The Polish Deal in a nutshell – summary of changes in taxes and labour law

In previous articles, we addressed the most significant changes introduced by the Polish Deal, including those concerning the health insurance contribution, leasing, employment legality, and new issues related to running sole proprietorships. We also mentioned ways to mitigate or avoid certain burdens, for example, by paying remuneration to board members based on an appropriate legal basis or changing the form of the business activity conducted.

Below is a summary of other key elements of the government’s amendment package. The issues described are significant for both entrepreneurs and employees.

Tax-Free Amount

For individuals taxed under the progressive scale, it will be important that the tax-free amount increases to PLN 30,000 for everyone regardless of income level. In practice, PLN 5,100 will be deducted from the tax. A new threshold for the first tax bracket will also be introduced at PLN 120,000. This means that income up to PLN 120,000 will be taxed at 17% minus PLN 5,100 (tax-reducing amount), and income above PLN 120,000 will be taxed at 32%.

Health Insurance Contribution

For entrepreneurs taxed under the progressive scale, the health insurance contribution will amount to 9% of income (as for employees). Entrepreneurs on the flat tax will pay a health contribution of 4.9% of their income from 2022, but at least PLN 270.90 (9% of the minimum wage). Importantly, the health insurance contribution will not be deductible from tax, nor will it be included in tax-deductible costs.

Thus, the method for determining the health insurance contribution base will undergo fundamental changes from the new year. From January 2022, it will depend on income, while for lump-sum taxpayers a fixed monthly amount will be required. For taxpayers on the lump sum tax card, the contribution will always be 9% of the minimum wage. However, only those who used this form in the current year will be able to choose the tax card next year. Meanwhile, limited partners in limited partnerships or the sole shareholder of a limited liability company will pay a fixed contribution of approximately PLN 550 per month.

Joint Annual Tax Return

Until now, preferential tax settlement applied both to spouses and to a single parent raising a child. It is worth noting that spouses had to be married for a full year to benefit from joint filing. The Polish Deal introduces a change allowing preferential joint filing already during the first year of marriage.

From 2022, i.e., in returns filed in 2023, single parents raising children will lose the right to file jointly with their child. Instead of joint filing, the parent will deduct PLN 1,500 under a new relief. This deduction will not be divided by months or days of child care per parent, nor will it be shared between parents. This relief will be available only to taxpayers taxed under the progressive scale.

Middle-Class Relief

The so-called middle-class relief has been in effect since the beginning of the current year. In principle, it is to be automatically calculated by the employer, but this will not always be advantageous for the employee.

The relief applies to employees earning between PLN 5,701 gross and PLN 11,141 gross per month (i.e., PLN 68,412 to PLN 133,692 annually). The purpose of the relief is to compensate for the negative tax effects of the Polish Deal (mainly related to the new method of calculating the health insurance contribution). However, automatic monthly calculation of the relief carries some risk. If an employee qualifies for the relief during certain months in 2022 but their annual income exceeds the thresholds set by law, they will face a tax underpayment after the annual settlement, which must be fully repaid to the tax office. The same consequence will apply if the form of employment changes resulting in lower earnings. Receiving monthly wages below PLN 5,701 gross will cause the loss of the relief, which will lead to the need to repay the tax.

It is therefore worth considering not applying the relief each month but settling it once a year in the annual tax return. This can be done by submitting a request to the employer to not apply the middle-class relief.

New Cash Transaction Limit

According to the new wording of Article 19(2) of the Entrepreneurs’ Law, the cash transaction limit has been lowered from PLN 15,000 to PLN 8,000. Payments between entrepreneurs related to business activity exceeding this limit must be made via the entrepreneur’s payment account. Transactions in foreign currencies are converted to PLN at the average exchange rate published by the National Bank of Poland on the last business day before the transaction.

Additionally, Article 7b has been added to the Consumer Rights Act, stating that consumers must make payments via a payment account if a single transaction with an entrepreneur (regardless of the number of payments resulting from it) exceeds PLN 20,000 or its equivalent. Foreign currency transactions are converted as described above.

The End of Depreciation on Residential Properties

According to changes in the Personal Income Tax Act effective from January 2022, depreciation will no longer apply to:

• residential buildings including lifts;
• residential premises constituting separate properties;
• cooperative ownership rights to residential premises;
• rights to a single-family house in a housing cooperative;

used for business activities or leased/rented under contract.
Exceptionally, due to transitional provisions, depreciation on the above assets acquired or produced before 1 January 2022 will be allowed until 31 December 2022. Entrepreneurs should therefore carefully consider potential investments in real estate intended for business use.