Severance Pay Tax: Seniors & Refunds – Tax Office Confirms

Seniors who have retired and received retirement severance pay and compensation for unused leave can count on a tax refund. The tax office confirms in the tax interpretation that under certain conditions these benefits are exempt from PIT under the so-called discounts for seniors. The moment of receiving remuneration and meeting the condition of “not receiving a pension” are crucial. Check if you can recover overpaid tax!

Is retirement severance pay included in the tax relief for seniors? KIS tax interpretation

In March 2024, the employer paid the taxpayer the amount due retirement severance pay and compensation for unused holiday leavein the total amount of PLN 49,479.40, while deducting personal income tax from both components of remuneration in the amount of PLN 6,264. The taxpayer retired on February 26, 2024. She turned 60 in June 2020. By decision of March 12, 2024, the taxpayer was granted a pension. Her first pension was paid on March 18, 2024. The retirement severance pay and the equivalent for holiday leave were paid to her on March 7, 2024.

In connection with the above, the taxpayer wanted to know: Is she entitled to apply the provision referred to in Art. in the annual PIT return submitted for 2024? 21 section 1 point 154 of the Personal Income Tax Act, in relation to the paid equivalent for holiday leave and retirement severance pay, i.e. the total amount of PLN 49,479.40 (relief for seniors)?

According to her, in the annual settlement of personal income tax for 2024, she has the right to apply Art. 21 section 1 point 154 of the Personal Income Tax Act. She also mentions that she has already used this right in her tax return for 2022 and 2023 as a working retiree. The tax deduction would apply to remuneration paid for retirement severance pay and the equivalent for unused holiday leave, which are directly related to the work performed by her. What does the tax office say about this?

The tax office indicates which revenues are free from PIT

The Director of the National Tax Information shared the taxpayer’s position. He explained that in accordance with Art. 21 section 1 point 154 of the PIT Act, income is free from income tax from a service relationship, employment relationship, outwork, cooperative employment relationship, from mandate contracts referred to in Art. 13 point 8, from maternity allowance referred to in the Act of 25 June 1999 on cash benefits from social insurance in the event of sickness and maternity, and from non-agricultural business activities, to which the taxation rules specified in Art. 27, art. 30c or art. 30ca or the Act on flat-rate income tax in the scope of a lump sum from recorded revenues, received by the taxpayer after the age of 60 in the case of a woman and 65 years of age in the case of a man, up to an amount not exceeding PLN 85,528 in the tax year, provided that the taxpayer is subject to social insurance in connection with obtaining these revenues within the meaning of the Act of 13 October 1998 on the social security system and despite acquiring the entitlement, the taxpayer does not receive:

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• pension or survivor’s pension referred to in the Act of 20 December 1990 on social insurance for farmers,
• pension or survivor’s pension referred to in the Act of 10 December 1993 on the pension provision of professional soldiers and their families,
• pension or survivor’s pension referred to in the Act of February 18, 1994 on the pension provision of officers of the Police, the Internal Security Agency, the Intelligence Agency, the Military Counterintelligence Service, the Military Intelligence Service, the Central Anticorruption Bureau, the Border Guard, the Marshal’s Guard, the State Protection Service, the State Fire Service, the Customs and Tax Service and the Prison Service, and their families,
• pension or survivor’s pension referred to in the Act of 17 December 1998 on pensions and annuities from the Social Insurance Fund,
• benefits referred to in Art. 30 section 1 point 4a,
• retirement pay or family pay referred to in the Act of 27 July 2001 – Law on the System of Common Courts,
• cash benefit referred to in the Act of February 8, 2023 on cash benefits due to family members of officers or professional soldiers whose death occurred in connection with service or taking actions outside the service to save human life or health or property.

Pursuant to Art. 21 section 39 above Act: When calculating the amount of income subject to tax exemption under section 1 points 148 and 152-154, income subject to flat-rate income tax under this Act, exempt from income tax and for which tax collection has been waived pursuant to the provisions of the Tax Ordinance is not taken into account.

Pursuant to art. 21 section 44 of the Personal Income Tax Act: The sum of tax-exempt revenues pursuant to section 1 points 148 and 152-154 may not exceed PLN 85,528 in a tax year.

Relief for working seniors – what is this tax preference in PIT?

As part of the “Polish Order”, regulations were introduced for people who: despite reaching the common retirement age, they still remain professionally active and do not receive retirement and disability benefits, commonly known as “relief for working seniors”. This relief is provided for in the above-mentioned Art. 21 section 1 point 154 of the Personal Income Tax Act.

Those entitled to benefit from this tax privilege are: women over 60 years of age and men over 65 years of age provided that they are subject to social insurance due to obtaining exempt income.

The analyzed provision provides for exemption from personal income tax on income earned by these persons from a service relationship, employment relationship, homework relationship and cooperative employment relationship (Article 12(1) of the Personal Income Tax Act), from mandate contracts referred to in Art. 13 point 8 above. of the Act, from maternity allowance referred to in the Act of 25 June 1999 on cash benefits from social insurance in the event of sickness and maternity and from non-agricultural business activities, to which the taxation rules specified in Art. 27 (taxation according to the tax scale), art. 30c (so-called flat tax, amounting to 19%) or art. 30ca (taxation at a rate of 5%, IP Box relief) or the Act on flat-rate income tax in the scope of a lump sum on recorded income.

The right to the discussed the exemption will therefore be available to taxpayers who engage in the above-mentioned types of professional activity (obtained sources of income) is covered by social insurance. However, the provision in question does not differentiate this title, which means that a taxpayer who received income as part of a full-time job consisting in part of, for example, retirement severance pay, on which no social security contributions are charged, will be entitled to apply the exemption for working seniors in relation to the entire income obtained as part of the employment relationship.

The tax office emphasizes that the condition of “not receiving a pension” is crucial for PIT exemption

To benefit from this exemption, the taxpayer cannot also receive, despite acquiring the entitlement, the benefits listed exhaustively in Art. 21 section 1 point 154 of the Personal Income Tax Act. This provision also states that: income received by a taxpayer who, despite being entitled to a pension, does not receive this pension is exempt from tax.

Meaning that, the variance of the “Emericy unsatisfaction” as a condition for the application of the above-mentioned tax exemption should be met at the moment of receipt of income, i.e. at the moment of payment of receivables from the employment relationship. As stated in Art. 11 section 1 of the Personal Income Tax Act:

“Revenues, subject to Articles 14-15, Article 17(1) points 6, 9, 10 in the scope of the exercise of rights arising from derivative financial instruments, point 11, Article 19, Article 25b, Article 30ca, Article 30da and Article 30f, are money and monetary values received or made available to the taxpayer in the calendar year and the value of benefits received in in kind and other gratuitous benefits. Therefore, revenue arises when funds are received or placed at the taxpayer’s disposal.

Tax office: senior citizens are entitled to relief, retirement severance pay and the equivalent are exempt from PIT

The Director of KIS stated that “the description of the case shows in particular that you turned 60 years old (…) in June 2020. In 2024 (i.e. after reaching the age of 60), you obtained the following income from the employment relationship:

1. in January, PLN 5,754.53 in sickness benefits, not subject to social insurance,
2. in February 5,754.53 PLN for sickness benefit, not subject to social insurance,
3. in the month of March:

• PLN 14,301.40 – equivalent for holiday leave,
• PLN 35,178 – retirement severance pay,
• PLN 4,826.38 – sickness benefit.

Social insurance covered amounts in lieu of annual leave allowance. You were paid the retirement severance pay and the equivalent for holiday leave on March 7, 2024. By decision no. (…) of March 12, 2024, you were granted a pension. You received your pension in 2024 in accordance with the ZUS decision for the period from February 1, 2024, i.e. from the month in which you submitted your application for it. Your first pension was paid on March 18, 2024. You did not receive the benefits listed in point (a). ag art. 21 section 1 point 154 of the Personal Income Tax Act, in addition to the above-mentioned first pension.

Consequently, I conclude that You have the option of applying the exemption in your tax return for 2024 referred to in Art. 21 section 1 point 154 of the Personal Income Tax Act. above sick leave you can apply to income obtained after the age of 60 from employment, including those paid on March 7, 2024. retirement severance pay and compensation for holiday leaveup to an amount not exceeding PLN 85,528 in the tax year. Payment of the above benefits from the employment relationship occurred before the first pension is paidi.e. before March 18, 2024.”

Individual interpretation of February 27, 2025, Director of the National Tax Information, ref. no. 0115-KDIT2.4011.626.2024.2.ŁS.
Source: EUREKA Customs and Tax Information System,