Proposed Changes to Thermal Modernization Relief to Expand Taxpayer Benefits

In 2022, the average taxpayer utilizing the thermal modernization relief in Poland deducted over PLN 18,600 from their income, resulting in a tax reduction of more than PLN 2,000, according to data from the Ministry of Finance. This relief, which plays a key role alongside subsidy programs in reducing the costs associated with upgrading outdated heating systems, is available to homeowners as part of their annual personal income tax (PIT) filing.

The thermal modernization relief, which came into effect on January 1, 2019, is governed by specific regulations, including a 2018 decree that outlines the eligible construction materials, equipment, and services. The relief is designed for owners and co-owners of single-family homes, including terraced and semi-detached houses, who undertake improvements to reduce the building’s heat demand. However, it does not apply to buildings under construction.

Eligible expenses under this relief include insulation of various parts of the building, replacement of old heating systems with more efficient ones, installation of renewable energy sources like heat pumps and photovoltaic panels, and the replacement of windows, doors, and ventilation systems. The maximum deduction allowed for 2024 is PLN 53,000, and taxpayers can claim it on their PIT-36, PIT-36L, PIT-37, or PIT-28 tax returns by submitting an invoice from a VAT-registered entity within the European Union.

However, recent legislative efforts by the Ministry of Finance aim to broaden the scope of the thermal modernization relief. One significant change addresses the issue of taxpayers being unable to claim the relief when payments are made to a commune that is not a VAT payer and, therefore, cannot issue an invoice. The proposed amendment will allow proof of payment to the commune to serve as the basis for claiming the relief, expanding access to more taxpayers.

In addition to these adjustments, the Ministry of Finance is also working to extend income tax exemptions for non-governmental organizations (NGOs). The proposed changes would exempt income intended for activities defined in the Act on Public Benefit and Volunteer Work, excluding economic activities, which is expected to simplify the tax process for NGOs and reduce administrative conflicts.

Deputy Finance Minister Jarosław Neneman emphasized the importance of these changes, noting that while the financial impact on the government is minimal—estimated at PLN 17 million—the benefits for both taxpayers and NGOs are significant. The proposed amendments are expected to increase the number of beneficiaries and simplify the process of claiming the thermal modernization relief.

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.