Polski Ład introduces a new tax relief called „Ulga na powrót” (Relief to come back). This is a tax relief intended for those returning from abroad. But also for some of the Expats who just moved in to Poland. Its main purpose is to encourage Poles living abroad to return to Poland. However only selected taxpayers will be able to use this solution. Before I start with describing new subject, I would like to remind, that the topic of Polski Ład was touched on my blog few times already. Hence, I recommend to visit one of the previous articles in order to get more details about it. Here are the links to mentioned posts:
So, coming back to the main plot. Who can count on the Relief to come back and what will be its purpose? Let’s have a look at a detail. Enjoy your reading.
How does the Relief to come back work?
After making the decision to return or move to Poland and transfer your tax residence here, there is a chance to take advantage of this tax relief. For example, if you as the taxpayer change your tax residence in 2021, then you will be able to apply the deduction when settling the tax:
- for the year 2022, 2023, 2024, 2025, if its base year is the year of the change of residence, i.e. 2021
- or for the years 2023, 2024, 2025 and 2026, if its base year is the year following the year of the change of residence, i.e. 2022.
In case of this tax relief, it will not matter whether the taxpayer submits annual PIT alone or together with his spouse. You can submit the deduction in both cases.
But, how much is it?
I will start with a quote from official podatki.gov.pl
“The amount of the deduction will depend on the amount of tax due for the tax year in which the tax residence was changed or tax due for the next tax year (following the year of change of residence). The regulations will allow the taxpayer to choose this year, known as the “base year”, so that he can choose the best solution for himself.
The amount of the deduction in the first year will be 50% of the tax due for the base year chosen by the taxpayer. In the second year, it will be 50% of the tax due for the first year of application of the deduction, i.e. 50% of the tax amount after deducting the “return credit” in the first year.”Source: podatki.gov
So to speak…
…there is no easy way to give you simple answer. However, taking into the consideration statement above, you should be able to get 50% of you income tax back during the first year of using this relief. Base for every single next year, will be reduced by the amount of relief which you have had a previous year. Let’s work with an example.
You paid 24 000 zł of income tax in 2022. You are eligible to get 50% back of it. Which means, that in 2023, you can retrieve 12 000 zł during annual PIT submission. However during PIT submission in 2024, you will be able to use this discount for 12 000 only, which means that 50% tax relief in 2024 equals 6 000 zł and in 2025, only 3 000 zł.
I need to mention here, that this process keep changing and evolving. To put it bluntly, I do not guarantee, that this is the final form of it. Just have a look on official podatki.gov.pl side in order t track changes.
Tax-free income – what source?
As mentioned before, a person transferring residence to Poland and, moreover, meeting the additional criteria, has a chance that their income will be reimbursed for the tax return. The tax relief will be used for a person who’s income is meeting one of the conditions below:
- income from a business relationship, employment relationship (full time job), homework, cooperative employment relationship;
- revenues from contracts of mandate;
- income from non-agricultural business activity (taxed according to the scale, flat tax or lump sum).
The taxpayer will be entitled to this tax relief for four consecutive years in a row. It is you, who has the right to decide from when you want to take advantage of the tax relief. You can choose that it will be the same year or choose each subsequent year. However, you can apply the relief only once. Which means that if the taxpayer left again and returned to Poland after three years, and had previously used the relief, then it would not be possible to submit it for a second time.
The exemption may apply to several sources of income. For example, if you the taxpayer who runs a business and at the same time obtain income from an employment contract or mandate, then all these income may be covered by the relief.
Relief criteria for the return
First of all, the main criterion will be that the taxpayer should not have had a place of residence in Poland for at least three years before returning or settling in Poland. Initially, the return relief supposed to be dedicated not only to Poles, but also to all foreigners. However, the provisions in the act have changed in order to dispel all doubts. So, in the present form politicians assume that the relief will be available to a person who:
- has Polish citizenship, a Pole’s Card or citizenship of a European Union Member State other than the Republic of Poland. But also country belonging to the European Economic Area or the Swiss Confederation
- or has been domiciled for at least three years continuously in a Member State of the European Union or in a country belonging to the European Economic Area, 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 Great Britain and Northern Ireland or the United States of America
- or resided in Poland for five years before the three-year break preceding the year of return and holds a certificate of residence or other proof of residence for tax purposes in the period necessary to establish the right to this exemption.
Therefore, in the case of taxpayers who will transfer their place of residence again to the territory of the Republic of Poland, it will not be possible to use the tax relief again.
Summary of Relief to come back
I hope that I clarified the subject of “Relief to come back” from Polski Ład. However once again, I need to remind, that these things keep changing. This gives me an impression, that these regulations were not properly prepared and now are being introduced at the last minute. I sincerely hope that politicians are implementing changes for the public good and that we, as “ordinary citizens”, will also benefit from this.
Special thanks to Eamon Gosney, who has helped with proofreading of this article.
https://www.podatki.gov.pl/polski-lad/pakiet-dla-biznesu-polski-lad/repatriacja-kapitalu-polski-lad/ulga-na-powrot-polski-lad/; https://www.e-pity.pl; https://poradnikprzedsiebiorcy.pl/Source