Changes in the Polish Deal – PIT reduction to 12%

According to information published by the Ministry of Finance on the website of the National Tax Information on 22 April 2022, the Council of Ministers adopted a draft amendment to the Personal Income Tax Act (PIT). The main assumptions of the draft Act amending the Personal Income Tax Act and certain other Acts are as follows:

• abolition of the middle-class tax relief,
• reduction of the income tax rate for taxpayers taxed according to the scale from 17% to 12%,
• and allowing entrepreneurs on the flat tax, lump sum, and tax card to deduct part of their health insurance contributions from their taxable base,
• additionally, single parents will be able to file joint tax returns with their children, and entrepreneurs will be able to change their chosen form of taxation once again within the tax year.

“All the changes are to the benefit of the taxpayer. Our proposals have been discussed with all relevant stakeholders, thoroughly analysed, agreed upon, and adopted by the government. They will be submitted to the Sejm this month. In June, we aim to return with the final provisions so that some of them can come into effect from 1 July. We reassure everyone — changes requiring adaptation by payers will start applying from 1 January 2023 to allow time for IT systems to be updated. The proposed solutions are stable, predictable, and more universal. The greatest benefits will still go to those with the lowest incomes, many of whom will not pay any PIT at all,” said Deputy Minister of Finance Artur Soboń.

The changes included in the draft cover, among others:

• The possibility for entrepreneurs on the flat tax, lump sum, and tax card to deduct part of their health insurance contributions.
• Joint tax settlement with a child for single parents, who will benefit from 1.5 times the tax-free allowance, i.e. PLN 45,000 (single parents raising a child with disabilities will benefit from double the tax-free allowance, i.e. PLN 60,000).
• A range of other family-friendly preferences, including increasing the income threshold a child can earn without causing the parents to lose tax benefits (from PLN 3,089 to PLN 16,061.28 in 2022).
• The possibility for entrepreneurs who chose the flat tax or lump sum to switch back to taxation according to the scale within the same tax year.
• Unification of deadlines for annual PIT filings (forms: PIT-37, PIT-36, PIT-36S, PIT-28, PIT-28S, PIT-36L, PIT-36LS, PIT-39, PIT-38). These returns will be filed between 15 February and 30 April.
• A unified PIT-2 form, which will include declarations and requests affecting the calculation of advance payments.
• No health insurance contributions on remuneration of persons appointed to perform social or civic duties — up to PLN 6,000 annually.
• From 1 January 2023, the possibility to settle the tax-free allowance in advance payments on income types where it was previously not applied, e.g. contracts of mandate.
• No employer liability in case of incorrect PIT advance deductions due to inaccurate information provided by the employee. Incorrect deductions may occur when an employee submits incorrect declarations to two employers, each applying the full tax-free allowance, whereas each should apply only half.
• Tax relief for historic monuments limited strictly to renovation costs. A formal condition will be introduced — relief can be claimed only after the renovation is approved by the monument conservator.

Offer: Legal advisor – tax law

The draft leaves unchanged favourable provisions effective since 1 January 2022, including the higher tax-free allowance (PLN 30,000) and higher tax threshold (PLN 120,000). The Deputy Minister of Finance points out that, out of 25 million taxpayers, the changes will benefit 13 million, while the rest will be neutral. Prime Minister Mateusz Morawiecki added that the proposed change in the settlement of health contributions will mean lower taxes for 1.4 million entrepreneurs.

Link to full draft text: Bill no. 2186 – Sejm of the Republic of Poland