Tax changes in 2023

The government has published information regarding tax changes coming into effect in 2023. In this article, we present the most important of them:

No taxation of private rental under general rules

From 2023, the rules for taxing rental income from residential properties outside business activity will change.
Individuals earning income from private rental will no longer be able to tax this income under the general rules — i.e., the progressive tax scale. The only available form of taxation will be the lump sum tax on recorded revenue (ryczałt).

This means rental income will be taxed at a rate of 8.5% on income up to 100,000 PLN, and 12.5% on the excess income above 100,000 PLN.

Taxpayers will no longer be able to deduct costs related to the rented properties. The lump sum tax on recorded revenue does not allow deductions for expenses such as repairs, depreciation, or mortgage interest.

No depreciation of residential premises

Changes in tax regulations will also affect depreciation of residential properties. Taxpayers renting residential premises as part of their business activity will not be allowed to depreciate these premises or include depreciation charges as tax-deductible expenses from 2023 onwards.
The prohibition on depreciation applies to residential buildings, residential premises, cooperative ownership rights to residential premises, and rights to single-family houses in housing cooperatives used in business activities or leased/rented by personal income tax (PIT) and corporate income tax (CIT) taxpayers.

New rules for applying the tax-free allowance

Tax changes in 2023 will also require that from this year, the tax remitter will be obliged to reduce tax advances by an amount equal to no more than 1/12 of the tax-reducing amount if the employee submits a declaration to apply such reduction.
A taxpayer (employee) will be allowed to submit declarations to up to three remitters, indicating that the remitter is authorised to reduce the advance:

• by 1/12 of the tax-reducing amount for one remitter
• by 1/24 of the tax-reducing amount for two remitters
• by 1/36 of the tax-reducing amount for three remitters

Application for no advance tax deduction during the tax year

In 2023, the changes will also extend the catalogue of income types that entitle taxpayers to submit an application for exemption from advance tax deductions in a given tax year.
For example, a taxpayer earning income from employment contracts, civil contracts (umowa-zlecenia), or specific-task contracts (umowa o dzieło) may submit such an application if they anticipate that their taxable income under the progressive scale will not exceed 30,000 PLN in the tax year.

Abolition of the obligation to submit PIT/WZ information (bad debt relief)

Entrepreneurs will no longer be required to submit, along with their tax returns, information on receivables and liabilities that decrease or increase the tax base (loss) arising from commercial transactions (PIT/WZ information).

Change in income settlement from pensions of minor children

From 2023, income from pensions earned by minor children will constitute the child’s income and will no longer be added to the parents’ income or reported in the parents’ annual tax return.

Modification of the heritage conservation allowance

From 2023, the possibility to use the heritage conservation allowance when purchasing a property – a heritage building registered in the heritage register – will be abolished (in 2022, it was possible to deduct from the tax base an amount equal to 500 PLN multiplied by the square meters of the purchased heritage property, but not more than 500,000 PLN).
Expenses related to conservation, restoration, or construction works on the heritage property may only be deducted after these works are completed, not during their execution. Additionally, only expenses covered by the permit from the provincial heritage conservator will qualify for deduction. Expenses exceeding this permit scope will not be deductible.

Increase in the percentage of tax payable allocated to public benefit organisations

From 1 January 2023, the amount a taxpayer can allocate in their tax return to public benefit organisations will increase from 1% to 1.5% of the due tax declared in the annual tax return (PIT).
The above list presents the key tax changes effective in 2023. For more information, please visit the government portal.