Poland Anticipates Lower Tax Refunds This Year Following Record-Breaking Returns in 2023

In 2023, Polish taxpayers celebrated a windfall as tax authorities disbursed a historic PLN 27 billion in refunds for Personal Income Tax (PIT) overpayments. However, this year is poised for a different trajectory, with expectations of reduced returns.

Marcin Łoboda, the head of Poland’s National Tax Administration (KAS), forecasts a decline in tax refunds for 2024 compared to the remarkable figures of the previous year. Łoboda attributed the exceptional refunds in 2023 to the effects of the “Polish Order,” a fiscal policy initiative that lowered the PIT rate from 17% to 12%. This reduction led to significant overpayments in the first half of 2022, resulting in substantial refunds when taxpayers filed their annual returns.

The PLN 27 billion refunded in 2023 was distributed among 15.7 million taxpayers, averaging about PLN 1,715 per person. This surge in refunds was directly linked to the reduction in tax rates, which prompted higher advance payments throughout the year.

Łoboda emphasized that this year’s refunds are anticipated to be notably lower due to fewer overpayments resulting from reduced advance payments. Additionally, the number of refund declarations is expected to decrease.

Tax refunds are granted to individuals who have made excess payments in advance during the previous tax year. Even those with lower incomes may benefit from refunds, albeit to a lesser extent. Łoboda clarified that these refunds are not government handouts but rather the return of overpaid taxes or adjustments based on certain relief measures or family circumstances.

The decrease in anticipated refunds underscores a shift in Poland’s tax landscape following the implementation of the Polish Order. While last year saw taxpayers receiving substantial returns, this year’s tax season is poised to reflect a more conservative fiscal environment. Detailed data on the average refund amount for 2024 will be disclosed in the coming months, shedding further light on the evolving tax refund dynamics in Poland.

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.