Foreign social security contributions — conditions for deduction in PIT

This guide concerns only the deduction of foreign compulsory social security contributions. It is based on the Ministry of Finance guidance on deducting social security contributions. Payment alone does not mean that the entire amount can be deducted — the conditions and exclusions below must be taken into account.

Which foreign contributions can be deducted

You may deduct contributions paid during the tax year from your own funds for compulsory social security insurance covering you or persons cooperating with you. They must have been paid in accordance with the compulsory social security rules applicable in an EU Member State other than Poland, another European Economic Area country or Switzerland.

There must also be a legal basis arising from a double taxation agreement or another ratified international agreement to which Poland is a party. It must allow the Polish tax authority to obtain tax information from the tax authority of the country where the compulsory social security contributions were paid. This guide does not analyse any particular agreement.

When deduction is excluded

You cannot deduct contributions:

• that you have included in tax-deductible costs;
• that you have already deducted in another tax return;
• that have been refunded to you in any form;
• whose assessment base is income or revenue exempt from tax under statutory provisions, or income for which tax collection has been waived under the Tax Ordinance;
• paid abroad whose assessment base is income or revenue exempt from tax under a double taxation agreement to which Poland is a party;
• paid and deducted in an EU Member State other than Poland, another EEA country or Switzerland against income, revenue or tax arising in that country.

Deduction amount and exchange rate

The deduction covers the expenditure actually incurred, subject to the conditions and exclusions above. In its section on the deduction amount, the Ministry of Finance states that the deduction is limited solely by the amount of income earned.

The method of taxation must nevertheless be distinguished:

• under the tax scale or the 19% flat-rate income tax, contributions are deducted from income;
• under the lump-sum tax on recorded revenue, contributions are deducted from revenue.

We do not present the source's income-based limitation as a separate limit rule for lump-sum taxation, where the deduction is made from revenue.

Contributions denominated in a foreign currency must be converted into Polish złoty using the average exchange rate for that currency announced by the National Bank of Poland for the last business day preceding the day the expenditure was incurred.

How to document payment

You determine the amount of contributions to deduct on the basis of evidence showing that the expenditure was incurred. Examples include a payment receipt, transfer confirmation or bank statement confirming that you paid the contributions.

The Ministry of Finance also lists a ZUS certificate among its general examples of supporting documents. It does not present this as mandatory evidence of payment of foreign contributions.

Optional organisational checklist

To organise your tax records, we suggest keeping the following together:

• evidence of contribution payments;
• expenditure dates, amounts and currencies, and details of the NBP exchange rates used;
• information on any previous inclusion of the contributions in costs or deductions, including foreign deductions, and any refunds.

This is an organisational recommendation, not an additional mandatory set of documents.

Reporting the deduction in the annual tax return

You report the deduction in the annual tax return appropriate to your circumstances. The Ministry of Finance lists forms PIT-37, PIT-28, PIT-36 and PIT-36L. Maintain the distinction between deductions from income under the tax scale or flat-rate income tax and deductions from revenue under lump-sum taxation, as well as the prohibition on deducting the same contributions again.

This guide does not determine entitlement to a deduction or its amount in an individual tax return.