The “return relief” constitutes one of the novelties introduced as part of the Polish Order. The aim of this institution is to encourage people living abroad to return to Poland. However, benefitting from the relief is subject to many conditions. Consequently, not every person who will want to become a tax resident in Poland will be able to take advantage of the exemption.
1. New tax exemption
The return relief is set out in new Article 21, point 152, of the Personal Income Tax Act of 26 July 1991 (i.e. Official Journal of 2021, item 1128), hereinafter referred to as the Act. The indicated provision states: The tax exemption concerns the revenue of a taxpayer who has transferred his/her residence to the territory of the Republic of Poland, up to the amount not exceeding PLN 85,528 in a tax year, obtained:
a) from a business relationship, employment relationship, home based work or cooperative employment relationship,
b) from contracts of mandate as referred to in Article 13, point 8,
c) from a non-agricultural economic activity to which the taxation rules determined in Article 27, Article 30c or Article 30ca or the Act on flat-rate income tax in the scope of lump-sum on registered revenue apply
– in four consecutive tax years, counting from the beginning of the year in which the taxpayer transferred this place of residence, or from the beginning of the following year, subject to paragraphs 39, 43 and 44.
2. Who can benefit from the relief?
A taxpayer who wants to take advantage of the return relief must fulfil the conditions specified in Article 21(43) of the Act. It results from this provision that the relief is available if the taxpayer meets the following conditions:
1. as a result of a change of residence in the territory of the Republic of Poland, the taxpayer is subject to unlimited tax liability here,
2. the taxpayer didn’t live in Poland during the period covering:
a. three calendar years immediately preceding the year in which the taxpayer changed his/her place of residence in the territory of the Republic of Poland, and
b. the period from the beginning of the year in which he/she changed his/her place of residence in Poland to the day preceding the day on which he/she changed his/her place of residence in the territory of Poland,
3. the taxpayer:
a. has Polish citizenship, the Pole’s Card or citizenship of an EU Member State other than the Republic of Poland or a country belonging to the EEA or the Swiss Confederation, either
b. had a place of residence:
– continuously for at least the period referred to in point 2, in an EU Member State or a country belonging to the EEA, in the Swiss Confederation, Australia, the Republic of Chile, the State of Israel, Japan, Canada, the United Mexican States, New Zealand, the Republic of Korea, the United Kingdom of Great Britain and Northern Ireland or the USA, either
– in the territory of the Republic of Poland continuously for at least 5 calendar years preceding the period referred to in point 2, and
4. holds a certificate of residence or other proof documenting the place of residence for tax purposes during the period necessary to determine the right to this exemption,
5. hasn’t previously benefited, in whole or in part, from the exemption in question – this condition applies only to taxpayers who will move their place of residence to the territory of the Republic of Poland again.
The above conditions must be fulfilled. The absence of any of them excludes the possibility of taking advantage of the relief.
At this point, it should be pointed out that the requirement to hold, as an alternative to the residence certificate, other proof documenting the place of residence for tax purposes for the period necessary to determine the right to this exemption, raises great controversy. Indeed, it isn’t known what is meant by the term “other proof” and what the tax authorities will consider as sufficient evidence documenting the place of residence. It’s possible that many disputes between taxpayers and tax authorities will arise in this context.
3. Revenue benefitting from the exemption
Revenue from the following sources benefits from the return relief:
a) from a business relationship, employment relationship, home based work or cooperative employment relationship,
b) from contracts of mandate as referred to in Article 13, point 8, of the Act, i.e.: revenue from mandate contracts obtained only from:
– an individual conducting an economic activity, a legal person and its organisational unit and an organisational unit without legal personality,
– the owner (possessor) of the immovable property in which the premises are rented, or the manager or administrator acting on his/her behalf, if the taxpayer performs these services only for the purposes of that property,
– the inherited enterprise
with the exception of revenues obtained on the basis of contracts concluded as part of non-agricultural economic activity conducted by the taxpayer and revenues from business management contracts, management contracts or similar ones, including revenues from such agreements signed as part of the taxpayer’s non-agricultural economic activity;
c) from non-agricultural economic activities which are taxed on the basis of a tax scale (Article 27 of the Act), flat tax (Article 30 of the Act), tax on qualified intellectual property rights (Article 30 ca of the Act) or on the basis of the Act on flat-rate income tax in the scope of lump-sum on registered revenue.
Revenues up to the amount not exceeding PLN 85,528 in a tax year are eligible for the exemption. Revenue exceeding this amount is taxed.
When calculating the amount of revenue subject to tax exemption, revenues subject to flat-rate personal income tax, revenues exempt from income tax, as well as revenues on which tax collection has been abandoned on the basis of the provisions of the Act of 29 August 1997 – The General Tax Code (i.e. OJ 2021, item 1540) won’t be taken into account.
If the taxpayer is simultaneously entitled to the return relief and relief for young people or that one for families with many children or the relief for a person who, after reaching the age of 60 in the case of a woman and 65 years of age in the case of a man, continues to work, the sum of revenues exempt from tax under these reliefs can’t exceed the amount of PLN 85,528 per year (Article 21(44) of the Act).
4. Period of using the relief
The relief is available for a period of four consecutive tax years. This period shall be counted from the beginning of the year in which the taxpayer transferred his/her residence to the territory of the Republic of Poland, or from the beginning of the next tax year. The decision concerning the year from which the relief shall be applied is up the taxpayer. When making a decision, the taxpayer should choose the solution that is more favourable to him/her.
5. One time
The taxpayer can benefit from the return relief only once. This is directly indicated by the wording of Article 21(43)(5) of the Act. According to this provision, the exemption referred to in paragraph 1, point 152, is provided on condition that he/she hasn’t previously used, in whole or in part, this exemption – in the case of taxpayers who will re-transfer their residence to the territory of the Republic of Poland.
6. Statement for the employer
The condition for the application of the exemption in question by the payer when calculating remuneration is the taxpayer’s submission of a statement that he/she fulfils the conditions for the application of the relief. The declaration should be made in writing and indicate the year of commencement and termination of applying the relief by the payer.
The payer should start applying the relief at the latest from the month following that one in which the receipt of the declaration occurred. The relief should be taken into account when calculating the remuneration due to the taxpayer by the date indicated in the statement.
In the event of a change in the facts, the taxpayer should notify the payer. In this case, the payer should cease to apply the relief at the latest from the month following that one in which he/she received the declaration.
7. Legal notice
The study is a work within the meaning of the Act of 4 February 1994 on Copyright and Related Rights (OJ 2006, No. 90, item 631, consolidated text, as amended). Publishing or reproducing this study or its part, quoting opinions, as well as disseminating in any other way the information contained therein without the written consent of Crede sp. z o.o. is prohibited.
