Poland Extends PIT Exemption on Mortgage Settlement Income Through 2028

Poland's New Tax Break for Mortgage Settlements

Poland's Ministry of Finance has drafted a regulation that would extend a personal income tax (PIT) exemption on income arising from mortgage settlements — including those tied to CHF-denominated housing loans — for two more years, from 1 January 2027 to 31 December 2028. The current exemption, introduced by a regulation of 11 March 2022, covers income earned between 1 January 2025 and 31 December 2026. The draft simply pushes that window forward.

The mechanism is straightforward. When a borrower and a bank sign a settlement restructuring a mortgage, the bank typically forgives part of the debt. That forgiveness is a financial gain for the borrower and would normally be taxed at the standard PIT scale of 12% or 32%. Under the regulation, no tax is collected on that gain, and the borrower does not have to declare it in an annual return or notify the tax office. The same relief applies to any negative interest on a housing loan, which can also generate taxable income from "other sources."

The relief covers forgiven principal as well as interest, commissions and fees the borrower paid to conclude the original housing loan. To qualify, the loan must have been granted before 15 January 2015 and secured by a mortgage on a property, a share in a property, perpetual usufruct rights, or a cooperative ownership right to a dwelling or single-family house.

Banks benefit too. As CIT taxpayers, they can deduct from their income the value of forgiven housing-loan receivables — specifically the portion of principal on which the PIT waiver applies. The Polish Bank Association (ZBP) has confirmed the case for extending the regulation, which the ministry cites in the draft's justification. The legal basis for the waiver is Article 22(1)(1) of the Tax Ordinance, which allows it when justified by public interest or an important interest of taxpayers.

What the Extension Means for Borrowers and Banks

Why the Ministry Is Extending the Relief

The regulation is designed to keep the settlement channel attractive for CHF mortgage borrowers. Without the exemption, a borrower who settles would face a PIT bill on the forgiven amount — often thousands of zlotys — which would make litigation or prolonged negotiation more appealing than a deal. By removing that tax cost, the ministry is effectively subsidising out-of-court restructuring and reducing the flow of CHF cases into Polish courts.

The Bank Calculus

For banks, the CIT deduction on forgiven principal is a direct financial offset. It lowers the after-tax cost of settling, which matters because CHF loan portfolios remain a source of legal and reputational risk. The ZBP's support signals that lenders see settlements as preferable to drawn-out litigation, where adverse rulings can invalidate entire loan agreements and expose banks to larger payouts.

Court Invalidations vs. Settlements

The article notes an important distinction: if a court invalidates a loan agreement, the resulting financial benefit is treated as income from an act that cannot be the subject of a legally effective contract and is excluded from PIT altogether. Interest for delayed repayment of improperly collected amounts under an invalidated contract is also outside the scope of income tax. So borrowers who win in court already avoid PIT — the regulation targets those who settle instead.

What Changes for Borrowers

For a borrower weighing a settlement offer, the extension removes a tax cost that could otherwise erode the benefit of a deal. The exemption applies automatically — no application, no declaration. The main condition is that the loan was granted before 15 January 2015 and is mortgage-secured. Borrowers with loans outside those parameters do not benefit.

Timing and Legislative Path

The draft is a regulation, not a statute, so it can move relatively quickly through the ministry and enter into force without parliamentary approval. The proposed window starts 1 January 2027, giving banks and borrowers time to plan settlements under the current regime (through 2026) and the extended one. The regulation is not yet final; the draft stage means terms could still change.

What Borrowers and Lenders Should Do Now

The extension removes the tax penalty on settling a CHF mortgage, making a negotiated deal financially cleaner for borrowers and cheaper for banks.

• Borrowers with pre-15 January 2015 mortgage-secured loans: if you are negotiating a settlement, the forgiven amount will not be taxed and does not need to be reported. Factor that into your decision — a deal that looked marginal after tax may now be worth accepting.
• Borrowers whose loans fall outside the criteria (granted after 15 January 2015 or not mortgage-secured) do not get the exemption. If you are in this group, the tax treatment of any settlement gain should be checked against general PIT rules.
• Banks: the CIT deduction on forgiven principal lowers the cost of settling. This strengthens the case for proactive settlement offers on CHF portfolios before the current exemption expires at the end of 2026.
• Watch the final regulation text: the draft covers 2027–2028, but the exact wording and any conditions could change before publication.