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This article will answer the following questions:
- What is the return relief?
- Who is eligible for it?
- What income is exempt from income tax upon a return to Poland from abroad?
The so-called. Polish Deal has introduced a regulation in the Personal Income Tax Act called the return relief. It applies to taxpayers with Polish citizenship moving their place of residence to the territory of the Republic of Poland, which allows them to enjoy an income tax exemption over the period of 4 years. The said preference is surely worth exploring. What are the conditions that must be met by individuals in order for them to be covered by the return relief?
Conditions for claiming the return relief
A taxpayer holding a Polish citizenship may claim the relief if, as a result of moving their place of residence to the territory of the Republic of Poland, they have become subject to unlimited tax liability (i.e. they are now a Polish tax resident), and also:
- they have not resided in Poland in the period of three calendar years immediately preceding the year in which they changed their place of residence (by settling, for example, in the United Kingdom of Great Britain, Northern Ireland, the United Mexican States or the United States of America) and
- they have not resided in Poland in the period from the beginning of the year in which they moved to the territory of the Republic of Poland to the day preceding the day of the change of place of residence.
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Place of residence in the territory of the Republic of Poland as one of the conditions for claiming the relief
Additionally, the taxpayer is required to hold proof of residence. The following give the right to enjoy the relief:
- Polish citizenship or the Pole’s Card (Polish: Karta Polaka),
- citizenship of another European Union Member State,
- citizenship of another European Economic Area Member State,
- citizenship of the Swiss Confederation.
Even if the taxpayer does not meet the citizenship requirement, they can still apply for the relief. In such a case, it is enough to have resided continuously in the Swiss Confederation or one of the countries belonging to the above-mentioned communities for the previously indicated three-year period preceding the move to Poland.
This is not all – if the taxpayer fails to meet the citizenship or place of residence condition, they are still entitled to the relief if, before the three-year period indicated above preceding the move to the territory of the Republic of Poland, they held a place of residence in Poland for an uninterrupted period of at least 5 calendar years.
Proof of residence is sometimes not enough
Taxpayers returning to reside in the territory of the Republic of Poland cannot enjoy the relief if they have already (in whole or in part) claimed it earlier.
The return relief may be claimed by a taxpayer who holds a certificate of residence or other evidence documenting the place of residence for tax purposes in the relevant period, i.e. preceding the moment of residence in the territory of the Republic of Poland (this may be, for example, an employment contract or a lease agreement for an apartment, showing data that constitutes a proof that the person resides outside the territory of the Republic of Poland).
What income is exempt from tax?
The return relief may be claimed by a taxpayer whose income does not exceed PLN 85,528 in a tax year. Upon exceeding the limit, the advance income tax will be charged on the surplus of income over the aforementioned limit. In the case of taxpayers accounting for taxes under the tax scale, the personal allowance of PLN 30,000 will apply.
Example: Ms Smith meets the conditions for claiming the return relief. After moving to Poland, she established a sole proprietorship, taxed under the tax scale. Her income exceeded the threshold of PLN 85,528, but she applied the personal allowance of PLN 30,000, therefore she will pay the advance tax only upon exceeding the total of the return relief limit and the personal allowance amount, i.e. PLN 115,528. The advance payment will be charged on the surplus of this amount.
The condition allowing to claim the return relief is that the taxpayer's income must be earned under employment contracts, contracts of mandate, non-agricultural business activity (taxed according to the tax scale, flat-rate tax, 5% tax under the IP BOX relief or tax on recorded income) or from maternity allowance.
Please note! The income limit of PLN 85,528 to which the return relief is applicable concerns the sum of those incomes to which not only the return relief is applied, but also the relief for young people, the relief for families with 4 and more children and the relief for working seniors. This is one common limit for the indicated tax-exempt incomes.
Return relief exclusions
The incomes subject to the relief do not include incomes taxed with the flat-rate personal income tax, exempt incomes, and those where tax collection has been waived.
Time limitation: when the return relief is applicable
The relief can be claimed over 4 consecutive tax years, and the taxpayer is entitled to choose the moment they want to start the period of exercising the return relief. The beginning of the 4-year period of enjoying the return relief can be the beginning of the year in which the taxpayer moved to Poland or the beginning of the year following the year in which they did so.
A taxpayer deriving income from employment contracts or contracts of mandate and wanting to claim the return relief should submit to their withholding agent a declaration of meeting the conditions for claiming the return relief, together with an information of the exact time of commencement of its application.
Please note! The return relief applies to taxpayers who moved their place of residence to the territory of the Republic of Poland after 31 December 2021*.
*Article 53 of the Act of 29 October 2021 amending the Personal Income Tax Act, the Corporate Income Tax Act and certain other acts (Journal of Laws, 2021.2105).
Should you have any questions regarding the return relief (or would like to consult us on whether you might be entitled to claim it) – we strongly encourage you to contact us.
