What is an Exit Tax, and who does it apply to?

From this article, you will learn:

• What is subject to the Exit Tax?
• Within what deadline taxpayers are obliged to submit declarations of income from unrealised profits to tax offices?
• What rates apply to the tax on income from unrealised profits?

Tax on income from unrealised profits, i.e. the so-called Exit Tax is a tax that applies when a taxpayer changes his tax residence or transfers his assets outside Poland. Therefore, if, as a result of the taxpayer's movements, Poland loses the right to "normal" taxation of a given property, the Exit Tax comes into play.

Who and in what situations has to pay Exit Tax?

Both natural persons and legal entities should take into account the risk of paying exit tax, i.e. tax on income from unrealised profits. Appropriate, quite analogous regulations can be found both in the Personal Income Tax Act (hereinafter: PITA) and in the Corporate Income Tax Act (hereinafter: CITA).

Exit Tax applies to the transfer of an asset outside the territory of the Republic of Poland, as a result of which the state loses the right to tax income from the disposal of this asset. At the same time, this transferred asset must remain the property of the same entity. This applies in particular to situations where the property is transferred to the taxpayer's foreign establishment.

The second situation in which Exit Tax will be applicable is the transfer of the tax residence of a taxpayer who was previously subject to unlimited tax liability in Poland. Due to the change of the taxpayer's tax residence, the Republic of Poland loses the right to tax income from the sale of assets owned by that taxpayer.

Importantly, in the event of a change of tax residence – in relation to assets not related to business activity – only assets constituting: 

• all rights and obligations in a company that is not a legal person, 
• company shares, stocks, and other securities, 
• derivative financial instruments and participation titles in capital funds, 

are subject to Exit Tax, provided that the taxpayer was resident in the territory of the Republic of Poland for a total of at least five years in the ten-year period preceding the date of change of tax residence.

Taxation rules – what do Polish Exit Tax regulations say about the tax amount and payment deadline?

The tax on income from unrealized profits has two rates: 19% and 3%. The lower rate applies only to natural persons and in a situation where the tax value of the asset is not determined. In practice, a higher tax rate will be applied much more often.

The tax base for Exit Tax is income from unrealised profits, i.e. the excess of the market value of an asset determined on the date of its transfer or on the day preceding the date of change of tax residence over its tax value.

In the case of natural persons, the Exit Tax obligation arises when the total market value of the transferred assets is at least PLN 4,000,000. In the case of spouses with marital property, this limit applies to both spouses jointly.

Corporate income tax payers are obliged to submit to tax offices declarations on the amount of income from unrealized profits by the 7th day of the month following the month in which the income from unrealized profits arose. They must also pay the tax due by the same deadline.

Individuals are obliged to submit a tax return on unrealised profits by the 7th day of the month for the previous month in which they exceeded the above-mentioned limit of PLN 4,000,000. If they continue to move additional assets abroad in the following months, they should also submit further declarations for these months.

It is worth noting that under the currently applicable Regulation of the Minister of Finance of 2 August 2023, tax due resulting from monthly declarations submitted for settlement periods from 1 January 2019 to 30 November 2025 must be paid by 31 December 2025. Exit Tax payment deadline for individuals has therefore been postponed.

However, this regulation introduces an exception. If the taxpayer loses or has lost an asset before 1 December 2025, he or she is obliged to pay tax by the 7th day of the month following the month in which the loss of all or part of this asset occurred. The loss of an asset is understood as the disposal of an asset, the exercise of rights arising from derivative rights or derivative financial instruments, or any other event resulting in the loss of ownership or the right to an asset. This means that in some cases natural persons are also already obliged to pay Exit Tax.

If you have any doubts whether Exit Tax may also apply to you, please use our services. Our experts will be happy to answer your questions.