Limitation of the abolition relief

On 1 January 2021 the changes to the Polish personal income tax regulations entered into force, which limit the amount of the so called “abolition relief” to the sum of PLN 1360 (around €300).

Limitation of the maximal amount of the abolition relief will entail the increase of tax burden of Polish tax residents who earn income higher than PLN 8000 (around €1800) in countries, with which Poland concluded international treaties providing for the avoidance of double taxation with the use of the tax credit method. These countries are e.g. the Netherlands, Belgium, Ireland, the UK, Norway, Denmark, Austria, Russia, the US, Finland, Israel, Japan, Lithuania, Slovakia, Slovenia.

The abolition relief consists in exemption of a Polish taxpayer who earn income in a foreign country from the obligation to pay the difference between tax paid abroad and tax due in Poland, when the Polish tax is higher than the foreign tax. In consequence, limitation of the abolition relief up to the amount of PLN 1360 (around €300) per year will result in arising the tax liability for the Polish taxpayer, in the amount equal to the difference between tax due in Poland and tax paid in another country, if such difference is higher than the said amount.

As a result, we recommend analysing tax residence of Poles who earn income in the respective countries, in order to determine the scope of their potential tax obligations in Poland and assess the consequences of the described changes for their tax settlements.

If it is determined that a given person is a Polish tax resident despite earning income in another country, we offer our help in the calculation of the tax liability due in Poland and in filing a tax return.

Please note that Polish tax residents are natural persons who stay in the territory of Poland for more than 183 days in a tax year or who have in Poland so called “center of vital interests” (family, home, other assets), even if they stay in another country for more than 183 days in a tax year.