Discussions on tax changes held with representatives of businesses

– Not a single week passes without a discussion on the Polish Deal, said Prime Minister Mateusz Morawiecki during a videoconference with entrepreneurs. This time, the meeting participants discussed the package of tax solutions and increased public spending for the health care system. The planned changes are primarily aimed at improving the quality of life for Poles and making the tax system fairer.

Apart from PM Morawiecki, the discussion was also attended by representatives of the Ministry of Finance, the Social Insurance Institution, as well as the Polish Economic Institute. The business world was represented by such organisations as the Federation of Polish Entrepreneurs, Lewiatan Confederation, Union of Entrepreneurs and Employers, Polish Economic Society, Family Business Foundation, Employers of Poland and BCC.

Project consultations are scheduled to last until 30 August.

Favourable tax changes in recent years

The Polish Deal will introduce positive tax solutions that will benefit Poles. However, this is not the first time that the government has introduced favourable tax changes. Between 2015 and 2019, the tax-free amount was increased twice – up to PLN 8,000. In 2019, the government introduced the PIT 0 for young people – a tax break benefitting the youth. A general PIT reduction from 18 to 17 per cent has also been applied. Additionally, 2019 saw a reduction in CIT to the level of 9 per cent. This has resulted in the tax rate being cut by more than half – from 19 to 9 per cent. Over 90 per cent of entrepreneurs have benefited from this solution. A new VAT matrix that lowered the tax rates for many basic necessities has been introduced as well.

Polish Deal – continuation of positive tax changes

The Polish Deal programme continues the trend of introducing positive tax changes. These changes will benefit millions of Poles, including employees, employers, pensioners, as well as multiple middle-class professional groups.

• Increasing the tax-free amount to PLN 30,000 for everyone

Raising the tax-free amount to PLN 30,000 for all citizens will undoubtedly prove to be a historic moment. This bold move by the government is meant to help people on lower incomes. Nearly 9 mln Poles will stop paying PIT – this includes persons on the lowest income and close to 70 per cent of pensioners. As a result of this change, Poland’s tax-free amount will be at a similar level as in Germany, France and Ireland.

• Increasing the income tax threshold from PLN 85,000 to PLN 120,000

For the first time in 12 years, the income tax threshold will be increased from PLN 85,000 to PLN 120,000, which will allow the middle class to retain more money. Since 2019 all taxpayers have been paying less thanks to a tax rate reduction from 18 to 17 per cent; once the changes are in place, only income above PLN 120,000 will be subject to a 32 per cent tax rate. This means a 32-grosz tax on every zloty earned above PLN 120,000, as well as a 17-grosz tax for every zloty earned for amounts between PLN 85,000 and PLN 120,000 instead of the previously applicable 32-grosz rate. The number of people paying a 32 per cent tax will decrease by half.

• A further reduction in lump-sum income tax rates for engineers, ITC professionals, doctors and others

We are lowering the lump-sum income tax rates for many professions. We are particularly focused on bolstering the Polish middle class. Business owners will be able to choose the most advantageous tax settlement form, i.e. general taxation principles, lump-sum income tax or Estonian CIT. For doctors, dentists, nurses, midwives and engineers, the lump-sum tax rate will drop from 17 per cent to 14 per cent. The rate for IT specialists, programmers and other ITC professionals will decrease from 15 per cent to 12 per cent.

Fair taxes

Currently, entrepreneurs pay a fixed health insurance contribution, whereas for employees its amount is income dependent. After the planned changes, both employees and entrepreneurs will pay a health insurance contribution amounting to 9 per cent of their income minus any social security paid. All funds collected on this basis will be transferred to the National Health Fund. They will be used to improve the quality of medical services and alleviate the impact that COVID-19 has had on the health of Polish citizens. The inability to deduct the health insurance contribution from the tax has been compensated through other solutions. The Polish Deal also provides for several new solutions and a reduction in lump-sum income tax rates for entrepreneurs.

Tax changes in figures

The tax reform under the Polish Deal brings many benefits:

• The tax changes will be beneficial or neutral for more than 23 million Poles. That’s 90 per cent of Polish taxpayers.
• Almost 18 million Poles will benefit from the changes.
• Nearly 9 million people will stop paying PIT.
• The Polish Deal will allow Poles to save more – about PLN 14 bln per year.
• 90 per cent of pensioners will also benefit from increased savings. In total, that's over 8 million people. As many as 2/3 of pensioners will pay no PIT whatsoever. Others will only pay tax on amounts above PLN 30,000.

The changes will bring noticeable benefits to employees and retirees. Here are some examples:

• A cashier earning PLN 3,000 a month will gain PLN 1,840 per year.
• A blue-collar worker earning PLN 4,000 a month will gain over PLN 1,360 per year.
• An accountant with a monthly salary of PLN 5,000 will gain over PLN 560 per year.
• A pensioner receiving a retirement pension of PLN 3,200 will gain PLN 1,600 annually.
• If the spouses are taxed jointly, a family with 2 children and a total net income of PLN 6,500 will gain PLN 328 a month, which amounts to almost PLN 4,000 a year. Married couples may also benefit from a tax break for two children, amounting to PLN 2,200.

Entrepreneurs will also benefit from the changes:

• A tailor with a monthly income of PLN 3,000 will save PLN 1,300 annually.
• A hairdresser with a monthly income of PLN 4,000 will save PLN 2000 annually.
• A mechanic with a monthly income of PLN 5,000 will save PLN 1000 annually.

Polish Deal – a package of reforms for entrepreneurs

Apart from employees and pensioners, entrepreneurs will also benefit from the tax changes included in the Polish Deal. The programme aims to boost investment and expansion activity. This will be possible thanks to such things as tax breaks for R&D, supporting innovative employees, robotisation and IP Box.

The Polish Deal is also about attracting capital and investors to Poland, as well as repatriating capital to Poland.