement, the tax remitter (Bank) will reduce the amount of PIT advances to the rate of 12%.

The Client shall submit the statement prior to the first payment in a tax year or before the end of the month in which the Client started to receive such income.

In a situation where the Client no longer meets the requirements for the application of the above-mentioned allowence, the taxpayer (Client) is obliged to notify the tax remitter (Bank) immediately. Subsequently, from the month following the month in which taxpayer (Client) discontinued to meet the allowance conditions, the Bank, as tax remitter will collect advances in accordance with generally applicable rules.

What documents should be submitted by the Client receiving benefit or pension from the U.S. for the Bank not to collect tax?

Client should submit to the Bank a document confirming the type of benefit received and the fact that relevant taxi s collected in the U.S. (e.g. certificate from the U.S. Embassy or information on granting benefit from SSA /The United States Social Security Administration/).

According to art. 5 of the Unites States – Poland Income Tax Convention of 1974 (Convention with the U.S.), Poland has the right to tax income from retirement pensions paid out by the U.S. to a person having place of residence within the territory of Poland. Incomes from disability and other benefits (including survivor’s benefits) or retirement pension from the U.S. may be also taxed in the country where such benefit is remitted (i.e. the U.S.). In such case relief from double taxation is provided by art. 20 of the Treaty (so-called method of pro rata application). The method involves crediting against the Polish tax appropriate amount of tax paid to the U.S. In case a benefit is subject to tax at the rate of 25,5% at source in the U.S., the Bank as tax remitter, will deduct this tax from amount of due advance towards PIT (usually the advance is calculated at the rate of 17% and therefore effectively the advance towards PIT is not deducted by the Bank). For this purpose, a Client should submit to the Bank appropriate document confirming the amount of tax deducted in the U.S. (it is necessary to underscore that according to the U.S. tax regulations the tax is assessed against the base of 85% of the benefit value and nominal amount of tax in the U.S. is 30%, hence effectively the rate is 25,5%). The „waiver” of tax collection in total by the Bank applies to Client incomes not exceeding the first threshold in the tax scale (120 000 PLN) i.e. when the tax rate of 12% is applicable.

On the other hand, with respect to the so-called governmental benefits and pensions (i.e. paid out in connection with work in bodies of the U.S. Government administration) the U.S. – Poland Income Tax Convention provides tax exemption in Poland.

Irrespective of whether the taxi s collected or not, the Bank prepares PIT-11 information for the Client and the Head of Tax Office relevant for the Client.

Irrespective whether the Bank waives collection of advance towards income tax, the mandatory health insurance contribution will be collected, obligatorily, at the rate of 9% of the benefit amount.

At what rates does the Bank convert inflows from foreign benefits and pensions to calculate the due tax amount?

Tax on income from foreign benefits and pensions realized in foreign currency must be always paid in to the Tax Office in PLN. To calculate the tax base and the tax itself in PLN the Bank applies average NBP FX rate for a given currency as on the last business day preceding the revenue generation day i.e. inflow of the benefit into the Client account. This is statutory requirement provided for in art. 11a of the Act of 26 July 1991 on personal income tax.

Does the Bank collect tax and contribution in case of the so-called own transfers i.e. in case the principal and beneficiary is the same person (Client makes transfer from own account in another bank into the account in Bank Millennium of a benefit with description indicating that it might be foreign benefit or pension)?

No, the Bank does not collect advances or contributions from transactions executed between Client’s own accounts maintained in different banks.

It is not a case of „payment by the bank of a foreign retirement and disability pension” in the meaning of art. 35 sec. 1 pt. 1 of the Act of 26 July 1991 on personal income tax (the PIT Act) and art. 85 sec. 9 of the Act of 27 August 2004 on health care benefits financed from public funds, which should be interpreted as a case when the Bank executes an incoming transfer to the Client’s account from a principal who is an entity disbursing the benefit (appropriate foreign social security institution or such institution’s settlement agent). In such cases (transfers between own accounts) the „original” payment is made to the Client’s bank account maintained in another bank and either this bank deducts and remits tax / contribution to the Tax Office / Social insurance Institution (ZUS) (if having head office located in Poland) or the Client, on a stand-alone basis assesses and pays advances in accordance with art. 44 sec. 1a of the PIT Act.

Is the income from foreign widow allowance subject to taxation in Poland?

In accordance with the individual tax ruling received by Bank (no. 0113-KDWPT.4011.249.2020.3.MH, published in the Tax & Customs Information System (https://eureka.mf.gov.pl/)link opens in a new window, widow’s allowance, as a kind of family benefit, can be tax-exempted on the basis of art. 21 sec. 1 p. 8 of the PIT Act (as well as orphan’s allowance). In order to apply this exemption Bank requires from Clients document attesting the title of such allowance, eg. a copy of decision granting it or periodically received statements from foreign social security institutions indicating the title of this benefit.