Lump-sum tax for new residents in Poland and CFC rules — practical implications for holding structures
- Introduction – What is the Lump-Sum Tax Regime in Poland?
- Key Conditions for Applying the Lump-Sum Tax
- Main Features of the Regime
- The CFC Exception — Why It Matters
- Practical Scenario: Cyprus Holding Structure
- Recommendations – How to Structure Properly
- Final Thoughts
- Contact our lawyer for more details
Introduction – What is the Lump-Sum Tax Regime in Poland?
Since 2022, Poland offers a lump-sum tax regime (Polish: „ryczałt od dochodów zagranicznych”) aimed at attracting wealthy individuals who relocate their tax residency to Poland. Inspired by similar schemes in Italy, Greece, or Portugal, the Polish model allows qualifying individuals to pay a fixed tax amount on foreign income, instead of being taxed under standard progressive PIT rules.
The core idea: no declaration, no tax accounting for foreign income, in exchange for paying a fixed PLN 200,000 per year (approx. USD 50,000), regardless of actual income earned abroad.
Key Conditions for Applying the Lump-Sum Tax
To qualify, an individual must meet all of the following criteria:
- Tax residency – they must become a Polish tax resident (i.e., spending >183 days in Poland or having their centre of vital interests there);
- Non-residency track record – they must not have been a tax resident of Poland for at least 5 of the last 6 years;
- Formal application – they must submit a declaration to apply the regime by the end of January of the year following their move to Poland.
Main Features of the Regime
- Applies only to foreign-source income i.e. Polish-sourced income (e.g., employment in Poland, rental from Polish real estate) is taxed under normal PIT rules;
- Fixed tax amount – PLN 200,000 per year, irrespective of income volume;
- Investment obligation – at least PLN 100,000 per year must be invested in approved Polish public interest projects (culture, science, sport, etc.);
- Applies for up to 10 years;
- No reporting obligation for foreign income (though documentation must be retained);
- Family members can join the regime at PLN 100,000 per year each, without the investment obligation.
An important caveat is that income taxed under the Controlled Foreign Corporation (CFC) rules is explicitly excluded from the lump-sum regime.
It is worth noting that an individual who relocates their tax residency to Poland and opts for the lump-sum regime may still be subject to tax obligations in another country. This can occur in relation to certain types of income which, under double taxation treaties, are always taxable in the source country — for example, income derived from the rental of real estate.
The CFC Exception — Why It Matters
This is the most important restriction for those considering foreign holding structures.
Although the lump-sum regime allows foreign income to be excluded from standard PIT taxation, it does not cover income taxed under Poland’s CFC rules.
What does that mean in practice? If you set up a foreign company (e.g. in Cyprus) to hold securities, earn dividends, or carry out other investment activity, and then pay yourself a dividend — Poland may still tax this income under CFC rules, regardless of the lump-sum regime.
Practical Scenario: Cyprus Holding Structure
Let’s apply this to a real example structure
- Polish lump-sum taxpayer sets up a Cyprus Ltd company;
- Company buys and holds securities, performs investment operations, earns profit;
- Profits remain in Cyprus, and eventually are distributed to the individual in Poland as dividends.
Questions
- • Can the income remain untaxed in Poland due to the lump-sum tax?
- • Or will CFC rules override the lump-sum protection?
Answer
CFC rules should apply, and the Polish tax authorities may treat the Cyprus company as a controlled foreign company and this means:
- Profits of the Cyprus company may be taxed directly in Poland, even before distribution;
- The lump-sum tax regime will not apply to this income;
- Dividends may also be taxed in Poland separately if not already covered by CFC taxation.
Recommendations – How to Structure Properly
The Polish lump-sum regime offers substantial simplification in the taxation of foreign income, yet it does not amount to a complete exemption from Polish tax obligations. High-net-worth individuals considering relocation to Poland — particularly those using complex, cross-border asset-holding structures — should carefully assess the following factors before committing to this regime:
- What types of income are generated (active vs passive)?
- Where is the entity located (low-tax jurisdiction)?
- Does the structure qualify as a CFC?
- Is there operational substance abroad (employees, office, risk-bearing functions)?
Substance is key under the lump-sum regime — purely passive “letterbox” companies are more likely to trigger CFC scrutiny. Structures with genuine economic activity in reputable jurisdictions stand on stronger ground. While active business models, such as consulting firms or product companies, may still fall within the benefits of the regime, asset-holding or investment vehicles require careful review against Polish CFC criteria. In practice, it may be prudent to separate income streams into three categories: (i) Polish-sourced income, which remains subject to regular Polish taxation; (ii) non-CFC foreign income, eligible for lump-sum treatment; and (iii) CFC-type income, which can result in additional Polish tax obligations despite the regime.
Final Thoughts
The Polish lump-sum regime, when combined with careful CFC analysis, opens the door to sophisticated cross-border wealth and business structuring for new residents.
The key lies in aligning asset-holding arrangements, operational substance, and jurisdictional choices to ensure that foreign income genuinely qualifies for lump-sum treatment. With proper planning, it is possible to create a tailored tax strategy that balances compliance with efficiency — transforming the regime into a structured product for high-net-worth individuals relocating to Poland.
Author: Aleksander Skirpan
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