Return relief - key information

Who can benefit from a return relief?

The return relief is available to individuals who settle in Poland after 31 December 2021. Under Article 21(1) para. 152 of the Personal Income Tax Act of 26 July 1991 (hereinafter: the PIT Act), the income of a taxpayer who has moved his place of residence to the territory of the Republic of Poland is free from income tax. This means that this relief covers income earned by such a taxpayer while he/she is already in Poland. The aforementioned provision regulates the tax-free amount, which amounts to PLN 85,528 in a tax year. Once this threshold is exceeded, the relief does not apply and the income is subject to taxation according to the general rules.

What is important is that the relief is available if income has been generated, for example:

• from the employment relationship,
• from mandate and specific task contracts,
• from non-agricultural business activity, to which the taxation rules set out in Article 27 of the PIT Act (tax scale), Article 30c of the PIT Act (flat tax), as well as in Article 30ca (tax on qualified income from qualified intellectual property rights) or the Act on lump-sum income tax on registered income apply, and in accordance with the most recent amendment of June this year also
• from the maternity allowance referred to in the Act of 25 June 1999 on cash benefits from social insurance for sickness and maternity.

in four consecutive tax years, starting from the beginning of the year in which the taxpayer moved his/her residence to Poland or from the beginning of the following year.

As a result, the individual entitled to this relief will be able to benefit from it for up to four years. At the same time, the allowance is only available once. Therefore, if during the 4-year period of the relief, the taxpayer changes his/her place of residence again, he/she will not be able to benefit from the relief once again after returning to Poland.

Terms and conditions for the return relief

A taxpayer who wishes to benefit from the return relief must fulfil a total of five conditions set out in Article 21(43) of the PIT Act.

1. The first of them refers to unlimited tax liability to which a taxpayer is subject as a result of moving his/her place of residence to the territory of the Republic of Poland, i.e. tax liability on all his/her income (revenues) regardless of the location of its sources. It should be borne in mind that, pursuant to the text of Art. 3(1a) of the PIT Act, a person is considered to have a place of residence in the territory of the Republic of Poland if:

• has a centre of personal or economic interest (centre of main interests) within the territory of the Republic of Poland, or
• stays within the territory of the Republic of Poland for more than 183 days in a tax year.

2. The second condition is that a taxpayer has no residence within the territory of the Republic of Poland during the period covering:

• three calendar years immediately preceding the year in which he/she changed his/her place of residence within the territory of the Republic of Poland, and
• the time period starting from the beginning of the year in which he/she changed his/her residence within the territory of the Republic of Poland until the day preceding the day on which he/she changed his/her residence within the territory of the Republic of Poland.

3. A taxpayer must have Polish citizenship, a Pole's Card or citizenship of a European Union member state or a member state of the European Economic Area or the Swiss Confederation other than Poland. The taxpayer may also fulfil this condition if he/she was domiciled:

• for a continuous period of at least 3 calendar years in an EU or EEA Member State, 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 United States of America, or
• within the territory of the Republic of Poland for a continuous period of at least 5 calendar years preceding the three-year period (when he/she was not domiciled in the Republic of Poland).
• In order to benefit from the return relief, a taxpayer must hold a tax residence certificate or other proof documenting tax residence for the period necessary to establish entitlement to this relief.
• The fifth and final condition will be met if a taxpayer has not previously benefited, in whole or in part, from this relief - this is for taxpayers who relocate again to the territory of the Republic of Poland.

Attractive tax preference for foreigners

The return relief may also be an attractive tax preference for foreigners who have come to Poland for the first time. For example, an EU resident who comes to Poland as part of a one-year posting for work and declares that he/she will be a tax resident in Poland and fulfils the above-mentioned conditions may benefit from the return relief, although de facto he/she does not return to the country and, moreover, does not intend to stay in Poland for a longer period.

This opportunity for foreigners temporarily posted to work in Poland to benefit from the return relief has been confirmed by the National Tax Information.