Poland seeks to boost investment with new tax-free personal accounts

Poland has launched a new initiative aimed at stimulating investment by introducing tax-free personal investment accounts, known as Osobiste Konta Inwestycyjne (OKI). Under the scheme, individuals can invest up to 100,000 zloty (approximately €23,200) without being subject to the 19% capital gains tax. A portion of this limit, up to 25,000 zloty, can be allocated to savings instruments such as bonds and deposits. Assets exceeding these thresholds will face a new annual tax rate of 0.85% in 2027, with adjustments planned each year. The legislation, signed into law by President Karol Nawrocki on Thursday, will come into effect on 1 January 2027. Finance Minister Andrzej Domański hailed the measure as “the biggest change in years for individual investors” and emphasized its role in fostering domestic capital accumulation to fuel economic growth. The government projects that the program could inject around 74 billion zloty into the Warsaw Stock Exchange by 2040, according to officials. Nawrocki, who belongs to the opposition party, typically exercises his presidential veto power frequently. However, in this instance, he endorsed the proposal, stating that it could benefit both citizens and the state. His office noted that the initiative provides Poles with a tool to enhance family wealth through a tax-free allowance and the absence of account maintenance fees. The plan builds upon existing mechanisms that offer tax benefits for savings, including Individual Retirement Accounts (IKE), Individual Pension Schemes (IKZE), and Employee Capital Plans (PPK). These programs, however, require participants to withdraw funds only after reaching retirement age. As a result, many Poles have not fully utilized them for direct investments. Despite the Polish stock market's robust performance, direct investment by households remains limited. Shares constitute just 2.9% of household assets, equivalent to 3% of GDP. This low participation highlights the need for measures that encourage broader engagement with the capital markets. Kamil Gemra, an assistant professor at the Warsaw School of Economics, expressed confidence in the government’s projections. He argued that even a small percentage of the substantial savings currently held by Poles could generate the projected inflow of 74 billion zloty into the stock exchange by 2040. Gemra noted that societal wealth has grown significantly, making the target achievable. The policy also anticipates a reduction in state revenue due to the tax exemption. Over a decade, the government expects a loss of nearly 9 billion zloty. This comes at a time when public finances are under pressure from rising national debt. The challenge lies in balancing the potential economic benefits against the fiscal implications. Meanwhile, the Warsaw Stock Exchange’s WIG20 index has reached a historic high, breaking a record that had stood for nearly 19 years. The index has led Europe’s major blue-chip indices, posting a gain of almost 25% this year. This surge underscores the growing appeal of the Polish market, potentially setting the stage for increased investor interest under the new tax-friendly framework.