Poland: Government plans new tax and limits on allowances

The Polish government is preparing significant changes to tax regulations, including a new tax rate and limitations on existing allowances, aiming to "seal the system and increase tax fairness."

The Ministry of Finance has drafted amendments that will introduce a 15% tax for individuals who do not employ staff and opt for a lump-sum settlement in services, specifically on income exceeding 100,000 PLN. Currently, the lump-sum tax rate is 8.5%, or 12.5% on amounts over 100,000 PLN. A similar 15% rate will apply to income from rentals exceeding 100,000 PLN to related entities. An even higher 17% rate is planned for rental or lease income from intellectual property to related entities, with an exception for works protected by copyright.

Furthermore, the government plans to restrict the housing allowance. Currently, individuals selling property within five years of purchase can avoid a 19% tax by reinvesting the proceeds into their own housing needs. Under the proposed changes, this allowance will only be available again three years after its previous use. The Ministry aims to curb the use of this exemption for investment purposes.

Additional changes will affect the sale of assets after a lease agreement, such as cars transferred to close family members. Such sales will only be tax-exempt after three years, compared to the current six months. Companies benefiting from the IP Box regime, which allows a 5% tax rate on income from intellectual property rights like inventions or software, will face new conditions. To qualify, businesses will need to employ at least three full-time equivalent staff for at least 300 days a year, or other individuals earning specified amounts.