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Income tax on stock exchange profits

Dom Maklerski Banku Handlowego S.A. is not responsible for the information specified below. The Act on Personal Income Tax is the only reliable source of legislation applicable to tax liabilities.

Please also note that taxation of income derived from dividends and sale of shares by foreign investors could depend on provisions of treaties entered into by Poland on avoiding double taxation.

Beginning with 1 January 2004, income derived from fee-based sale of securities or derivative financial instruments and from performing the rights therefrom are subject to taxation. Income tax is settled once per year at a single rate of 19% of the income attained (rt. 30b.1 of the Act).

The Brokerage House

Pursuant to Art. 39.3 of the Act, brokerage houses are obligated to send to the taxpayer and the tax office information about the level of income attained by such taxpayer from fee-based sale of securities or derivative financial instruments and from performing the rights attributed thereto, by the end of February of the year falling after the tax year (i.e. by end of February 2008 for income derived in 2007) using the tax return form PIT8C. The brokerage house issues one PIT form per account. If the taxpayer operates several investment accounts at different brokerage houses, appropriate rows of the tax return form should be totaled.
Note that information supplied by the brokerage using form PIT8C does not constitute the final income tax liability on the title of such activities. Neither doers the brokerage house settle the tax liability. It is the taxpayer who is obligated to specify such income in his tax return, to calculate the tax due and pay the tax liability.

Calculation of income

Income derived from fee-based sale of securities or derivative financial instruments, as well as from performing rights resulting therefrom, is determined according to the following principles:

  • Income constitutes the difference between the total revenue attained from fee-based sale of securities, instruments and performing rights, and the costs associated with generating such revenue.
  • According to the Personal Income Tax Act, income is calculated using the FIFO (First In First Out) principle. This means that securities purchased first are being sold first.
  • This is of special importance in case of shares purchased prior to 31 December 2003, because income from purchase of such shares is exempted from income tax.
  • No advance payments are required during the tax year.
  • Profits and losses are calculated in respect to closed transactions, only.
  • Costs of generating revenue may include brokerage fees on orders performed, fees for operating the investment account, and access to information services, all fees and commissions charged by the brokerage house on title of rendering brokerage services to the taxpayer, provided they are related with attaining of the revenue disclosed, etc.
  • Income attained from stock exchange investments is not combined with income generated from other sources (which are subject to progressive tax rates).
  • Profits from investments into bonds, shares and derivatives may be compensated with losses incurred on such instruments. Income from bank deposit and investment fund units may not be compensated with profits/losses attained in result of investing into bonds, shares or derivatives.

Settlement of losses

Losses on stock exchange investments (also on title of selling currency contracts) sustained during the year may be compensated with profits attained on the title thereof. Losses exceeding profits in 2007 may be settled over the next five years, but not more than 50% in the following year. Losses from stock exchange transactions may not be compensated with profits e.g. from bank deposits or sale of fund units.

Securities purchased prior to 1 January 2004

Pursuant to Art. 19(2) of the Act of 12th November 2003 amending the personal income tax act and certain other acts (Journal of Laws of 2003 No. 202 item 1956), provisions of the Act do not apply to taxation of income attained after 31st December 2003 on title of fee-based sale of securities provided that such securities were purchased prior to 1st January 2004.

Dividends

The withholding tax rate applicable to income derived from dividends is 19% beginning with 1 January 2004. Tax rate set forth in the Act will apply to individuals not having their place of domicile or residence in the Republic of Poland will apply only if the treaty on avoiding double taxation executed with the country in which such person has his/her domicile or residence does not provide otherwise. However, application of the tax rate resulting from the treaty on avoiding double taxation (or not-charging tax as provided for in such treaty) is possible only after obtaining from the taxpayer a certificate, stating his/her place of domicile or residence abroad for taxation purposes, issued by the appropriate tax authorities (certificate of residence).
Tax on income attained on title of dividend is deducted by the company which is paying such dividend and which assumes the role of taxpayer in respect of such income tax.