Double taxation avoidance agreements and the Polish JDG in 2026

Tax residence, establishment, services for a foreign client, exclusion and tax credit methods and MLI.

A foreign client does not automatically mean foreign income to be settled using the double tax avoidance method. First, you need to determine residence, type of income and whether the activity constitutes a permanent establishment in the other country.

Residence according to Polish law

A person has his place of residence for PIT purposes in Poland if:

has a center of personal or economic interests here,
or stays in Poland for more than 183 days in the tax year.

Conditions are alternative. If two countries recognize a person as resident, the specific agreement applies tie-breaking rules, usually in the order of domicile, closer links, habitual residence and citizenship. In some cases, agreement between the authorities is needed.

Enterprise profits and plant

A typical agreement provides that the company's profits are taxable in the country of residence unless the business is carried on in the other country through a permanent establishment situated there.

A mere invoice to a German, British or American customer does not usually create an establishment in the customer's country. A permanent establishment may be established by means of a permanent establishment, construction site, dependent representative or other premises of a specific contract.

The type of income matters

The contracts have separate articles for, among others:

hired work,
company profits,
dividends, interest and royalties,
real estate,
transport services,
pensions.

It is impossible to assign the entire country to one method without indicating the type of income.

Methods of avoiding double taxation

The most common:

exclusion with progression,
proportional deduction, called the tax credit method.MLI changed the method in many Polish contracts, but not for every pair of countries and not necessarily for every income. The list of countries from a blog article quickly becomes out of date - check the summary text of a specific agreement and the date of entry into force of changes.

With proportional deduction, foreign tax is deducted up to the Polish tax limit attributable to foreign income. You cannot use a sample tax amount without calculating the scale, tax allowance and other income.

Statement

A Polish resident reports foreign income in the form appropriate to the source and form of taxation. PIT/ZG is not automatically required for every foreign invoice.

The possibility of deducting tax paid abroad on a lump sum basis depends on the law and the relevant agreement. First, there must be foreign tax collected in accordance with the agreement.

Sources

Do you have income in two countries?

First, determine your residence, income type and establishment. Oxyok provides ongoing accounting for Polish JDGs - from PLN 49 + VAT per month.

Write to Paweł.