Polish Deal in PIT: Changes concerning individuals
Act published in the Journal of Laws
Employer Zone 5/2021 | 25 November 2021
The act amending the Personal Income Tax Act, Corporate Income Tax Act and certain other acts, a.k.a. “Polish Deal” has been signed by the President and published in the Journal of Laws. Thus, most of its provisions shall come into effect in January 2022. What are the changes in the area of Personal Income Tax?
Most of changes announced a while ago will impact income received by individuals employed under employment contracts, entrepreneurs and management board members.
Please find below an executive summary of key changes, for employees based on the final wording of the amendment Personal Income Tax provisions. The mentioned changes were already discussed by us in the previous editions of our bulletin (taking into account the form they took at the various stages of the legislation procedure)
W bieżącym projekcie utrzymano przepisy mające na celu wprowadzenie podatku od spółek będących podatnikami (rezydentami podatkowymi w Polsce) z tytułu tzw. przerzucanych dochodów. Podatek ten miałby wynosić 19%.
Za „przerzucone dochody” mają zostać uznane określone koszty poniesione bezpośrednio lub pośrednio na rzecz podmiotu powiązanego ze spółką i stanowiące należność tego podmiotu, jeżeli:
- faktycznie zapłacony podatek dochodowy przez ten podmiot powiązany za rok, w którym otrzymał należność, w państwie jego siedziby, zarządu, zarejestrowania lub położenia jest niższy o 25% niż kwota podatku dochodowego, który byłby od niego należny, gdyby dochody tego podmiotu zostały opodatkowane z zastosowaniem 19% stawki podatku, przy czym przez podatek faktycznie zapłacony rozumie się podatek niepodlegający zwrotowi lub odliczeniu w jakiejkolwiek formie, w tym na rzecz innego podmiotu, oraz
- koszty te:
- podlegają zaliczeniu w jakiejkolwiek formie do kosztów uzyskania przychodów, odliczeniu od dochodu, podstawy opodatkowania lub od podatku tego podmiotu powiązanego lub
- wypłacane przez ten podmiot powiązany w formie dywidendy lub innych przychodów z udziału w zyskach osób prawnych za rok, w którym otrzymał należność
- stanowiły co najmniej 50% wartości uzyskanych przez ten podmiot przychodów określonych zgodnie z przepisami o podatku dochodowym lub zgodnie z przepisami o rachunkowości.
Projekt zakłada, że powyższe zasady opodatkowania nie znajdą zastosowania w przypadku, gdy wskazane koszty zostaną poniesione na rzecz podmiotu powiązanego, podlegającego opodatkowaniu od całości swoich dochodów w państwie członkowskim Unii Europejskiej lub w państwie należącym do Europejskiego Obszaru Gospodarczego i prowadzącego w tym państwie istotną rzeczywistą działalność gospodarczą.
- Commonly used tax rates of 17 % or 32 % remains unchanged. However, the income tax threshold for the 32 % rate has been increased from PLN 85,528 to PLN 120,000.
- The tax-free amount has changed as well, from the current progressively decreasing amount of up to PLN 8,000 to PLN 30,000 per year, which results with the tax-reducing amount (PLN 5,100). This amount will be deducted from the taxpayer’s tax liability (calculated on income taxed in accordance with the general rules with application of17%-32% tax rates) regardless of the level of income derived by a taxpayer.
This change will exclude taxation of taxpayers whose average gross monthly income does not exceed PLN 2,500. Please note that the tax-free amount does not apply to individuals which income is subject to taxation at the lump-sum or a flat-rate tax of 19%.
In case of individuals taxable on general rules, healthcare contributions still (as before) amounts to 9 % of the tax base (i.e., gross revenue less social security contributions). Under the New Deal, the formerly deductible portion of the healthcare contribution (7,75% of the assessment basis) will no longer be tax deductible from income tax. This will be a major change for employees, entrepreneurs paying their PIT in line with general rules and entrepreneurs paying a flat rate tax of 19%tax who will pay the healthcare contributions up to 4.9 % of their actual income (less social security contributions) and these contributions will not be tax deductible.
Despite the increase in the tax-exempt amount and the tax rate change threshold, non-deductibility of the healthcare contributions will reduce the amount of net income of certain taxpayers. In order to mitigate the negative impact on taxpayers whose annual gross income ranges from PLN 68,412 to PLN 133,692, the Act introduces an additional allowance for employees working under an employment contract and self- employed paying income tax under general rules( so-called “middle-class relief”), which will be calculated using a special formula and deducted from the tax base in order to ensure tax-neutrality of the planned changes for employees and sole entrepreneurs who pay tax calculated on general rules and earn monthly revenue from PLN 5.701 to PLN 11,141. Please note that the allowance will be not applied to income earned under a contract of mandate (umowa zlecenia),and income taxable with the flat rate of 19% derived from management contracts or to income received by appointed management board members.
The amendment introduces the obligation to calculate the allowance applicable to employees on a monthly basis: employers as tax remitters will be obliged to apply the allowance directly in the payroll in relation to months in which income earned by an employee from work performed for a given employer will fall into the above income ranges. Therefore, the new regulations will require a respective adjustment of payroll calculation systems.
The healthcare contribution shall be non-deductible for all persons who pay it, not only those working on employment contracts. Furthermore, under the New Deal, the method of calculating healthcare contribution for members of management boards and sole entrepreneurs under a various tax regimes will change significantly:
- Individuals appointed to the position by a resolution and remunerated for the work performed in this position (e.g. members of the management boards) will pay healthcare contribution.
- The rules for calculating healthcare contribution for individual entrepreneurs using a flat rate or progressive rate will change: the contribution will be calculated on the monthly income obtained from non-agricultural business activities, which will increase the healthcare contributions amount for a large group of self-employed.
- If the income earned in a given month by a self-employed individual will be lower the minimum wage (or in case of loss), the assessment basis of healthcare contributions will be basis of the statutory minimum wage for a given tax year (the minimum healthcare contribution for 2022 will be PLN 270,00 per month).
- The healthcare contribution paid by self-employed individual subject to taxation at flat-rate will depend on the amount of income earned by individual in the period covered by the contribution and the average amount of income.
Certain reliefs, deductions and tax preferences determined in the PIT Act, such as the rehabilitation allowance or joint filing of tax returns in the year of marriage, has been modified. In addition, the PIT Act introduces a new tax allowance related to the remuneration and thus important for employers. On the basis of a declaration submitted by the employee, the employer as a remitter, will be obliged to apply the following reliefs:
- Exemption in connection with the transfer of residence to the territory of the Republic of Poland – applicable for four consecutive years, under certain conditions, including maintaining tax residence in Poland and being a tax resident of another country for the three years preceding the year of moving to Poland, which can be documented with an appropriate tax residency certificate.
- Exemption for taxpayers bringing up at least four children - applicable to a person who during the year exercises parental authority, acts a legal guardian if the child has lived with him/her, or performs the function of a foster family, performs maintenance duties or acts as a foster family for adult children continuing education over at least four children in a given year.
- Exemption for taxpayers with pension rights – applicable to employees, individuals employed on a mandate contract or self-employed over 60 (women) and 65 (men), provided that social security contributions are paid during the year.
Moreover, it should be noted that the above-mentioned reliefs may be applied only within the annual income threshold of PLN 85,528 (it concerns all reliefs, including relief for taxpayers under 26 years old). Therefore, it is important that the total amount of reliefs available under various titles do not exceed the fixed income threshold of PLN 85,528.