Individual - Foreign tax relief and tax treaties

Last reviewed - 05 March 2024

Foreign tax relief

When a Polish resident earns income in a foreign country that has not concluded a DTT with Poland, double taxation is avoided based on the credit method. The Polish resident is liable for income tax imposed on its worldwide income, but this tax is proportionately reduced by the income tax paid abroad. Numerous DTTs provide for the same credit method. However, some of them provide for the exemption method (i.e. foreign income covered by such a treaty is exempted from taxation in Poland).

Tax abolition relief

The tax abolition relief was introduced to the Polish tax law in 2008 as a method of equalising the tax situation of people working in different countries and applying various methods of avoiding double taxation.

It uses a complex deduction system, which effectively allows Polish tax residents to use the exemption method for all their foreign incomes even if the applicable DTT states that the credit method should be used. However, this relief is not applicable to income earned in tax havens.

As of 2021, the application of the relief is limited to an amount not exceeding PLN 1,360, which means that only the non-Polish income up to PLN 8,000 will be exempted from the Polish taxation. This limitation does not apply to people who work offshore (i.e. seafarers).

Limitation of the tax abolition relief vs the Multilateral Instrument to Modify Bilateral Tax Treaties (MLI)

Poland has ratified the MLI, under which the method of avoiding double taxation is changed to the tax credit method in many DTTs that Poland has concluded with other countries. Hence, the tax abolition relief could have a broader use than before the ratification of the MLI.

It is advisable to check which countries have ratified the MLI Convention changing the method of avoiding double taxation.

Tax treaties

Countries with which Poland currently has a DTT:

Albania France Luxembourg Slovenia
Algeria * Georgia Macedonia South Africa
Armenia Germany Malaysia South Korea
Australia Greece Malta Spain
Austria Guernsey Mexico Sri Lanka
Azerbaijan Hungary Moldavia Sweden
Bangladesh Iceland Mongolia Switzerland
Belarus India Montenegro Syria
Belgium Indonesia Morocco Taiwan
Bosnia Herzegovina Iran Netherlands Tajikistan
Brazil Ireland New Zealand Thailand
Bulgaria Isle of Man Nigeria * Tunisia
Canada Israel Norway Turkey
Chile Italy Pakistan Ukraine
China Japan Philippines United Arab Emirates
Croatia Jersey Portugal United Kingdom
Cyprus Jordan Qatar United States
Czech Republic Kazakhstan Romania Uruguay *
Denmark Kuwait Russia Uzbekistan
Egypt Kyrgyzstan Saudi Arabia Vietnam
Estonia Latvia Serbia Yugoslavia
Ethiopia Lebanon Singapore Zambia *
Finland Lithuania Slovakia Zimbabwe

* Signed but not entered into force.