Open Pension Funds to be Disposed of

The Polish government announced its plans for a new pension system reform and its intention to entirely do away with Open Pension Funds (OFE). This will be a definite end of the retirement system as we know it.

Several years ago, after the reform of 1999, OFEs were supposed to be the main pillar of the pension system, where millions of Polish workers would deposit a part of their income waiting for old age to come. Today, lawmakers have a different vision of how the system should look like. But what about the funds deposited in the old pension funds or accounts?

The Major Changes in Pension Funds:

In a recent press conference, Prime Minister Mateusz Morawiecki presented how the shift from the old to the new will look like. Open Pension Funds, currently managing approximately 160 billion zlotys, will be closed and the funds will be transferred out. The government wants to give Polish citizens a choice when it comes to what will happen to their money.

The funds will be transferred either to Individual Pension Accounts (IKE), or the so-called third pillar (voluntary retirement savings), or Social Insurance Institution (ZUS), the first pillar. A transfer to IKE will entail a 15% fee. This is justified by the fact that money in Individual Pension Accounts are free from tax on capital gains, unlike funds in ZUS. The Prime Minister assured that the funds will be “100% private and inheritable”.

The lawmakers are currently working on applicable provisions. It is projected that the reform will come into effect at the beginning of 2020. Government experts estimate that majority of future pensioners will decide to move their money to IKEs instead of ZUS. This will give the state budget over 19 billion PLN in the form of the aforementioned “conversion” fee.

What This Means for Businesses in Poland

Tax policy changes in Poland have direct implications for both domestic and foreign-owned businesses. Companies operating in Poland must stay informed about regulatory developments to optimize their tax position and maintain compliance. The Polish tax system includes CIT (19% standard, 9% for small taxpayers), VAT (23% standard rate with reduced rates of 8% and 5%), and various sector-specific levies.

For international entrepreneurs and investors, understanding the Polish tax landscape is essential for business planning. Poland offers several attractive incentives including the Polish Investment Zone (up to 15 years of CIT exemption), R&D tax relief (up to 200% deduction), and the IP Box regime (5% effective CIT rate on qualified intellectual property income). Professional tax advisory can help identify the most beneficial structure for your specific situation.

The interplay between Polish domestic tax law and international tax treaties is particularly important for foreign-owned entities. Transfer pricing regulations, withholding tax provisions, and anti-avoidance rules (GAAR) require careful navigation to ensure both compliance and optimization.

If you are doing business in Poland or considering entering the Polish market, Zalewski Consulting can help. Learn more about our tax advisory services in Poland, or contact us for a free consultation.