The exit tax provisions provide for taxation of unrealised profits in connection with the transfer of assets (including assets forming part of a foreign permanent establishment) by the taxpayer to another country or in connection with a change of tax residence, as a result of which Poland loses the right to tax income from the sale of an asset owned by that taxpayer. Cryptoassets, as an extremely mobile class of assets usually held by the mobile holders, have the potential to constitute assets subject to exit tax.
What is exit tax?
The exit tax has been in force in Poland since 2019 as a result of the implementation of the so-called ‘ATAD Directive’. Its purpose was to counter tax avoidance practices that directly affect the operation of the EU internal market.
Exit tax covers both natural persons and legal entities, thus analogous provisions can be found in both the PIT Act and the CIT Act. In the case of natural persons, the tax obligation arises when the total value of assets is at least PLN 4,000,000 (the same limit applies to both spouses transferring assets covered by matrimonial co-ownership).
Exit tax assumes the taxation of unrealised gains in connection with the following events:
- the transfer of an asset outside Poland, as a result of which Poland loses the right to tax income from the disposal of that asset, and the transferred asset remains the property of the same entity;
- a change of tax residence by a Polish tax resident, as a result of which Poland loses the right to tax income from the disposal of an asset owned by that taxpayer due to the transfer of his residence to another country (although exit tax does not apply to assets which, after the change of tax residence, remain associated with a foreign permanent establishment situated in Poland of the taxpayer who changed tax residence).
In the case of exit tax, its subject is an income from unrealised gains defined as the excess of the market value of the asset determined as at the date of its transfer or as at the date preceding the date of the change of tax residence over its tax value. The amount of exit tax therefore generally depends on the value of the asset being transferred.
The rate of exit tax depends on whether the tax value of the transferred asset is determined and amounts to:
- 19% if the tax value of the asset is determined,
- 3%, if the tax value of the asset is not determined.
Both business-related assets and, in some cases, so-called ‘personal assets‘ may be taxed. The category of personal assets includes the components enumerated by the legislator, i.e.: all rights and obligations in a company that is not a legal person, shares in the company, shares and other securities, derivative financial instruments and participation titles in capital funds.
The transfer of personal property defined in this way is subject to exit tax in Poland if the taxpayer has been a tax resident of Poland for a total of at least five years in the 10-year period preceding the date of change of tax residence.
The regulations do not exclude the possibility of multiple exit taxation, e.g. in the case of a multiple change of Polish tax residence to a foreign one. On the other hand, in the case of a return to Poland – it is possible to apply for a refund of exit tax.
Exit tax does not apply to an asset transferred outside the territory of Poland for a limited period of time, not longer than 12 months, when the transfer:
- is directly related to the liquidity management policy of the taxpayer’s enterprise located in the territory of Poland and another country;
- in the case of securities or other assets – their transfer is made on the basis of an agreement of transfer to secure a claim.
In addition, the following assets are exempt from tax on income from unrealised gains:
- transferred for the purposes indicated in Article 4 of the Act on Public Benefit Activity to specific organisations from the European Union or the European Economic Area, conducting public benefit activity in the sphere of public tasks, realising these purposes – if the taxpayer does not have rights to share in the profit or assets of such organisations;
- intended for the official use of employees, directly related to their work, not constituting fixed or current assets (within the meaning of the accounting regulations).
It cannot be overlooked that the Polish exit tax, raises doubts as to its compliance with Community law, in particular in the context of the obligation to pay it immediately.
The basic deadline for filing the declaration and payment of the exit tax is the 7th day of the month following the month of transfer in which the total market value of the transferred assets exceeded the taxation threshold (PLN 4 000 000), and if, after the month in which the total market value of the transferred assets exceeded this amount, further assets are transferred – by the 7th day of the following month.
At the same time, the deadline for payment of exit tax has been postponed (this does not mean that there is no tax obligation, but only that the payment deadline has been postponed). The postponement of the deadlines for payment of exit tax results from the Ordinance of the Minister of Finance of 2 August 2023 amending the Ordinance on the extension of the deadline for payment by personal income taxpayers due to the exit tax. According to this regulation, the deadline for payment of exit tax will be:
- by the 7th day of the month following the month in which the taxpayer lost (in whole or in part) an asset subject to exit tax – if the loss (in whole or in part) of the asset occurred before 1 December 2025;
- until 31 December 2025. – in all other cases.
Can cryptoassets be subject to exit tax?
As indicated above, exit tax may be levied on business-related assets, including so-called ‘personal assets’ comprising assets constituting:
- all rights and obligations in a company that is not a legal entity,
- shares in the company,
- shares and other securities,
- derivative financial instruments and participation titles in equity funds.
The PIT Act and the CIT Act do not explicitly identify cryptoassets as subject to exit tax (provided that the other conditions for taxation are met). It does not, however, explicitly exclude them from exit taxation.
In practice, it seems crucial to determine whether cryptoassets constitute a business-related asset and, if not, the legal and tax nature of cryptoassets. If they fulfil the conditions for classification as virtual currencies within the meaning of CIT and PIT regulations (which, in turn, define virtual currencies by reference to the definition of this concept included in Article 2(2)(26) of the AMLAct), they should not be subject to exit tax as a special category within the meaning of these regulations, not listed in the catalogue of assets subject to this tax.
The above position was taken by the Director of National Tax Information in an individual tax ruling of 22 December 2022, no. 0113-KDIPT2-3.4011.809.2022.1.NM issued on the grounds of PIT. It indicated that a taxpayer who sells virtual currencies after a change of tax residence and earns more than PLN 4 million on this will not pay exit tax. The provision regulating this tax applies only to the disposal of: all rights and obligations in a partnership, shares in a company, shares and other securities, derivative financial instruments, participation titles in capital funds. Virtual currencies, however, are something different. They are not derivative financial instruments within the meaning of Article 5a(13) of the PIT Act, nor are they other assets listed in Article 30da(3) of the PIT Act, which contains a closed catalogue of assets constituting so-called ‘personal property’ subject to exit tax.
Still, cryptoassets do not include only virtual currencies (in the above sense), being a much more capacious and internally differentiated category. Some cryptoassets may, therefore, be considered, for example, as being derivative financial instruments (e.g. energy-linked tokens) that may be subject to exit tax.
Establishing that a given cryptoasset is in a category of assets subject to exit tax does not automatically imply exit taxation. Indeed, other conditions must be met. In the case of natural persons, taxation with this tax will not occur if the total value of the assets does not exceed PLN 4,000,000. It is also possible to consider the application of exclusions or exemptions from exit tax.
Summary
The status of cryptoassets in the light of exit tax is clear with regard to those that constitute virtual currencies – their transfer is not subject to this tax, but only if they do not constitute assets related to the conducted activity. In other cases, an analysis of the legal and tax status of cryptoassets may be necessary. Non-taxation of cryptoassets may also occur if, for example, conditions for being outside the scope or exempted from tax are met.
