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Polish Order – repatriation of capital

In order to increase the potential and attractiveness of Poland as a place for development of companies within the provisions of the Polish Order, the Capital Repatriation Programme was prepared. It is addressed to experienced employees and entrepreneurs gaining experience abroad and is meant as an incentive to return to Poland.

The Capital Repatriation Programme is addressed to three groups:

– Employees and entrepreneurs who have been working abroad for years;

– Business owners who have set up and run their companies abroad;

– Athletes and artists.

The programme in question consists of five elements:

Return relief

The PIT-0 relief is aimed at taxpayers who have lived and worked abroad for a minimum of three years and reside in Poland after 31 December 2021. The relief covers certain incomes up to PLN 85,528 in the tax year.

The relief covers income:

– Received on the basis of employment contracts, service relationship, contracted work or cooperative employment relationship;

– Obtained under contracts of mandate concluded with an entrepreneur;

– Obtained in connection with business activities taxed in accordance with the tax scale, 19% flat tax, 5% rate (the so-called IP Box relief) and lump sum from registered income.

This income must be earned in four consecutive years.

It should be noted that the return relief will also apply to social insurance. A taxpayer returning to Poland, who has lived abroad for at least 3 years, will be able to benefit from preferences in respect of the payment of social insurance premiums, if he is subject to social insurance in Poland for at least half a year and submits an appropriate application to the Social Insurance Institution.

Lump sum for new investors

It is an incentive for investors to transfer their tax residence to Poland. This solution creates the possibility of not paying more than PLN 200,000 of tax in Poland on income which the returning investor earned outside of Poland. In order to benefit from the lump-sum tax credit for new investors, the taxpayer must invest in Poland PLN 100,000 per year in undertakings of particular social importance, e.g. in innovation, science, culture or sport.

The lump sum for new investors may be used by persons who

– transfer their place of residence (tax residency) to Poland

– were not Polish tax residents for at least 5 out of 6 preceding tax years,

– will carry out investments for the purposes specified in a separate regulation in the amount of min. PLN 100 thousand per year.

This solution guarantees a fixed amount of annual charges, as the tax will not be higher than PLN 200 000 per year and will apply only to foreign income. Additionally, the taxpayer obtains certainty of taxation principles for the entire period selected by him, which is up to 10 years.

Voluntary Disclosure Programme

The programme provides another tool for repatriation of capital to Poland, i.e. the so-called transitional lump sum. The taxpayer has the opportunity to “cut off”, so to speak, from risky tax practices by disclosing them to the tax authorities and making a declaration for taxation with the so-called transitional lump sum on income, revenue or gains not yet declared for taxation in whole or in part in Poland on the basis of the acts subject to amendment. 

It should be remembered that there is only a one-time possibility to take advantage of this programme, and it will only apply to income taxes.

It is also worth bearing in mind what will not be covered by the Voluntary Disclosure programme:

– the effects of offences or fiscal offences;

– VAT matters;

– cases of taxpayers and payers subject, as at the date of filing the application, to tax proceedings, tax audit or customs and fiscal control, the subject of which is undeclared income.

The use of the described flat-rate taxation depends on the submission of an application addressed to the competent head of the tax office; an application which does not meet the requirements will require supplementation, and failure to do so within 14 days is to result in considering that the application has not been submitted.

An entity intending to submit an application may also obtain an opinion from a separate body – the Capital Repatriation Council. Obtaining the Council’s opinion is optional, therefore it does not have any consequences for the procedure of applying for a lump sum payment. However, it is important that the time of waiting for the opinion is to extend the period for applying for the application of the lump sum, which, let us recall, is to last from 1 July 2022 to 31 December 2022.

The payment of the transitional lump sum on the income declared in the application will obviously result in the exemption of this income from personal income tax, flat-rate income tax on certain incomes earned by natural persons and corporate income tax respectively. 

It should also be borne in mind that an entity or perpetrator of a tax offence acting on behalf of an entity which has submitted an application and paid the transitional flat-rate income tax in full on the reported income

– is not subject to punishment for a fiscal offence or fiscal misdemeanour consisting in exposing the State Treasury to a depletion of personal income tax or corporate income tax,

– is exempt from liability for tax not collected or collected in a lower amount and is not subject to a penalty for a tax offence or a tax offence consisting in exposing the State Treasury to a depletion of personal income tax or corporate income tax – if the application was submitted by the payer.

Family Foundations

Following the example of other countries, the legislator decided to introduce to the Polish legal system the institution of a Family Foundation. This solution enables business owners to smoothly pass the business to the next generations. A family foundation will be able to conduct business activity, and its establishment will not entail any negative tax consequences for an entrepreneur. The contribution of property to the Family Foundation will not be taxable. In the case of a dividend payment from the company to the foundation managing it, the tax will be the same as if the payment had been made for the benefit of its founder. In the case of payments from the foundation to its beneficiaries, they will also be treated as if they were personally made by the founder, if they are made to the closest persons, they will not be taxed at all, and if the funds are received by further relatives of the founder, the tax rate will be identical as if it were a donation made by the founder.