Lump-Sum Tax for New Polish Residents

What is the Lump-Sum Tax?

Since 2022, in order to attract high-net-worth individuals and stimulate investment in the country’s economy, Poland has introduced a special regime for one-off taxation of foreign income for individuals relocating to Poland for permanent residence (hereinafter – “Lump-Sum Tax”).

The Lump-Sum Tax is an alternative form of taxation of foreign income, similar to regimes in Greece or Italy. It allows individuals not to declare foreign income and instead pay a fixed amount of tax regardless of the income level.

Conditions for Applying the Lump-Sum Tax

To apply the special tax regime, an individual must cumulatively meet the following conditions:

• Not to have been considered a Polish tax resident for at least 5 out of 6 years immediately preceding the year in which they moved to Poland and became its tax resident.

  Note: A Polish tax resident is an individual who (i) has their centre of personal or economic interests in Poland, or (ii) stays in Poland for more than 183 days in a tax year.

• Submit a declaration to the tax authorities electing the Lump-Sum Tax no later than the end of January of the year following the year in which the individual became a Polish tax resident.

 Application of the Special Tax Regime

• The Lump-Sum Tax applies only to income derived outside Poland. Income sourced from within Poland remains subject to the general income tax rules.|

  Note: Polish-sourced income includes remuneration for work performed in Poland, even if paid by a foreign company.

• The Lump-Sum Tax is payable as a fixed amount per tax period – PLN 200,000 (approx. USD 50,000).
• In addition to paying the tax, the individual must annually (starting from the year following relocation) invest at least PLN 100,000 in socially significant areas, such as economic growth, science and education, cultural heritage protection, and promotion of physical culture. The list of eligible investment objects is determined by the Polish Ministry of Finance.

 Key Features of the Regime

• The regime may be applied for 10 consecutive years.

  Note: If Polish tax residency is lost, re-application of the regime is possible only if all conditions are met again, including the requirement of non-residency in Poland for 5 out of the last 6 years prior to the new relocation.

• The individual may voluntarily opt out of the Lump-Sum Tax at any time.
• Family members of the main applicant can apply the same regime, but the annual Lump-Sum Tax for them is PLN 100,000, and they are not required to make the annual PLN 100,000 investment.
• Foreign income does not need to be reported in a tax return, but the taxpayer must retain documents evidencing the source and amount of such income.
• The Lump-Sum Tax does not apply to foreign income subject to the Controlled Foreign Companies (CFC) rules.

Author: Yaroslavna Zadesenskaya

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