Exit tax in Poland: when does tax on unrealised gains arise?

Exit tax in Poland, formally referred to as the tax on unrealised gains, is an issue that most often arises in connection with a change of tax residence, the transfer of assets abroad, a corporate group restructuring, or the liquidation of business activity carried out in Poland through a foreign permanent establishment. Although it is not a tax that most entrepreneurs encounter in day-to-day settlements, it may become highly relevant in restructurings, M&A transactions and changes to an international business model.

The essence of exit tax is the taxation of an increase in the value of certain assets before they are actually sold. Tax on unrealised gains may arise when Poland loses the right to tax income that could be generated in the future from the sale of a given asset.

From a business perspective, this means that a tax obligation may arise not only when assets are sold, but also when they are transferred cross-border, when tax residence changes, or when activity carried out in Poland through a permanent establishment is discontinued. For this reason, exit tax should be analysed particularly carefully in restructuring projects involving assets with significant economic value.

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What is exit tax?

Exit tax is the common term for tax on unrealised gains. Under Polish tax regulations, it functions as a mechanism for taxing situations in which a taxpayer transfers assets or changes tax residence in a way that causes Poland to lose the right to tax income from the future disposal of certain assets.

In practice, this concerns a situation where an asset has increased in value while it was subject to Polish tax jurisdiction, but its later sale could be taxed outside Poland. In such cases, the Polish legislator assumes that the unrealised gain should be recognised and taxed before Poland loses the right to tax that income.

Tax on unrealised gains may apply to both legal persons and individuals. In practice, it may therefore be relevant for companies, entrepreneurs, shareholders, investors, key managers and foreign businesses operating in Poland through a permanent establishment.

However, not every organisational change gives rise to an exit tax obligation. The key issue is whether, as a result of a given action, Poland actually loses the right to tax income from the future sale of the relevant asset.

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When may tax on unrealised gains arise in Poland?

Tax on unrealised gains may arise primarily in cross-border situations. Simply holding high-value assets is not enough to trigger the tax. What matters is an event that changes the tax jurisdiction or moves assets outside the Polish tax system.

Exit tax usually requires analysis in three main areas:

• transfer of assets abroad,
• change of tax residence,
• liquidation or transfer of business activity carried out through a permanent establishment.

Each of these situations may occur as a standalone event or as part of a broader restructuring, M&A transaction or change in the operating model of a corporate group.

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Transfer of assets abroad

One of the most important situations in which exit tax may arise is the transfer of an asset from Poland to another country. This may involve both tangible and intangible assets.

In practice, this may include:

• machinery and equipment,
• production lines,
• trademarks,
• licences,
• intellectual property rights,
• know-how,
• shares,
• financial instruments,
• assets allocated to a permanent establishment.

An example would be a Polish company transferring production machinery to a foreign branch or allocating a trademark, licence or other intangible right to activity carried out outside Poland. If, after such a transfer, Poland can no longer tax income from the future disposal of those assets, an obligation to recognise tax on unrealised gains may arise.

This does not mean, however, that every physical movement of assets abroad automatically triggers exit tax. The tax consequences of the specific operation must be analysed. Relevant factors include whether the asset remains allocated to activity taxed in Poland and whether Poland retains the right to tax future income from its sale.

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Change of tax residence

Another important case is a change of tax residence. This is particularly relevant for individuals holding significant assets and for entities whose tax status changes as a result of moving their place of management or business operations.

For individuals, exit tax may be especially relevant for:

• company shareholders,
• stockholders,
• investors,
• company founders,
• key managers,
• individuals holding significant financial assets,
• individuals participating in incentive schemes based on shares or financial instruments.

An example would be an individual transferring tax residence from Poland to another country while holding shares, stock or other property rights of significant value. If, as a result of the change of residence, Poland loses the right to tax income from the future disposal of those assets, there may be a risk of tax on unrealised gains.

For individuals, the asset value threshold is also important. Tax on unrealised gains may apply if the total market value of assets covered by the relevant provisions exceeds PLN 4 million. The individual’s prior tax residence in Poland for the required period is also relevant.

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Liquidation of a Polish permanent establishment of a foreign business

Exit tax may also be relevant for foreign companies operating in Poland through a permanent establishment. If such an establishment is liquidated and the assets allocated to it are transferred abroad, it is necessary to assess whether Poland loses the right to tax income from their future disposal.

An example would be a foreign company that carried out operational activity in Poland for several years, held fixed assets, inventories, contracts or other assets in Poland, and then decided to close its Polish permanent establishment and transfer the assets to its head office or another country.

In such a situation, it may be necessary to determine:

• which assets were allocated to the activity carried out in Poland,
• what their market value is,
• what their tax value is,
• whether Poland retains the right to tax future income from their sale,
• whether there is an obligation to recognise income from unrealised gains.

For foreign entrepreneurs operating in Poland, this is particularly important when exiting the Polish market, changing the business structure or transferring operational functions to another country.

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Why is exit tax important in corporate restructurings?

Corporate restructurings often involve the transfer of assets, functions, risks or rights between entities located in different countries. In such cases, exit tax may become one of the elements of the tax analysis, even if the main objective of the reorganisation is to improve business efficiency.

Tax on unrealised gains may arise especially when a Polish company or Polish permanent establishment loses assets that have generated, or could generate, income taxable in Poland.

This may apply, for example, when a corporate group:

• centralises intellectual property ownership in one country,
• transfers production functions outside Poland,
• changes its distribution model,
• limits the scope of activity of a Polish company,
• transfers significant assets to a foreign company,
• liquidates a Polish permanent establishment,
• reorganises the supply chain,
• transfers part of its activity to a shared services centre abroad.

In such processes, exit tax should not be analysed only after the reorganisation has been completed. If a potential tax obligation is identified too late, it may affect the profitability of the entire project, the transaction timeline and the way documentation should be prepared.

In practice, the analysis of such consequences should form part of broader reorganisation planning covering taxes, accounting, corporate documentation and the legal effects of the planned changes. In this area, businesses may benefit from getsix® support in tax advisory in Poland, accounting services and the coordination of restructuring processes.

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Exit tax and M&A transactions

Tax on unrealised gains may also be relevant in M&A transactions, especially where the sale, acquisition or merger of companies is followed by a restructuring of assets.

In practice, an M&A transaction often does not end when the share purchase agreement is signed. After acquiring a company, an investor may plan to integrate operations, change the operating model, transfer trademarks, reorganise intellectual property rights, liquidate selected structures or merge companies from different jurisdictions.

This is precisely the stage at which exit tax risk may arise. If, as part of a post-transaction restructuring, assets are transferred from Poland abroad or Poland loses the right to tax future income from their disposal, an analysis of tax on unrealised gains will be required.

Exit tax may therefore affect:

• transaction valuation,
• post-acquisition restructuring costs,
• the legal structure of the transaction,
• project closing timelines,
• tax documentation,
• risks identified during due diligence.

For this reason, in transactions involving Polish companies, assets or permanent establishments, exit tax should be included as one of the control points in the tax analysis. This is particularly important where assets are expected to be transferred outside Poland after the transaction or where the functions performed by the Polish entity are expected to change significantly.

In transactions involving the sale, acquisition or reorganisation of companies, it is important that the tax analysis remains consistent with the business assumptions and transaction documentation. getsix® supports companies in the areas of mergers and acquisitions, legal and tax advisory in Poland, and accounting services in Poland, which may help organise the tax impact of planned changes before they are implemented.

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Which assets may be subject to exit tax?

The scope of assets covered by tax on unrealised gains depends on the type of taxpayer and the nature of the assets. In the case of business activity, the scope may be broad and may include various assets used in the business.

In practice, particular attention should be paid to assets that have significant economic value or may generate future income. This applies to both tangible and intangible assets.

Assets that may require exit tax analysis include, among others:

• fixed assets,
• machinery and equipment,
• real estate connected with business activity,
• trademarks,
• patents,
• licences,
• copyrights,
• know-how,
• customer relationships,
• shares and stock,
• securities,
• financial instruments,
• rights and obligations in a partnership.

The analysis of intangible assets may be especially difficult. Their value is not always directly reflected in accounting records, and in intra-group transactions it may also be necessary to consider transfer pricing and the economic rationale of the reorganisation.

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Exit tax and individuals

For individuals, exit tax is most often associated with a change of tax residence. This does not mean, however, that every move abroad results in an obligation to pay tax on unrealised gains.

In the case of personal assets, the provisions focus primarily on certain capital assets. These may include shares, stock, securities, derivative financial instruments, participation units in investment funds, and rights and obligations in a partnership that is not a legal person.

The value of the assets is also important. For individuals, the relevant threshold is PLN 4 million. Only after this threshold is exceeded should it be analysed in detail whether an exit tax obligation arises.

In practice, the risk may mainly concern individuals who:

• hold significant blocks of shares or stock,
• are founders of high-value companies,
• participate in incentive schemes based on financial instruments,
• plan to change tax residence before selling shares,
• hold significant financial assets,
• perform management or ownership functions in international structures.

For such individuals, a change of tax residence should be preceded by an analysis of whether Poland will lose the right to tax future income from the sale of the assets held.

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How is the tax base determined?

As a rule, the tax base for exit tax is income from unrealised gains. This means the difference between the market value of the asset and its tax value.

In practice, the two most important elements are:

• the market value of the asset,
• the tax value of the asset.

The market value should correspond to the value that could be obtained in a transaction between independent parties. The tax value, in turn, is the value that could be recognised as a tax-deductible cost if the asset were sold for consideration.

For simple assets, such as securities listed on a regulated market, determining the value may be relatively easier. Much more complex cases involve trademarks, licences, know-how, customer relationships, intellectual property rights or assets used within a corporate group.

In such cases, the valuation should be consistent with the economic rationale of the transaction, corporate documentation, accounting records and any transfer pricing documentation.

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Tax rates for tax on unrealised gains

For exit tax, the basic rate is 19% of the tax base. In relation to individuals, Polish regulations also provide for a 3% rate in certain situations where the tax value of the asset is not determined.

However, the tax rate itself is usually not the main practical problem. The key issue is correctly determining whether, in a given case, an event covered by the tax on unrealised gains provisions has actually occurred.

The most common difficulties concern:

• determining whether Poland loses the right to tax future income,
• identifying the assets covered by the analysis,
• determining the market value of the assets,
• determining the tax value,
• linking exit tax with other tax consequences of the restructuring.

For this reason, in cross-border transactions the calculation of the tax is usually only the final stage of the analysis.

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Tax returns and formal obligations

If an obligation to settle tax on unrealised gains arises, the taxpayer should also determine the relevant reporting obligations. Depending on the type of taxpayer, specific forms concerning income from unrealised gains may apply, in particular PIT-NZ or CIT-NZ.

In this context, Personal Income Tax (PIT) applies to individuals, while Corporate Income Tax (CIT) applies to legal persons and certain other taxpayers. The scope of obligations depends on whether the taxpayer is an individual, a legal person, an entrepreneur conducting business activity, or a foreign entity with a permanent establishment in Poland.

In practice, it is necessary to determine:

• when the tax obligation arises,
• which form should be filed,
• the deadline for submitting the tax return,
• the deadline for paying the tax,
• whether payment in instalments is possible,
• which documents support the adopted valuation and calculation.

Due to the specific nature of exit tax, the formal analysis should be carried out in parallel with the business and tax analysis of the planned restructuring.

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Can exit tax be paid in instalments?

In certain situations, Polish regulations allow tax on unrealised gains to be paid in instalments. This is particularly important because exit tax concerns income that has not yet actually been realised through the sale of an asset.

From a business perspective, this creates an important liquidity risk. Tax may arise even though no cash proceeds have been received from a sale. Therefore, when planning a cross-border restructuring, businesses should consider not only the amount of the potential liability, but also the timing of payment and its impact on cash flow.

The possibility of paying the tax in instalments requires certain conditions to be met. In some cases, additional formal requirements or security may also be required. This aspect should therefore be analysed individually, especially in larger restructuring projects.

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Exit tax and transfer pricing

Exit tax is very often linked to transfer pricing. This applies mainly to corporate groups that transfer assets, functions or risks between entities in different countries.

If a Polish company transfers intangible assets, production functions, customer relationships or other profit-generating elements to a foreign entity, it is necessary to assess not only the consequences related to tax on unrealised gains, but also whether intra-group settlements are arm’s length.

Tax authorities may examine whether the Polish entity received appropriate remuneration for transferred assets or lost profit potential. Particular attention is paid to situations where, after the reorganisation, the Polish company performs a less significant role than before, for example where it moves from being a full-fledged manufacturer or distributor to a limited-risk entity.

In such cases, consistency is required between:

• the exit tax analysis,
• transfer pricing documentation,
• asset valuation,
• intra-group agreements,
• the business rationale for the reorganisation,
• the actual course of the transaction.

A lack of such consistency may increase tax risk, even where the reorganisation itself has a valid business rationale.

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Examples of situations where exit tax should be analysed

Transfer of machinery to a foreign branch

A Polish manufacturing company transfers part of its machinery to a branch in another country. The machinery still belongs to the same company, but it is no longer allocated to activity carried out in Poland. If, as a result of this operation, Poland loses the right to tax income from the future sale of the machinery, an obligation to recognise tax on unrealised gains may arise.

Transfer of a trademark or licence

A corporate group decides to centralise intellectual property rights in one country. As part of the reorganisation, a trademark, licence or other intangible right is transferred or allocated to activity carried out outside Poland. Such assets may have significant value, and their valuation requires particular care. In this case, it is necessary to analyse whether Poland loses the right to tax income from their future disposal and to take into account transfer pricing and the business rationale for the reorganisation.

Change of tax residence by a shareholder

An individual holding shares in a company transfers tax residence from Poland to another country. If the value of the assets covered by the regulations exceeds the statutory threshold and Poland loses the right to tax the future disposal of those assets, an exit tax obligation may arise.

Liquidation of a Polish permanent establishment of a foreign business

A foreign company carries out business activity in Poland through a permanent establishment and then decides to terminate the activity and transfer assets to its head office. In such a situation, it is necessary to determine whether the assets previously allocated to the Polish permanent establishment trigger an obligation to recognise income from unrealised gains.

Reorganisation before the sale of a company

A corporate group prepares for the sale of a Polish company and reorganises its asset structure before the transaction. Some rights, licences or functions are transferred to another group entity. Such a reorganisation may have a business justification, but it should also be assessed from the perspective of exit tax, Corporate Income Tax (CIT), transfer pricing and transaction documentation.

Common mistakes in exit tax analysis

The biggest mistake is treating exit tax as a tax that applies only to individuals leaving Poland. In reality, tax on unrealised gains may be highly relevant for companies, corporate groups and foreign entrepreneurs operating in Poland.

The most common mistakes include:

• ignoring exit tax in cross-border restructurings,
• analysing tax consequences only after assets have been transferred,
• overlooking intangible assets,
• failing to value assets,
• failing to document the market value of assets,
• inconsistency between valuation and transfer pricing documentation,
• ignoring the impact of tax on liquidity,
• assuming that no sale means no tax risk,
• overlooking changes in the tax residence of key individuals.

In practice, particular caution is required for assets whose value is not obvious from accounting records. This especially concerns intellectual property, business relationships, know-how and business functions transferred within a group.

Documentation and tax security

Documentation is particularly important for exit tax. The taxpayer should be able to demonstrate which assets were transferred, why the reorganisation took place, what the market value of the assets was, and whether Poland lost the right to tax income from their future disposal.

Documentation may include, among other things:

• a description of the planned reorganisation,
• tax analysis of the consequences of asset transfers,
• asset valuations,
• transfer pricing documentation,
• corporate resolutions and documents,
• intra-group agreements,
• the business rationale for the reorganisation,
• tax residence analysis,
• calculation of potential tax,
• assessment of reporting obligations.

Well-prepared documentation does not automatically eliminate tax risk, but it may significantly improve the taxpayer’s position in the event of a tax audit or dispute with the Polish tax authorities.

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Exit tax as part of a broader tax analysis in restructuring

Exit tax should not be analysed separately from the other tax and legal consequences of a restructuring. In practice, tax on unrealised gains may be only one element of a larger process involving Corporate Income Tax (CIT), Personal Income Tax (PIT), transfer pricing, asset valuation, corporate documentation, accounting treatment and the legal effects of transferring assets.

This is particularly important for corporate groups planning to change their operating model, centralise functions in another country, transfer intellectual property or liquidate activity carried out in Poland through a permanent establishment. In such cases, the business decision may be economically justified, but it still requires an assessment of whether Poland loses the right to tax future income from the sale of specific assets.

From an entrepreneur’s perspective, it is crucial that the effects of exit tax are identified early enough. If the analysis is carried out only after assets have been transferred or after the business structure has changed, the possibilities for reducing tax risk may be significantly more limited. This applies especially to assets that are difficult to value, such as trademarks, licences, know-how, customer relationships or shares in companies.

In restructuring and transaction processes, exit tax should therefore be treated as one of the control points within a broader tax analysis. It will not always lead to a tax payment obligation, but ignoring it may result in an incorrect assessment of restructuring costs, disputes with tax authorities or the need to revise transaction assumptions later.

In this context, services related to tax analysis, legal transaction support, international settlements and accounting support for business reorganisations are particularly important. When planning changes in a group structure, it is worth considering both tax consequences and practical implications for accounting, documentation and reporting.

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How should a company prepare for an exit tax analysis?

Before deciding on a cross-border restructuring, it is worth organising the key information concerning the planned operation. This makes it possible to assess whether tax on unrealised gains may arise at all and what data will be needed for further analysis.

In practice, several steps should be considered.

Identify the planned event

The first step is to determine whether the planned action involves an asset transfer, a change of tax residence, liquidation of a permanent establishment, a change in the operating model or a reorganisation of functions within a corporate group.

Determine which assets should be analysed

Next, it is necessary to identify which assets may fall within the scope of the exit tax provisions. Particular attention should be paid to high-value assets, intangible assets and assets allocated to activity carried out in Poland.

Assess Poland’s right to tax

The key issue is to determine whether, as a result of the planned operation, Poland loses the right to tax income from the future disposal of the assets. This element determines whether tax on unrealised gains may apply.

Value the assets

If there is an exit tax risk, it may be necessary to determine the market value of the assets. For intangible assets, shares or business functions, the valuation should be prepared in a way that can be justified in the event of a tax audit.

Calculate the potential tax

Only after determining the market value and tax value of the assets is it possible to assess the potential tax base and amount of tax.

Assess formal obligations

Finally, it is necessary to determine the relevant tax returns, deadlines, the possibility of paying the tax in instalments and the documents needed to support the adopted position.

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Exit tax in Poland – summary for entrepreneurs

Exit tax in Poland, or tax on unrealised gains, does not apply only to the actual sale of assets. It may arise already at the moment of transferring assets abroad, changing tax residence, liquidating a permanent establishment or reorganising a corporate group, if Poland loses the right to tax income from the future disposal of specific assets.

For entrepreneurs, three issues are particularly important. First, it is necessary to determine whether the planned operation falls within the scope of the exit tax provisions. Second, the assets covered by the analysis and their market and tax values must be properly identified. Third, the tax consequences should be assessed early enough, preferably before corporate decisions are made and transaction documents are signed.

Tax on unrealised gains is particularly relevant in restructurings, M&A transactions, transfers of assets abroad, changes of tax residence and liquidation of activity carried out in Poland through a foreign permanent establishment. In such situations, exit tax should be treated as one element of a broader tax, legal and accounting analysis.

In the case of planned restructurings, M&A transactions, asset transfers abroad or changes to the operating model within a corporate group, exit tax should be included as one of the key control points in the process. getsix® supports entrepreneurs in areas such as tax advisory in Poland, international accounting and reorganisation support, helping assess the tax, organisational and documentation consequences of planned changes.

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