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Can a UK company earn in PLN? Foreign currency and mortgage in Poland.

adamm19830 10 | 43
17 Jun 2016 #1

I'm seeking some advice. I am the owner of a UK company and I have employed a Polish Tax advisor. Ultimately I am looking to relocate from the UK to Poland. My Polish tax advisor has advised that our company can be left in the UK whilst we live in Poland without any problem. This is great as she told me we would only need to pay UK tax.

However, this now poses a problem for us when it comes to getting a mortgage. Our financials more than satisfy the Polish mortgage criteria other than the fact we earn in GBP. The banks have told me if we earn in PLN than we can get a mortgage without a problem.

Here's the question - Can I somehow show the UK company earns in PLN to satisfy the banks request?

17 Jun 2016 #2
There really shouldn't be any problem with this, as the company can always exchange its earnings into Polish zlotys at some point.

So, where is the problem really?
cms 9 | 1,255
17 Jun 2016 #3
I doubt banks have considered the fact that you are putting your earnings in a UK limited company and I doubt they would be happy with that - check that out with the bank, but they would have to believe the property was strong collateral

Leaving that aside then yes you can show them that the inflows to your UK company are in PLN.

However a bigger problem for you is how to get your money out of the UK company tax free - if you take dividends you will pay UK CIT and then Polish dividend tax on top of that. if you pay yourself a salary you will pay Polish tax on that. if you loan money from the company to yourself then at the time you write it off you will pay Polish tax.

And also bear in mind that having a UK company might cause some VAT complications for your customers here. i dont know what line of business you are in but check that too.
peterweg 37 | 2,320
17 Jun 2016 #4
company can always exchange its earnings into Polish zlotys at some point.

Then the bank is exposed to currency risk as the company does NOT earn PLN. I suppose if you had a large deposit (50%) you might find a lender who would lend to you.. in the past.

This is not then. Next week is the Brexit vote, you will be almost certainly barred from a mortgage until after the vote.

After the vote, if its Leave, getting a mortgage with a non-EU Ltd company would 100% certain to be refused. Its impossible.

Your right to live and work in Poland would be uncertain for years.
OP adamm19830 10 | 43
17 Jun 2016 #5
I should have said that our company is a UK based self employed partnership however I can change this to a ltd company if needed.

Every bank in Poland I have spoken to have said I need to be earning in PLN rather than GBP. If I can show them that without having to pay Polish tax then everything is fine.

I can avoid paying Polish tax because I won't have a Polish income. My tax consultant has told me this. I also won't have to pay ZUS as I will get healthcare covered by the EU. As long as I don't have a Polish income everything is fine. I just need to satisfy the banks for the mortgage.
peterweg 37 | 2,320
17 Jun 2016 #6
If you live in Poland for more than a certain amount of time per year you have to pay tax and ZUS. The EU will never cover you for being resident in a country.

You have to earn in PLN to get a mortgage, not earn in GBP and convert it.

As long as I don't have a Polish income everything is fine. I just need to satisfy the banks for the mortgage.

Mutually exclusive I'm afraid.

(this assumes UK stays in EU. If the UK leaves the currency risk will become MUCH higher and it will be come even hard to get a loan)

Get a personal loan in the UK

There is also a flat tax rate of 18%, you get no tax free allowance, you pay 18% from 0pln.. I'm not sure of the polish name for it but its similar to a sole trader. Much cheaper than UK tax after a certain level
OP adamm19830 10 | 43
18 Jun 2016 #7
Very interesting comments Peterweg. We have employed a Polish Tax advisor and they have categorically told us in writing that we can leave our business in the UK and still reside in the Poland without paying polish tax or ZUS. Our consultant/advisor has quoted us all the statutes that would allow us to do this. She also told is this can be set in concrete by the ministry of finance for a small fee and the local tax offices cannot override it. This is a professional we have employed.

The mortgage is the main problem for now. I'm in the middle of speaking with millennium bank now.

The tax rate you mention in Poland is called "line tax" where you pay 18-19% flat rate and lay your ZUS fee. You don't get your tax free allowance like the UK though. Our consultant has told us that keeping the business in the UK is the best option for us for cheaper tax reasons and as mentioned before has stated this as possible.

terri 1 | 1,664
18 Jun 2016 #8
You are VERY much mistaken, if you think that the EU card will cover you for healthcare if you are 'resident' in Poland.

Anyway, you can believe me or believe me not, but the first time you need a doctor or a prescription for anything or a dentist for your toothache or an extraction - see how far your EU car gets you.

You are right of course, that if you do not have any earnings in Poland you do not have to pay tax or Zus. But then what exactly will you live the tax office will start to question you on what income/funds you have.....this is the problem. As a fully-fledged resident you will have to complete the tax forms at the end of the tax year....and then the problems will start.

The situation is totally different if you go to Poland for a holiday, but are not 'resident' of Poland.

You must ask the right questions, and the fact that someone has given you something on paper means absolutely nothing - will they be liable for any consequences arising from their advice. I do NOT think so.
18 Jun 2016 #9
Terri may be right here to some extent..

Private or public medical insurance may be needed least in some cases.

Article 3 of the Polish act on PIT is very precise: if someone has lived at least 183 days in Poland during the last fiscal year, he is obliged to pay PIT no matter where the sources of his income are based (in EU or outside EU, etc.). As a lawyer I have dealt with Polish tax laws for some time now (though I am not an expert on Polish tax laws myself) so why exactly do you think you won't have to pay any income tax in Poland?

Is this because of a double-tax agreement between Poland and UK?
OP adamm19830 10 | 43
18 Jun 2016 #10
Please excuse me on this. My knowledge is limited on it all I have merely been repeating what my Polish Tax advisor has told me. I have paid her for this service. I will look at the paperwork she sent me and post it here again. From memory it does have something to do with a 2006 tax agreement.
Sparks11 - | 335
18 Jun 2016 #11
This has been discussed on some other forums as well. Polish banks are notorious for being pig-headed about giving mortgages if you don't actually earn in PLN, it may not make sense but that is how it is. I don't think you will be able to get one not earning in the country.
OP adamm19830 10 | 43
18 Jun 2016 #12
Ok, so the document I received from our Polish Tax advisor in Poland is a 5 page document so fairly long. In this document she discusses all of our possibilities when we move to Poland including if we moved the company to Poland. I've cut the majority of it out but you should see her point, apologies for the broken English :- ....

Summing up in the context of the facts it should be made clear that if the taxpayer, who is a Polish resident (and that you intend to be) receive income both in Poland and in the UK, it should account for the income using the method of avoiding double taxation ( the taxpayer settled in the UK, according to the British tax law, and shall submit a return in Poland- the tax paid only once). However, if a taxpayer Polish tax resident, he received only foreign income (did not receive any other income in Poland) do not have to settle tax in Poland, because its income is exempt from tax in Poland. It should be noted that some of the Polish tax offices require in such a situation, receipt of PIT zero (there are different practices). In terms of payment of social security contributions in Poland (in the facts) I received information in the Social Insurance Institution (ZUS helpline tel. Phone 22 560 16 00), that if the person involved does not conduct business in Poland he or she is not obliged to pay any contributions. In case of any illness the use of medical care on the basis of the European Health Insurance Card. I want to also inform that in Poland there is an institution submitting to the Minister of Finance requests for individual interpretation of tax laws with respect to the facts (for printing ORD-IN). Issued by the Ministry of Finance interpretation of the rules is binding, the taxpayer, who to apply it is protected by such an interpretation. I Inform about this on the grounds that you can take advantage of this by presenting the facts accurately predicted, due to an official from one application is 40 zł., Plus a fee for the person preparing such a request. With this interpretation of the taxpayer it is confident that his actions will not be challenged by the tax authority in Poland. The time issue interpretations by the Minister of Finance is three months from submission of the application.

Let me know your thoughts. I have paid for this and she has clearly done her research.
terri 1 | 1,664
18 Jun 2016 #13
I have carefully read the document. In a nutshell.
1. If you are a Polish resident and receive income from the UK which has been taxed at source (eg old age pension, private pension) - this is taken account of in the calculation of your Polish income. I believe that she is wrong is assuming that foreign income will NOT be taxed at all. You must be very careful about this. The Polish authorities will ask you what your income is - you must tell the truth as they will check with the UK.

2. If you do not conduct business in Poland you do not pay ZUS, however she is wrong in assuming that you will be entitled to the same medical care. You must tell the UK authorities (National Insurance and Income Tax) that you will be a resident of another country. Usually, any medical care given to UK residents under the guise of the European card is recoverable from the UK, but as you will NOT be a UK resident they will not be able to claim and will bill you for the services. Remember that you might hold a UK medical card to which you are NO longer entitled as you are NOT a UK resident. You may be entitled to a Polish medical card - but I very much doubt it.

4. In your case, I would pay the 40pln and get advice straight from the Ministry and then get a really good solicitor to ensure that the Ministry will be liable for any incorrect financial advice they have given you.
OP adamm19830 10 | 43
18 Jun 2016 #14
Thanks for the input terri.

Regarding the medical care I'm not too worried about this as I will probably opt for private healthcare anyway.

Getting the mortgage is my new obstacle. Im awaiting a reply from Millenium bank. They are the only bank I have found that has a proper "English" section on their website and it specifically talks about accepting varying income types. I'm hoping we will fall under this category as every other bank I've spoken to so far have a problem with the fact we will earn in GBP rather than PLN - hence my original question in this thread. :-)
polishinvestor 1 | 362
18 Jun 2016 #15
Regarding the medical care I'm not too worried about this as I will probably opt for private healthcare anyway.

Thats fair enough for a sore tooth or other minor complaints. But if you are seriously injured and end up in hospital you might find a huge bill waiting for you when you leave hospital. If you are living in Poland you have to pay medical insurance ZUS either by way of self employment or through your employer, or a mix of the two. If you are not employed, you are expected to sign on. You can pay just the medical part of the ZUS and you will be covered but sooner or later you will have to declare where you got the money from to pay for it. And if thats from UK earnings, you will be taxed on them since you are or plan to be a tax resident. Keep in mind fines on undeclared and untaxed income can be up to 75%. The best thing to do would be to go straight to the urzad skarbowy in the area where you are planning to live and explain the situation. Go with someone polish speaking if you dont speak Polish well enough. Any questions you have they will be able to answer. They actually appreciate someone trying to do things within the law and more than likely you will get your answers within an hour. Prepare for a lot of questions from the staff out of interest on why you are moving to Poland when everyone else is going the other way. Its harmless and it builds up a rapport.

Re the mortgage, you are going to need some PLN earnings. Try a mortgage broker, they should be able to tell you straight away if anyone is interested and will save you a lot of time running around banks which will only negatively affect your credit rating anyway.
peterweg 37 | 2,320
19 Jun 2016 #16
Polish banks are notorious for being pig-headed about giving mortgages if you don't actually earn in PLN, quote too long.

Its not being pig-headed, its the law. In March 2016 the European Mortgage Credit Directive (EMCD) came in to force. Banks have to stress test the ability of borrowers to repay over varying interest rates and using 10 year historical exchange rates. Combine the two and its very risky.

European banks have been told to not to do foreign currency loans as its a stability risk.

Poland has elected a government that is going to force banks to take over the risk from borrowers with foreign currency loans.

Add in the Brixit vote (which could knock 30% off sterling and remove the legal basis for recourse)

Any bank that gives a foreign currency loan in these situations is stark-raving mad and a prime target to be sued for negligence, incompetence and whatever else.
Sparks11 - | 335
19 Jun 2016 #17
I'd say it's being pig-headed when a bureaucrat earning 4 k zloty a month can get a mortgage because they have an umowa o praca but a business owner earning, let's say, 50k pounds/year can't because it isn't stable, no matter that they earn 5 times more than some urzednik. Same thing with people who have a dzialnosc and earn way over 4 k a month, taking short-term, higher cost loans is no problem, in fact, the banks practically beg you to take money, ask for a mortgage and it's a different story.
terri 1 | 1,664
19 Jun 2016 #18
Any complains about banks willingness or ability to grant mortgages - please refer to the Government. Banks do not make the rules - they only follow them.

Whether you think this is fair or unfair has no bearing on their ability to function.
19 Jun 2016 #19
" However, if a taxpayer Polish tax resident, he received only foreign income (did not receive any other income in Poland) do not have to settle tax in Poland, because its income is exempt from tax in Poland. "

This statement is clearly false.

Which legal rule in polish law says this???

Article 22 of the agreement of 2006 on avoidance of double taxation will be applied in your case. So in fact have to submit monthly tax declarations in the Polish tax office if you stay in poland for more than 183 days in 2016.
terri 1 | 1,664
19 Jun 2016 #20
>>>>This statement is clearly false.
I agree with this. It only goes to show that you can't trust people even though they claim to be Polish Tax advisers, as they get things WRONG. The adviser has probable used the 'cut and paste' method from various sources without seeing or understanding the bigger picture.
cms 9 | 1,255
20 Jun 2016 #21
A more charitable explanation is that the tax advisor wrote this in Polish and it was very badly translated. Alternatively the OP did not provide her the full facts - especially that he intends to live on British funds while he is in Poland. But yes there are many things in there that are just plain wrong, most of which covered above; but two extra points

- 40 zloty to get a binding ruling is far from straightforward; you have to be very precise in the wording used in your application and unless you then follow the route exactly; your binding ruling will not protect you. Drafting a ruling like this could easily cost a few thousand zloty at a good accountant.

- The ruling comes from the local tax office, not from the Ministry of Finance. And nobody is going to indemnify you for bad advice.

Overall you seem to be performing many contortions to save a small amount of tax (which boils down to the false hope you can get the UK's higher tax free allowance). But these will hurt you badly if you really do settle here - its not just when you are sick or need a mortgage, but also in future you will need to have real residence addresses to register your kids at kindergarten, get a phone line or make a planning application.
terri 1 | 1,664
20 Jun 2016 #22
Since many people (all over the world) may be reading this forum, I'd like to clarify.

If you are NOT a UK resident, (or ordinary resident), you are NOT entitled to the UK tax-free allowance on anything. You must tell UK Government that you are now a resident of another country. If you do not tell them, they will get you in the end and will charge you with tax evasion.

Any monies remitted or obtained from the UK will be taxed at source (i.e. by the UK tax authorities) and you will get the net amount. The tax paid in this way can be offset by any income tax due to the Polish authorities (double-treaty agreement). If you become a Polish resident, then you are going to be treated in the same way as any other Polish resident. (Any income from abroad is liable for Polish income tax.) You will need to complete the forms for income tax.

My best advice - and you can follow it or not - is to remain a fully fledged UK resident (therefore be entitled to tax-free allowance), have your company in the UK and ensure that you spend less than half-a-year in Poland (you need to have this documented). You can of course, open up a business in Poland, get someone else to run it (or run it yourself). The half-a-year is counted in days, so that you can stay in the UK 4 or 5 weeks, come to Poland for 4-5 weeks and continue in this way. You would then have to pay income tax and Zus.

The very first post which started this thread confuses people. As I understand it, you want to retain your company in England, and yet at the same time be a fully-fledged resident of Poland. In that case, you will pay tax in Poland, (based on residency) and not in England (as you will then NO longer be a UK resident). You cannot (for tax purposes) be a resident of two countries at the same time.

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