From January 1, 2019 a tax on unrealized gains, colloquially called “exit tax” was introduced into the Polish legal order.

Taxpayers of the exit tax

Taxpayers of corporate income tax and taxpayers of personal income tax are both subject to taxation, both running the business activity and running no such activity.

Subject of taxation

The taxation covers two categories of events:

1. transfer of an asset related to a business activity conducted on the territory of Poland outside its territory without disposing of its property (with exceptions, e.g., in the case of a temporary transfer),
2. change of tax residence by a taxpayer who hitherto had an unlimited tax liability in Poland,

if as a result of these events, Poland, in whole or in part, loses the right to tax income from the sale of an asset belonging to the taxpayer.

In the case of natural persons changing a tax residence, the taxpayer’s personal property will be taxed at exit tax if he has had residence in Poland for tax purposes for a total of at least 5 years in the ten-year period preceding the change of the tax residence, and only the following assets not connected with the business activity will be subject to taxation: all rights and obligations in a company that is not a legal person, company shares, shares and other securities, derivative financial instruments and participation units in capital funds.

In case of transfer of assets by a natural person, the tax on unrealized gains is payable if the market value of the transferred assets exceeds the amount of PLN 4 million.

Tax base

The basis for taxation on the income from unrealized gains is the sum of income from unrealized gains established for individual assets. This income is determined as the surplus of the market value of the asset determined as of the date of its transfer or the day preceding the change of tax residence, over its tax value.

Tax rates

The basic rate of exit tax is 19% of the tax base or in the specific case of natural persons - 3% of that base.

Tax deductions, installments and tax refunds

There is the possibility of a proportional deduction from the tax on unrealized gains of a tax amount equal to the equivalent tax paid in a foreign country.

In case of transfer of assets or transfer of a tax residence in the territory of a Member State of the European Union or another EEA State, it is possible to spread the payment of the tax into installments, for a period not longer than 5 years.

In case of natural persons, it is also possible to apply for a refund of the tax paid if within 5 years the asset was transferred back to the territory of Poland or the taxpayer again became a person with unlimited tax liability in Poland.

Deadlines

Taxpayers are obliged to submit tax declarations, according to a template, on the amount of unrealized gains and pay the tax due:

1. taxpayers of the corporate income tax - by the 7th day of the month following the month in which income from unrealized gains arose,
2. taxpayers of personal income tax - by the 7th day of the month following the month in which the total market value of the transferred assets exceeded the amount of PLN 4 million; if after the month in which the total market value of the transferred assets exceeded the abovementioned amount, subsequent assets are transferred, taxpayers are required to submit a declaration by the 7th day of the month following the month in which the assets are transferred.

Taxpayers are also required to pay the tax due on these dates.

By virtue of the Regulation of January 31, 2019 (Journal of Laws, item 197) deadlines for submission by taxpayers of the declarations on the amount of income from unrealized gains and payment of the due tax shown in those declarations, for months from January until May 2019 were extended until July 7, 2019.

Note

For taxpayers of personal income tax, the deadline for payment of tax due on income from unrealized gains has been extended again. Based on Regulation of June 27, 2019 (Journal of Laws, item 1204), it was extended:

1. until the 7th day of the month following the month in which the taxpayer lost the entire or part of the asset that is the subject of this tax - if the entire or part of that asset was lost before December 1, 2021,
2. until December 31, 2021 - in other cases.

The extension of the deadline applies to the tax due on income from unrealized gains arising from the monthly declarations submitted for the settlement periods from January 1, 2019 to November 30, 2021.

According to the Regulation the term “loss of an asset” shall mean: the sale of an asset, the exercise of rights arising from derivative rights or derivative financial instruments or another event resulting in the loss of ownership or the right to an asset.