Polish companies and entrepreneurs purchase various services from foreign contractors. Income from certain types of services provided by foreign contractors without a registered office or management board in the Republic of Poland is subject to corporate income tax or withholding tax. In this regard, notifications on forms IFT-2 and IFT-2R are also generated. The conditions for applying withholding tax on the income of foreign contractors are discussed in this article.

Polish non-residents or foreign contractors are required to tax certain income received in Poland with income tax in the form of withholding tax and file form IFT-2R.

Who is considered a foreign contractor?

A foreign contractor is a Polish tax non-resident, meaning a taxpayer who does not have a registered office or management board in Poland and is therefore subject to limited corporate income tax (CIT) in Poland, meaning only income earned in Poland.

What types of income of foreign contractors are subject to CIT at source?

1. Income subject to withholding tax on share in profits of legal entities, received in the Republic of Poland from dividends and other income (profit) from share in profits of legal entities registered or managed in the Republic of Poland.

1. Income:

• from interest,
• from copyright or related rights,
• from rights to inventive designs,
• from trademarks and decorative designs,
• from fees for disclosing a recipe or production process,
• for the use of or right to use an industrial device, including vehicles, commercial or scientific equipment,
• for information related to experience gained in the industrial, commercial or scientific fields (know-how).

3. Income from fees for services provided as part of entertainment, recreational or sporting events held by legal entities located abroad, organized through natural or legal persons operating in the field of artistic, recreational or sporting events in the Republic of Poland.

4. Revenue from the following services:

• consulting,
• accounting,
• market research,
• legal services,
• advertising services,
• management and control,
• data processing,
• personnel recruitment and hiring services,
• guarantees and sureties, and similar services.

5. Revenue from export fees for cargo and passengers accepted for carriage in Polish ports by foreign shipping companies, excluding cargo and transit passengers.

6. Revenue received in the territory of the Republic of Poland by foreign air navigation companies, excluding revenue received from scheduled passenger air transport (transport for which the passenger requires an air ticket).

When is corporate income tax exempt from withholding tax on foreign contractors' income?

Payments for services to foreign contractors are made in accordance with double taxation treaties and residency certificates. Deductions for certain expenses are also taken into account.

How is income tax paid at source?

Polish companies, as taxpayers, are required to withhold corporate income tax on payments made to a foreign contractor on the day the remuneration is paid.

Who submits IFT-2 and IFT-2R forms?

A Polish company that purchases certain types of services from foreign contractors is required to prepare and submit Form IFT-2R to the tax office, and Form IFT-2 upon request of the foreign contractor.

Form IFT-2 is information prepared during the tax year, but only at the request of the foreign contractor.

Form IFT-2R is mandatory annual information prepared after the end of the tax year.

These forms indicate the portion of the remuneration paid to a foreign contractor that is subject to withholding tax (income), as well as the portion that is exempt from taxation.

Podstawa: art. 26 Ustawa z dnia 15 lutego 1992 r. o podatku dochodowym od osób prawnych.