Adjacent to Germany in Eastern Europe, Poland may be a good destination for EU contractors, and although wages are not as high as in other countries, the cost of living is fairly low. There is a need for skilled workers, which could be to a contractor’s advantage.
Before you go, it is necessary to understand what you will be facing as a foreign contractor, in terms of visas, taxes, and best methods of contracting with Polish clients. This guide will outline the basics for you, so you are prepared to enter and work in a new country.
Do I need a visa to be a contractor in Poland?
EU nationals will not need a work visa in Poland and can travel freely or obtain a residence permit. Non-EU nationals will need a work permit sponsored by a valid Polish entity.
How do I get paid as a contractor in Poland?
The way that you choose to structure your contract and get paid while contracting in Poland can affect taxes, immigration, and client confidence.
Work as a self-employed freelancer
Many contractors prefer the simplicity of working as a self-employed, and EU nationals can do this easily in Poland for any length of the contract. There is even a special flat tax rate for stays shorter than six months. Some Polish clients might be wary of a new freelancer, so it’s important to have references to offer.
Non-EU contractors would have to rely on their clients to sponsor a work visa, and they might be willing if you have a specific skill set and can demonstrate your commitment.
Set up your own limited company
Likewise, EU nationals can also set up a limited company in Poland just like a citizen, and for experienced contractors, this may be a good choice. It will mean going through the business registration process, and may also affect tax rates.
For UK contractors post-Brexit, setting up a limited company or using your own from the UK will be decidedly more difficult due to visa requirements.
Work with an umbrella company in Poland
The simplest method to get paid as a new contractor in Poland is to use an umbrella company. The umbrella company as a legal entity can sponsor work permits if needed and will facilitate the contract and payment between you and your client.
The umbrella company will also calculate and withhold taxes, and give your client assurance that milestones are met prior to payment.
How do taxes work for contractors in Poland?
Tax residency in Poland
Poland does use the 183-day rule for tax residency and stays longer than that result in taxation of worldwide income. To overcome that, you would need to look to a tax treaty to offset double taxation in your home country.
Residents will pay a tax rate of 17% up to PLN 85,528 (USD $23,000) and 32% for amounts over that. For non-residents, there is a simplified flat 20% tax rate on personal service contracts, which would include any contractors working less than six months in Poland.
How to file taxes in Poland
Step 1: Prepare Documents
Collect a PIT-11 form from your employer before 28 February.
Step 2: Fill a PIT-37 Form
Employees in Poland are generally required to fill out a PIT-37 form, using details on your PIT-11 form. You can do this via e-Deklaracje, an official program provided by the Ministry of Finance, or use pre-filled tax return forms here.
Pre-filled tax return forms are easier, but are not available until March.
For a comprehensive step-by-step guide (with English translations) on how to use the 2 programs, click on this and this
Before using pre-filled tax return forms, you must register here.
Step 3: Submit Forms by 30 April
Forms should be submitted to the office designated for the area that you lived in until the last day (31 December) of the previous tax year.
You may submit online or in person at the designated office. It is recommended that you go to the office if you expect to receive a tax refund. If you have received tax refunds previously, the tax office should have your bank account details in their database.
If this is your first time receiving a tax refund and you have a PESEL, you need to fill out a ZAP-3 form which can be found here or at the tax office.
Upon entering Poland, you may have applied for a NIP (numer identyfikacji podatkowej). If you filled out section D1 of the NIP-7 form which required your bank account number, you may submit your forms online. If not, you need to fill out a NIP-7 form at the tax office, providing your bank account details.
When will you receive your refund?
A refund will be paid to you within 90 days, in March or April.
What are social security contributions in Poland?
If you are an EU citizen, you may be allowed to retain your home country’s social security plan and contributions, and avoid those in Poland. Otherwise, you will be required to enter a complex maze of contribution calculations that are adjusted each year. They are calculated upon a contribution base equal to 60% of the average monthly income of all self-employed in Poland.
Here is a summary:
- Social Insurance Fee: 31.7%
- Retirement Fee: 5%
- Health Insurance: 9%
- Disability Fee: 8%
- Others: 7%
Those percentages are multiplied against the contribution base for a fixed contribution rate, no matter what your earnings are.
How do I stay compliant while contracting in Poland?
The main compliance concerns for international contractors in Poland are making correct tax payments, meeting immigration requirements, and paying social contributions. Each of these can apply to expat contractors in Poland, and depend on a number of criteria that may be difficult to learn if you are new to the country.
The easiest way to remain compliant is to use an umbrella company as your local partner in Poland. They are already well-versed in the rules for self-employed contractors and can help you get started with the contract, and then facilitate all of the compliance-related steps on your behalf.
Using an umbrella company is the best way to avoid any misclassification issues or violating any self-employment rules. Aside from compliance, here are the other benefits of using an umbrella company:
- First, handle all client payments, tax withholding, and any social contributions
- Issues you a payslip each month, to a local or foreign account
- Sponsors work permits for non-EU citizens
- Helps set up the contract with the client
- Moderates any disputes with your client
- Last but not the least, advise on access to totalization and double taxation treaties
We have experienced umbrella companies in Poland who are ready to help you right away, even before your leave home. Please contact us for more information on how an umbrella company can be your essential partner in international contracting.