Introduction of tax incentives for individuals to settle in Poland

Under the new tax legislation called The Polish Deal, Poland introduced tax incentives in order to encourage individuals to settle in Poland and pay their personal taxes there.

1. Lump-sum tax for High-Net-Worth Individuals (HNWI)

The first incentive is dedicated to HNWI. Persons who settle in Poland and submit a declaration opting for lump-sum taxation could pay the lump sum tax on their foreign income (except for CFC income) in the amount of PLN 200 000 per year plus PLN 100 000 for each family member of a person benefiting from this new regime. The amount of the lump sum will be independent of the amount of the actually earned foreign income.

Individuals can use this form of taxation if they have not lived in Poland for at least 5 of the last 6 years before moving to Poland. In addition, a person who chooses lump-sum taxation will have to spend PLN 100 000 annually on economic growth, the development of science and education, the protection of cultural heritage or the promotion of sport in Poland.

Types of expenditures that have to be incurred in order to take advantage of the lump-sum tax on foreign income has been designated in the executive regulation of the Minister of Finance and encompass e.g. donations to public-benefit organisations, an acquisition of immovable monument or purchase of the shares in an alternative investment company.

The family member of a HNWI does not have to incur expenses mentioned above.

Income on foreign assets is not disclosed in tax returns or tax books, but the taxpayer has to possess evidence necessary to determine the origin, the amount and the period in which the foreign revenue has been earned.

Taxpayers are obliged to pay the lump-sum tax on foreign income up to 30 April of the year following the tax year.

Lump-sum taxation can be used for up to 10 years. It is possible to opt out of participating in this regime more quickly, after submission of a statement to opt out of the scheme.

It should be stressed that the Polish income of a person benefitting from this new tax regime will be taxed according to the usual tax rules, i.e. the 17-32% tax-band scale, the 19% flat rate of tax, or a lump sum on registered income.

2. Tax exemption for individuals who become Polish tax residents.

The second incentive is dedicated not only to people with a higher than average level of income, but to almost all of the taxpayers who will choose Poland as a place of permanent residence.

Polish citizens and citizens of other EU/EEA countries and Switzerland who settle in Poland after living for at least 3 years in another country can benefit from tax exemption of their revenue from an employment contract, a contract of mandate or from business activity, up to the amount of PLN 85 528 per year.

The exemption can be used for 4 years from the beginning of the year in which the person settled in Poland or from the beginning of the following year.

Taking into account that a standard tax free income in Poland since 2022 amounts to PLN 30 000 per year, the tax exempt income of persons using the new exemption may be equal to PLN 115 528 per year.