Starting this year, exit tax applies in Poland under the obligations imposed on Poland by the EU directive to those who move their business together with their assets outside the country. In theory, this is one of the tools that is intended to keep entrepreneurs in Poland and prevent tax optimization and moving business activity to another country due to a more favourable law or a friendly tax system. In practice, the exit tax in its Polish version is called a legal dud by the economic media and it is fairly easy to avoid it.

The idea of introducing exit tax was very simple and was initiated by an EU directive, although the Polish authorities had considerable freedom in shaping the rules of collecting the tax and were not required to impose it on ordinary citizens, i.e. PIT payers. Exit taxation is intended to stop entrepreneurs from moving their companies to other countries and compensate for lost tax profits in the country where the business is actually conducted. The actions of the Polish government are supposed to force business owners to stay in the country and refrain from attempting to optimize mostly in terms of income tax. It is worth remembering, however, that exit tax does not apply in every case and de facto is not an obstacle for entrepreneurs who decide to develop their company in the UK. This is because the principle of the European single market and the freedom to conduct business activity still apply.

Who is subject to the tax?

The Act sets out two exit tax rates – 19 percent and 3 percent. The first rate applies to those assets whose value has been determined. The second one applies to those assets whose value is not determined in the case of flat-rate taxation.

Pursuant to Polish law, exit tax applies to those who own a company abroad and transfer part of their assets thereto which was previously related to business conducted in the territory of the Republic of Poland, as well as entrepreneurs not being Polish tax residents who change their tax residency to a domestic or another one in relation to revenues generated in the territory of Poland and entrepreneurs whose assets transferred abroad exceed the amount of PLN 4 mil.

The above list is open, so it can be expected that the officials will indicate additional circumstances under which they can impose exit tax, although in theory it is fairly easy to identify entities eligible for taxation. Simply put, exit tax is intended to deal with entrepreneurs who not only change their tax residence, but also decide to transfer their assets.

Exit tax base

The tax base is the sum of income from unrealized profit for individual assets, whereas the income is the excess of the market value of the asset determined as of the date of its transfer or the date preceding the date of changing the tax residency above its tax value. The new regulations introduce both the definition of market value and tax value.
 
The market value of items or property rights is determined on the basis of market prices used in the trading of items or rights of the same type and grade, taking into account in particular their condition and degree of consumption as well as time and place of disposal for consideration.

On the other hand, the tax value of an asset is the value not previously included in tax deductible costs in any form that would be assumed by the taxpayer as tax deductible if such asset had been disposed of by the taxpayer for consideration. The tax value of an asset is not determined in the case when, pursuant to separate provisions, tax deductible costs from the disposal of such asset for consideration are not taken into account for the purposes of income tax.

How to avoid exit tax?

Exit tax may make it difficult to move the business to large corporations with numerous relationships, but not to small and medium-sized enterprises, which by nature react more dynamically to adverse trends.

There are several options for moving a company to the UK without being subject to exit tax. First of all: total closure of the business in Poland and opening of the company in the UK. A parallel company dedicated to a market other than the Polish market is a neutral solution. It is also possible to purchase a company operating in the UK. The purchase of a company with history is a practice also used on the Polish market. Another solution is to establish an offshore company, i.e. a tax structure consisting of a new or existing British limited company and a civil law partnership in a tax-friendly country outside of the UK.

In practice, at Admiral Tax, in the case of service companies operating in the B2B sector, we hardly ever come across any doubts regarding exit tax. It is also worth noting that pursuant to the judgments of the Court of Justice of the European Union and the following representation of the Polish Ministry of Finance, with respect to PIT, the tax will be deferred until the disposal of assets or the realization of profits, not their transfer abroad.

Obligatory bank account in Poland for a British company

When it comes to exit tax, there are also questions about the obligatory Polish bank accounts for foreign companies in Poland. Starting from November 1, all companies that are registered outside of Poland and have been registered for VAT in Poland are required to have accounts with Polish banks. This is the result of the entry into force of the amendment on the so-called split payment. It is worth noting, however, that the obligation to register for VAT in Poland applies only to those entities which conduct sales to consumers. Companies operating in the enterprise sector are still exempt from these obligations, and it is companies from the B2B sector that most often move their business from Poland to the UK.

Agnieszka Moryc, CEO Admiral Tax

British citizens are invited for series of meetings which will provide information about UK nationals rights in Poland after Brexit. Meetings are free and open, but registration is obligatory (ID will be requested on the door).

The main organizers of the events are: British Embassy Warsaw and Polish Office for Foreigners. On the meetings participants will be updated on the rights of British people living and working in Poland. Everyone will have an opportunity to ask questions.

Upcoming events

Krakow, 30 September 2019 – Register here

Katowice, 1 October 2019 – Register here

Wroclaw, 7 October 2019 – Register here

Poznan, 8 October 2019 – Register here

Lodz – coming soon

Previous events

Krakow, 21 March 2019

Gdansk, 14 March 2019

Warsaw, 13 March 2019

Lithuanians in the UK cheated by banks

If you pay or paid a monthly fee for your bank account, you may be able to reclaim all the fees paid for years. Banks mis-sold paid bank accounts specially to migrants, with Lithuanians, Poles and other A8 migrants being targeted the most. According to financial experts, over 20 million bank accounts were mis-sold.  

Some bank’s customer claim as much as £3,000 per bank account. The longer you paid for your bank account, the more money you get.  It’s worth to claim the money back as it does not impact the relationship with bank.

Packaged Bank Accounts Explained

Packaged Bank Accounts are bank accounts with added benefits (like travel insurance, mobile phone insurance, car breakdown cover, discounts or vouchers for many products or services).  You get those benefits for a fixed monthly fee. It means that every month bank takes from your account the same amount of money, even though you do not use any of the benefit added. Packaged Bank Accounts were widely sold, specially to migrants, like Lithuanians, who were less aware of UK banking rules and were easy target.

CLAIM NOW>>

Why can I claim bank fees back?

For many people, the benefits were irrelevant, offered poor value for money or the benefits would never have been payable (for example you were self-employed, while benefit was only for employed people or you have car breakdown cover, but you didn’t own a car).

Some customers were told that they have to take a packaged account to obtain an overdraft, mortgage or loan (which is against a law) or were never told that bank offered free accounts, which is a case for many Lithuanians.

Many customers had never used any of the benefits included in their packaged bank account. It means they paid £10-35 a month for many years for nothing. They can now get a refund of all this money.

Which banks sold Packaged Bank Accounts?

Packaged bank accounts can cost between £6.50 and £40 a month and are offered by all UK banks. Name of accounts are were “Account Plus”, “Premier Account”, “Gold Account”, “Privileged Account”, “Silver”,  “Reward Account” and other.

• Lloyds

• Co-Operative

• First Direct

• Barclays

• Halifax

• HSBC

• Santander

• Natwest

• Bank of Scotland

• Clydesdale Bank

It there a deadline to claim bank fees?

You can claim up to 6 years back so it is worth claiming as soon as possible.

CLAIM NOW>>