The taxation of seafarers, such as the PIT exemption or the possibility for seafarers to benefit from the so-called abolition relief, is regulated by the Personal Income Tax Act. However, the preparation of a seafarer’s correct annual tax return can be quite troublesome, because the regulations governing these issues are not clear or precise.
Whether or not a seafarer in Poland will pay income tax and whether he is obliged to file an annual return in Poland will depend on several factors, including where the shipowner of the ship on which such a taxpayer sails has its actual management. Ideally, it should be a country with which Poland has signed a double taxation treaty and with the method of exemption with progression.
Offer
Services offered to seafarers
- consultations concerning the tax situation as regards PIT
- tax analyses/opinions on tax obligations in Poland
- preparation of an application to NUS to limit PIT withholding on seafarer’s remuneration
- Preparation of annual tax return (PIT) on the basis of source documents
- preparation of an application for an individual tax interpretation
- analysis of summons from tax authorities and preparation of draft responses in the course of examination activities or tax proceedings
- preparation of appeals against decisions of tax authorities regarding PIT
- preparation of complaints to administrative courts (WSA/NSA)
- representing the applicant during tax interpretation proceedings
- representing the taxpayer before tax authorities of the first and second instance
- representing the taxpayer before WSA/NSA, etc.
Taxation of seafarers
i.e. when is a seafarer’s income exempt from income tax?
Pursuant to the current wording of Article 21(1)(23c) of the PIT Act (amended from the beginning of 2021), the following are free from income tax: income of seafarers who are citizens of a European Union member state or a state belonging to the European Economic Area, obtained from work on seagoing vessels used for the carriage of cargo or passengers in international shipping, if it was performed for a total period of at least 183 days in the given tax year, with the exception of work performed on: tugs on which less than 50% of the working time actually performed by the tug during the year was the carriage of cargo or passengers by sea, dredgers on which less than 50% of the working time actually performed by the dredger during the year was the carriage of extracted material by sea.
Prior to 1 January 2021, the provision allowed for the exemption of income earned only by those seafarers who performed work on maritime vessels flying the flag of a Member State of the European Union or a country of the European Economic Area, as indicated in the Act.
The problem with the application of the above provision arises from the fact that, in accordance with the amending provision (i.e. Article 23(1) of the Act of 28 November 2020 amending the Act on Personal Income Tax, the Act on Corporate Income Tax, the Act on Lump Sum Income Tax on Certain Income Earned by Natural Persons and certain other acts), Article 21(1)(23c) of the PIT Act in its updated wording will apply to income earned after the European Commission issues a positive decision on the compatibility of public aid with the internal market. As such a decision has not been issued, the version of the provision prior to 1 January 2021 should be considered applicable and the flag of the ship should be taken into account for the possible application of the exemption.
What if there is no PSA
The extension of the exemption of income from taxation will be of particular importance for seafarers working on ships with flags of countries with which Poland has not signed a double taxation treaty, such as Antigua and Barbuda, Argentina, Barbados, or Liberia, a popular choice for German shipowners. Currently, Polish seafarers sailing on such vessels cannot apply the exemption from Article 21(1)(23c) of the PIT. Then the manner of settlement results from the provisions of bilateral agreements signed to avoid double taxation.
For countries without a signed DTT, the proportional deduction method is applied by default. However, the Minister of Finance, in a general interpretation, indicated that the right to deduct will only arise if the tax is actually paid in the country where the shipowner’s management is based. If the country of domicile of the shipowner’s actual management does not require the seafarer to pay the tax, it should be paid in full in Poland.
In addition, it is not uncommon for the tax authorities to also refuse to exempt from PIT the income of seafarers working under the EU or EEA flag on such vessels as, inter alia: platforms, cable-layers or specialised vessels (e.g. research, seismic).