Amendments to the Act on Personal Income Tax (PIT): 70% tax on compensation

From 1st January, 2016, certain type’s severance pay and compensation connected to non-complete clauses will be subject to tax.

Compensation of 70% PIT

Tax will be subject to, amongst others, compensation awarded on the basis of regulations concerning non-complete clauses will be taxable; these regulations only apply to payments of compensation to employees or former employees – they do not apply in cases where a manager is a service provider for a company under a contract governed by Civil Law.

Compensation for the non-complete clauses, which are paid to managers who work for a company on the basis of a managerial contract, is thus not paid on the basis of regulations on non-complete clauses, but on the basis of a contract governed by Civil Law, and according to the letter of the law, should not be taxed.

Source: Dorodca Podatki I Rachunkowość (December, 2015)