We have been through two years of the pandemic, manipulation of gas prices and war across our eastern border. To say that we live in difficult times is an understatement. We must realise that Russia has not only attacked Ukraine. Russia has also impacted energy and food security and led to economic destabilisation in Europe, generating enormous inflation”, said Prime Minister Mateusz Morawiecki.

 

“We are looking for solutions, holding discussions and consultations so that our tax system is as simple and fair as possible, and at the same time, one that encourages people to work and to be entrepreneurial”, he added. The Prime Minister also said that taxpayer-friendly taxes must, first and foremost, be low, simple and fair, which is why Poles can count on state support in these troubled times.

PIT to be reduced from 17% to 12% starting from 1 July

The whole world is struggling with inflation. We want to limit its impact on Poland as much as possible. The Council of Ministers has adopted a bill that provides for further favourable tax changes to help Poles in today’s trying times.

“We are lowering the PIT from 17 to 12 per cent. This is the most significant tax cut in years. A tax cut that is bound to affect several million more taxpayers”, announced PM Morawiecki.

The PIT rate will be reduced from 17% to 12% in the first-rate band, applicable to those earning up to PLN 120,000 a year. In practice, this means a nearly 30% tax cut. The PIT reduction will apply to taxpayers using the rate band, including retirees and pensioners, employees, contractors and entrepreneurs.

Solutions from before 2022 would already release nearly 6.7 million taxpayers from paying the PIT. This number will more than double once the new changes are introduced, with almost 15.2 million taxpayers set to be relieved of this duty.

Preferential conditions for health contribution payments

Yet another positive change is preferential conditions for health contribution payments. Entrepreneurs paying flat tax, lump-sum tax or fixed amount tax will be able to deduct paid health contributions, up to a specified limit, from the tax base. This solution will apply to nearly 1.4 million taxpayers.

For flat tax payers, the limit will be PLN 8,700 (reduction of income). For lump-sum tax payers, it will be set at 50% of health contributions paid (reduction of revenues). For fixed amount tax payers, the limit will be 19% of the contributions paid (reduction of tax).

Abolition of the middle-class tax relief

The new tax solutions will abolish the so-called middle-class tax relief. At the same time, the introduced changes will be beneficial or neutral for taxpayers.

In practice, the tax office will refund the difference between the tax due and the tax calculated using the middle-class tax relief to anyone for whom the tax settlement based on the middle-class tax relief turns out to be more profitable than the settlement according to the new rules.

The reform also provides for liquidating the so-called tax amnesty and changing the heritage building tax relief so that it only applies to renovation expenses. A new security mechanism will also be introduced, requiring any renovation of heritage buildings to be approved by a heritage conservator.

More favourable rules for applying the tax credit for advance tax payments

The project also aims to solve the problems faced by taxpayers who have several sources of income at the same time. This includes individuals who, for example, work under several employment contracts or combine work income with an old-age pension. After the changes, starting from 1 January 2023, such persons will be able to authorise up to 3 taxpayers to reduce their advance PIT payments (by PLN 3,600), including:

• employers,
• principals,
• Social Insurance Institution (ZUS).

“We are simplifying the tax credit settlement for people who work two or three jobs. Many people and organisations pointed to this issue as a critical matter that should be included in the act. In this way, people working many jobs will be able to experience a reduction in taxes starting from the first payday. This solution was called for by entrepreneurs, accountants and tax advisers”, stressed PM Morawiecki.

The tax cut amount will be as follows:

• for one contract – PLN 300,
• for two contracts – PLN 150 each,
• for three contracts – PLN 100 each,

Thanks to this, multi-job holders will be able to take full advantage of the tax credit as early as the stage of making advance tax payments.

The double obligation to calculate advances for 2022 will also be repealed, and as such, a uniform system for calculating advances will apply.

Beneficial changes for families

The new regulations will enable a joint settlement with a child for single parents, for whom the tax credit amount will be 1.5 times the base amount, i.e. PLN 45,000. Single parents who are raising a child with disabilities will benefit from double the tax credit amount – PLN 60,000.  The joint settlement will replace the PLN 1,500 tax relief introduced on 1 January 2022.

Moreover, 2022 will see the amount that a child can earn without his or her parents losing their tax preferences increase from PLN 3,089 to PLN 16,061.28 (12 times the social pension amount).

Family pensions received by minors will not count towards the parents’ income. This means that children will be treated as separate taxpayers, and as such, will benefit from the tax credit amount of PLN 30,000 alongside their parents.

Tax reliefs (for young people, for return from emigration, for families with 4+ children and for working senior citizens) will also cover maternity benefits granted to parents and carers who take foster children into their care. This will ensure that benefits are not taxed – up to the limit set by these reliefs.

Proceeds from 1% tax donations for Public Benefit Organisations, as well as financial security for local governments

We will introduce a special mechanism to mitigate the impact that the reduced proceeds from the 1% PIT donations will have on the PBO sector.

On the other hand, local government units will be compensated through an increase in the development subsidies or a supplement to the general subsidies.