If you have read the story and comments on my earlier blog post about English Cars in Poland you will know that until now it has been possible (although difficult) to register a RHD vehicle if the minister of transport gives permission.

This is against the European Union directives on free movement of goods which is why the EU reminded Poland in October 2009 that refusing to register RHD vehicles is against EU law and demanded a change in Poland’s regulations.

This new ruling by the supreme court is a result of Grzegorz Dorobek attempting to register his RHD Vauxhall Vectra and getting denied by his local authorities in June 2008.  He took the matter to court from where it escalated.  The voivodeship court in Kielce (Wojewódzki Sąd Administracyjny w Kielcach) ruled in April 2009 that “the positioning of the driver on the right-hand side has a negative effect on road safety” and that improving safety should be a fundamental target in a given country, therefore EU laws have no foundation to demand registration of this type of vehicle.  This decision was upheld by the supreme court.

Dorobek’s lawyer argued that Poland’s current position is confusing given that some RHD vehicles are given permission and some aren’t.  After the ruling Dorobek said he would consider taking the matter further to the EU.

• Have you bought a property in Poland?
• Has your decision been based on the recent economic downturn in the UK?
• What are your reasons for moving to Poland?

If you are interested in contributing to a case study or being interviewed or for more details please contact Antonia Koumantaropoulou at Tideway Communications via email at antonia@tidewaycommunications.com

This blog post is loosely based on the polish article at moneta.pl and also my understanding of the Polish tax system, so don’t sue me if this post contains mistakes – please treat this post as a guide and check with a qualified accountant for proper advice.  I also used podatki.pl, pit.pl and egospodarka.pl and a meeting with my own accountant as resources.

Polish Tax Year

This is nice and simple – in Poland the tax year runs from January to December.  Why don’t we do that in the UK? (For those non-Brits wondering what I am talking about in the UK the tax year runs from April to April).

Tax Schemes

There are 4 different ways to account for your tax if you are a private individual or self employed:

• General rules (zasady ogólny).  Here you keep a ledger of your income and expenditure and you pay either 0, 19, 30 or 40% tax depending on your final profit.  You can offset expenses against your tax bill and also use your spouse’s tax allowance to reduce your tax bill.
• Flat-rate tax (podatek liniowy).  As you might guess you pay a flat rate tax of 19% which could be good if you are going to be in the 40% tax bracket.  The catch is that you can’t get tax breaks for a number of things such as tax losses from previous years, social insurance payments or health insurance payments.  Also you can’t share your tax allowance with your spouse.
• Tax card (karta podatkowa).   Here the amount of tax due depends on certain factors such as the type of activity you are doing, number of employees you have, number of residents in your business’s neighbourhood and so on.  The virtue of this form is there is no requirement to keep a ledger or file accounts each year.  But only certain types of company are allowed to use the tax card system such as light industrial companies like small transport firms, building companies or catering companies.
• Outright scheme (ryczałt od przychodów ewidencjonowanych).  To be honest I am not sure if ‘outright’ is a meaningful name for this scheme but a quick look on dict.pl for ryczałt didn’t give me any better ideas so I shall refer to it only in Polish as ‘ryczałt’.  This scheme allows you to pay a lower rate of tax if your company is involved with certain specified activities.  For example if your company is involved with computer software then you pay a flat rate of 17% tax instead of 19%, 30% or 40%.  On the plus side the tax rates can be very low but on the flip side you lose the ability to use certain tax relief schemes such as deducting expenses or off-setting your tax allowance with a spouse.  Therefore it is best suited to businesses with (very) low expenses or those who want to trade for a short limited time.  The tax rates for company activites are given below.  Note that you can’t do this scheme if your pre-tax income will be more than 150,000 Euros in 2008.

For completeness I should mention that as of 2007 there is a 5th way called podatek tonażowy but that is only for people involved with international shipping so I won’t write about it.

‘Outright’ scheme (ryczałt) tax rates

• 20% for people who are classified as having a ‘wolny zawód’ [free profession] such as painters, actors, singers, translators, architects, lawyers etc..
• 17% for those involved with a number of activities such as hotels, guest houses, carparks, car mechanics, vechicle rental, computer hardware/software
• 8.5% for those involved with a number of activities such as working with pre-school children, sale of alcoholic drinks, botanical/zoological/environmental protection type stuff
• 5.5% for those involved with building works or transport with loads above 2 tonnes
• 3% for those involved with gastronomical activities (except alcohol)

Offsetting tax with your spouse – shared tax returns for married people

If one partner earns more than the other partner, for example if one of you stays at home or works part-time then it can be beneficial to be taxed together.   There are catches to this such as:

• the marriage must be longer than the tax year in question
• the marriage must be based on mutual assets for tax purposes
• if you are late with your tax return you can lose the right to do shared tax returns
• you can’t do shared tax returns if you are using the flat-rate tax scheme or the ryczałt tax scheme

When do I have to pay tax?

For all schemes except for the ‘tax card’ system you have to account monthly and pay by the 20th of the following month.  You need to also do a tax return once the year ends.  If you are doing ‘general rules’ then that means in January 2009 you go and get a PIT-36 form and do a return for the 2008 tax year.

When do I choose a scheme?

You have until one day before your company starts trading to give a written declaration to the Polish tax office (Urząd Skarbowy).  If you are already trading then you can change only change it at the start of a tax year – up until the 20th of January.  By default your company is on ‘general rules’ unless you change it.  So if you start your company like I did in October it is not necessarily a catastraphe if you decide your tax scheme is costing you more than you thought because you are only stuck with your current tax scheme until the end of the year.  But on the other hand if you start your company early in the year and make a mistake with this you are stuck until January!

Which tax scheme should I use?

For most people the choice boils down to – should I do general rules or should I opt for ryczałt or the flat-rate scheme?

Ryczałt is very popular for small companies.  If you are doing an activity that qualifies for a low tax rate then it can be attractive.  The accounts are simpler to run than for ‘general rules’.  But you must consider that you can’t deduct expenses from your tax bill which can have a big effect.  Even if you don’t expect many expenses remember that in Poland you can still get away with claiming your car, mobile phone, internet connection etc.. without much hassle (unlike in the UK where they want to know which percentage was private use and what was business use).  There is a calculator that you can use at podatki.pl.  It is only in Polish and you have to register with their website to use it, but you enter the ryczałt tax rate (stawka), enter your expeced income (spodziewane przychody) and expected expenses (spodziewane koszty) and it will tell what your tax bill would be on both general rules and ryczałt.

General rules – I am using general rules at the moment.  There is the risk that I could pay more tax by not having opted for ryczałt or flat-rate scheme if my net profit for 2008 exceeds 44,490 PLN and therefore puts me in the 40% per year bracket.  However I like the fact that I can offset my car as an expense and all fuel bills, insurance, servicing etc.  I also can take advantage of the fact that my wife does not work and therefore use her tax allowance.  Also I have a limited company in the UK and therefore if I think my Polish company is earning too much I can issue an invoice from my UK company to remove money.  Therefore I can ensure that I remain below the 40% threshold this year.

Flat rate – this could be a good option if your income is going to put you into a higher tax band and either you don’t have a spouse or your spouse doesn’t have any spare tax allowance because he/she also works.  It is a popular option with higher earners.

‘Gotchas’ – things to watch out for

If you make a mistake somewhere along the line it can cost you dearly.  There are a couple of known issues you must be aware of:

• your PKD code(s) affects whether you can use ryczałt or not.  This can catch you out if you added extra PKD codes for things you might want to do in the future.  Example: my PKD code is 62.01.Z for computer software.  Normally I would be able to pay 17% on the ryczałt scheme.  But because I also added code 85.59.A for teaching foreign languages (because I am thinking about doing this in the future) I am no longer eligible for the 17% ryczałt scheme. Therefore consider this when you choose your PKD codes!
• Get a stamped copy of everything you give the Urząd Skarbowy! This is a GOLDEN RULE.  My accountant currently has a case where a woman gave a form to the Urząd Skarbowy to say she wanted to pay ryczałt back in January this year.  She didn’t get a copy.  She has paid the reduced ryczałt rate all year so far.  The Urząd Skarbowy now say they have no record of her form and therefore is on ‘general rules’.  The tax difference in her case runs into thousands of zloty.  Apparently the Urząd Skarbowy lose forms all the time.  Therefore it is critical that everything you submit you do in duplicate AND you get your duplicate copy stamped with their rubber stamp to prove it.  In fact my accountant is quite paranoid on this and asks for everything in triplicate so he has a copy too.

Polish tax terminology

Income – przychód

Expenditure – rozchód

Turnover – obrót

Costs – koszty

Earnings – dochód

Odliczenia – reductions (such as social insurance and health insurance payments)

Basic taxable earnings – podstawa opodatkowania

Income minus costs = earnings

earnings minus reductions = basic taxable earnings

What is a PESEL?

A Pesel is an 11 digit identification number partly based on your date of birth. Polish people are assigned one within a couple of months of being born. When my daughter was born here in Poland we simply called the Urząd Miasta when she was 2 months old and they told us it over the phone. For foreigners you get it in the same place where you do your zameldowanie.

A Pesel is not a VAT number, nor is it a tax number (called a ‘NIP’ number in Poland), nor is it a national insurance number. It is just an ID number.

How do I get my PESEL?

If you are a foreigner (i.e. you don’t have confirmation of Polish citizenship) then a pesel can be applied for when you do a zameldowanie for a a period greater than 3 months. But to register for more than 3 months you will need to have got your karta pobytu already which lets you register for 5 years.
When you do your 5 year zameldowanie make sure you explicitly tell them that you want a Pesel. They are supposed to ask you about it but they didn’t ask me at all.
I have heard that sometimes they generate the Pesel automatically and some people didn’t even know that one had been generated for them. But for me no-one mentioned anything and on checking today they said I don’t have one.
Because the procedure is that a Pesel can only be generated when you register, I therefore needed to de-register and re-register (wymeldować and again zameldować). Unfortunately I didn’t have my documents with me so I will come back and do this another time. I was told I would receive my Pesel within 10 days of doing this.

Getting a Pesel is very easy to do and doesn’t cost anything. It will save you many arguments in public offices and shops. I wish I had known about this a few months ago…

EDIT – 19th Aug 2008:

I just returned form the Urząd Miasta and was told something different – the regular guy was there and he claimed that he did offer me a Pesel and I declined it. I find that hard to believe (why would I decline a Pesel?) but maybe I misunderstood something. He said that it would now be difficult to issue one. After a few phone calls and playing with his computer he said he would delete me, start over again from new and do it. So in the end it was sorted and I didn’t have to de-register and re-register. He said I had to return in a week to collect it. I asked if I could just call by phone and he said no. By this time he was getting grumpy so I didn’t try and push my luck any further…

• As you might expect, our road signs are a little different. But unless you have recently passed your test who honestly remembers what they all mean anyway? So I didn’t pay too much attention to that paragraph except the bit regarding this sign:
  As I am sure you remember from the Highway Code (nod along blankly if you don’t) in the UK this means “National Speed Limits now appy”, which in a car with no trailer means 60mph or 70mph on a dual carriage-way. Therefore whenever I saw this sign in Poland I put my foot down. But according to that article in Poland it means “previous signs banning things no longer apply” and thus has nothing to do with speed limits. Whoops.
• Seatbelts – they change the law all the time on this back in the UK so I haven’t got a clue what the rules are now anyway. It used to be that children under 14 didn’t need a belt in the back. Now babies need a car seat. Now your pet dog needs to be bolted to the floor. Well probably. The rules in fact according to this article say:
  • In Britain – Everyone has to wear a seatbelt. There are no exceptions for pregnant women or those in the back. Children under 12 not taller than 135cm need a kiddy seat or booster seat.
  • In Poland – similar except women who are “visibly pregnant” don’t need to wear a belt. The kiddy rule is the same except the height limit is 150cm.
• Alcohol – Britain has a very liberal blood-alcohol limit of 0.8. Most of Europe is 0.5. Poland is 0.2 which leaves you very very little margin to drive if you have had anything to drink at all. Personally I don’t drive if I have had a drink at all and was aware of this, but worth mentioning.
• Penalty points – In Britain if you get 12 points you lose your licence. Most speeding offences carry 3 points and they last for 3 years. Poland is not so strict. Points only last 1 year and you don’t feel them until you have racked up 24 points! Plus if you aren’t spanking it down the road it’s probably only 2 points anyway. But this is irrelevant for most of us – Poles will be driving in the UK on a Polish licence (thus no British points for them) and likewise for us Brits in Poland. The EU is a great thing!
• Headlights – this should be simple. If it get’s dark, turn them on. If it’s not, turn them off. But it’s not:
  • UK – headlights required when visibility falls below 100 metres. Only side-lights are required in built-up areas with street-lighting.
  • Poland – headlights (not sidelights) required 24/7 365. Worth mentioning that this previously was a requirement only in winter months, but as of 2007 it is summer months too. But I saw on the news they are debating reverting it back to winter months again…. oh Politicians!

Happy motoring.

Here’s the link to their website in English – yes that’s right, it’s in English! mBank.pl

You can read all the details of what they offer on their site so I won’t duplicate it here, but the main points and the reason I am so happy and thought it worth a blog post is:

• the bank account is free to operate. Most Polish banks charge you monthly fees or fees to do basic things like make simple payments. Maybe this isn’t a shock for non-Brits, but for us Brits who are used to banking for free (well free if you don’t count unfair bank charges as a fee) then this is a taste of home
• they are quite foreigner friendly. You don’t need to have a PESEL number, you don’t need to have a karta pobytu. Their website is in English.
• opening an account is easy – because mBank is an internet bank you don’ have to physically go to a branch. I did the formalities over the phone and then a courier came to my house to check my passport and give me my activation pack.
• mBank is actually part of one of the big boy banks in Poland who collectively hold a third of all personal accounts in Poland. Well their brochure says something like that, so at least they’re not a little mickey mouse bank

Here’s the downside:

• Unfortunately when you call them they don’t speak English, so that might be a bit of a show-stopper if your Polish is a bit ropey or non-existent. I will guess that having a friend call won’t help as you have to personally answer their questions and accept their terms and conditions etc..
• Their internet banking service is only in Polish too.

Also worth mentioning that when I called up to apply they tried to tell me I couldn’t open an account without a PESEL despite their website saying this wasn’t required. I had to tell the guy I thought he was wrong and ask him to check with his manager before he relented. Apart from that the sign-up process was quick and smooth.

Here’s a couple of things I recently discovered which might help a newbie to Polish/international banking:

• When you want to make an international payment the UK banks ask for the foreign bank’s Swift code. In Polish this is called the “BIC” number – numer rachunek BIC.
• Poles don’t quote the sort-code and account number separately like we do in the UK. They use the IBAN system. Therefore their bank account number is just one long number such as 04 2000 1234 0000 1111 2222 3333 (preceded by “PL” for international operations). I have no idea how Poles remember their bank account numbers. …

Happy banking…!

The following short conversation impressed me so much I thought it worthy of a blog post:

Me – hello can you deliver a pizza to me?
Her – no, there’s no driver
Me – OK, but this is the 11th time we’ve ordered from you, and only once have you been able to actually deliver. Either you say there’ s no driver or there’s no car. What’s the point in putting “free delivery” on your menus if you can’t offer delivery?
Her – to be honest I don’t care. Complain to the boss. If you want your pizza come and collect it

Although shocked at what she said, afterwards I thought it was brilliant. There’s no American-style customer service here, no false smiles and pretending to care. At the end of the day she doesn’t give a toss and said so which I think is fair enough.

In a funny way that’s one of the things I like about Poland…

A few months ago I was browsing their website and was a little bit miffed to see the front page was plastered with “Living and Working in the UK” featuring lots of help for Polish people going to the UK. I don’t have any problem with that – but should there not be at least SOMETHING on their website giving advice for Brits “Living and Working in Poland”?

So back in October 2007 I sent the following email to them:

Hi

I was looking at the website of the British embassy in Poland. There is
a lot of information for Poles going to the UK, but not so much help for
Brits in Poland.

For example, can you point me towards any resources that explain about
things such as:
* temporary and permanent registration in Poland
* how I can go about getting a mobile phone contract
* registering a car
* opening a bank account
* polish language lessons

It would be nice to know what the official procedures are as I am often
giving conflicting information when I ask in Polish offices.

Thanks.

Ben

After not hearing back from them I then forgot all about it. Then last week something bizarre happened. After a delay of only 6 months I got a reply. Someone might find something useful in it so I shall quote it in its entire glory:

Dear Sir,

Thank you for your email.

The British Embassy may signpost you towards organisations who may offer you professional help.

Here are some useful contacts with reference to your enquiry:

RESIDENCY IN POLAND

Poland is now a full member of European Union and you have the right to live here without visas and permits. However, after an initial stay of 3 months in Poland, you should contact

DEPARTMENT FOR FOREIGNERS at the relevant Voivod Office to apply for registration of your stay in Poland.

This office should also provide you with information about permanent residency in Poland.

For more information referring to different issues for British residents abroad please enter:

www.direct.gov.uk/BritonsLivingAbroad/fs/en

You may also find useful the following webpages :

www.msz.gov.pl ( Polish Ministry of Foreign Affairs, information available in English)

www.fco.gov.uk/traveladvice

(Travel Advice prepared by FCO)

and the British Embassy in Warsaw website: www.britishembassy.pl

You may also find useful the assistance of a professional agency (relocation agencies) that assists foreigners in many issues like: Settling-in Services; Home Finding Programme; Medical; Taxes etc.This is : POLAID, contact MR Olgierd Chrobak, 00-082 Warszawa, tel: 0048 600431204 email: olgierd.chrobak@polaid.pl , PRO Relocation, ul. Kaniowska 41, 01-529 Warsaw, tel. +48 22 869 04 40, info@prorelo.com, www.prorelo.com, Pryma Agency, www.pryma-cudzoziemcy.pl .

Right hand cars cannot be registered in Poland. You may consider contacting the relevant department of the Ministry of Transport and Construction at the following address for clarification of this issue:

Ministerstwo Transportu i Budownictwa
Departament Dróg i Transportu Drogowego
Ul. Chalubinskiego 4/6
00-928 Warsaw
tel. 022 630 12 40

I hope you find this information helpful.

Regards,

Consular Section

Well I am impressed that if you do email them then they eventually will reply. Whether it’s worth them bothering to reply after 6 months is another question…

I just hope that if ever I should have the misfortune to get arrested in Poland then their consular assistance people are are little quicker than the rest of the departement….

One of the nice things about the car registration system in Poland is that unlike 3rd party insurance is included with the annual registration fee, similar to the Australian system.

This makes total sense – you are assured that all drivers have the minimum legally required insurance cover, unlike in London where I see that 1 in 10 drivers aren’t properly insured.

The plus side of this is that you can lend anyone your car as long as they have a valid driver’s licence. Gone to the pub and decided to drink? No problem, let someone else drive back…

Roads

As everybody knows the quality of the roads isn’t great, but what do you expect after years of underinvestment? The money is pouring in from the EU and they are busy building motorway networks. Give it a few more years and the roads won’t be so bad. They’ll just be full of traffic instead.

Overtaking

One of the pleasures (or terrors, depending on how you look at it) of driving over here for me, is the Polish custom for overtaking at any possible place, regardless of road-markings or oncoming traffic. Slow car in front? Overtake them anyway, the slow car will pull to the side to make room for you and the oncoming truck will do the same. Brilliant.

Lights

As of 2007 you have to drive with dipped headlights on 24/7. In previous years this was just required in winter months, now it is obligatory all year round. I know they thought about introducing this at EU level and dropped the idea because the enviromentalists said it would hurt the environment with the extra energy consumption. Personally I think it’s a great idea, it makes vehicles much easier to spot at distance or in bad weather and if that saves lives then it’s worth it.

An example is the PLN – GBP exchange rate. A couple of years ago you could get 6 zloty to the pound, now it’s around 4.8 zloty to the pound.

But it’s a double-edged sword of course – while the increasing strength of the Polish economy makes Poles ‘wealthier’ relative to established western economies, the cost of living is also rising. Things like food and rent are going up which makes Poland a less attractive and more costly place for me to live. Still, with no council tax to pay (well OK, about £50 property tax a year) and petrol still cheaper than back in the UK I think I will be happy here for some years to come…

Still it pleases me when I see constant reports like this one of foreign companies pouring money into Poland.