Polish Tax Order – more money in the wallets of Polish citizens

Over the last 5 years, we have reduced nearly 20 taxes. This includes reduction of the personal income tax from 18 to 17 percent as well as a zero-percent personal income tax for young adults. Now the time has come for another significant step in tax changes: the tax-exempt amount will be increased to PLN 30 thousand. The reform will benefit approx. 18 million Poles, while for 90 percent of taxpayers the new solutions will be either beneficial or neutral.

“The essential change is the increase in the minimum income subject to taxation in Poland to PLN 30 thousand per year,” emphasised Prime Minister Mateusz Morawiecki. He added that this is coupled with another tax bracket being raised from PLN 85 thousand to PLN 120 thousand. “This is the basic instrument for building the Polish middle class,” stated the Head of the Polish Government.

Taxes – what will change?

• The tax-exempt amount will be increased to PLN 30 thousand.
• Married couples will have the opportunity to take advantage of a tax-exempt amount of PLN 60 thousand.
• The 32 percent tax bracket will be raised from approx. PLN 85 thousand to PLN 120 thousand.
• A “middle-class tax relief” will be introduced. It will apply to those who work full-time and earn an annual income from employment contracts between PLN 68,412 and PLN 133,692.
• The reform will be either beneficial or neutral for taxpayers who work under an employment contract with monthly remuneration of up to PLN 12.8 thousand.
• Pension up to PLN 2.5 thousand will be exempt from tax. Pensioners whose benefits are higher will pay tax only on amount exceeding PLN 2.5 thousand.
• For engineers, IT professionals and doctors, among others, flat rates will be further reduced.
• A so-called “Fair Play” principle will be introduced with respect to health insurance contributions. This means that a situation where health care expenses are borne almost exclusively by employees will not be accepted. For those who run their own business and pay their personal income tax at the flat 19 percent rate, the health insurance contribution will be 4.9 percent of income.

How much will Poles benefit from the changes?

Full-time employees

• A cashier who earns PLN 3,000 gross (PLN 2,203 net) will gain approx. PLN 1,840 per year.
• A physical labourer who earns PLN 4,000 gross (PLN 2,907 net) will gain approx. PLN 1,360 per year.
• An accountant who is paid PLN 5,000 gross (PLN 3,613 net) by their company will gain approx. PLN 560 per year.

Business owners

• A tailor who earns PLN 3,000 gross (PLN 1,620 net) will save approx. PLN 1,300 per year.
• A hairdresser who earns PLN 4,000 gross (PLN 2,480 net) will save approx. PLN 2,000 per year.
• A mechanic who earns PLN 5,000 gross (PLN 3,310 net) will save approx. PLN 1 thousand per year.

Families

• A 2+2 family, where the parents collectively earn a total of PLN 6,500 gross (PLN 4,900 net), will, provided they file a joint income tax return, gain PLN 328 net per month, meaning almost PLN 4,000 per year. The couple will also be able to deduct a tax relief for two children of PLN 2,200.

Pensioners

• A pensioner who receives a pension of PLN 3,200 gross (PLN 2,660 net) will gain PLN 1,600 per year.
• A married couple of pensioners where one of the spouses receives minimal pension, while the other an average pension, will gain PLN 2,997 per year.
• A married couple of pensioners where both spouses receive a pension of PLN 1,800 will gain PLN 2,946.

Tax on large corporations

We want to tighten the tax system by introducing a new form of corporate income taxation for large corporations. That way, they will no longer be able to evade paying taxes in Poland.

• This tax will not burden Polish small and medium enterprises.
• It will not burden investors and will not reduce Poland’s attractiveness for investment projects. Companies which incur real investment expenditure will also no be subject to the tax. The tax will also not burden enterprises which struggle with consequences of the pandemic.
• It will at most be paid by a few percent of companies – the largest corporations. This means those companies which do not pay a corporate income tax in Poland not because of large-scale investment projects, tax reliefs or a critical situation, but because of tax evasion and aggressive tax engineering.

Support for local governments

The Government wants to help finance investment projects carried out by local governments. New roads, sports venues, renovated schools, restored parks or projects related to water and sewage facilities – these are only some of the examples of beneficial changes which can be experienced by residents near their homes. At the same time, we want to assist local governments with respect to consequences of implementation of ambitious solutions of the Polish Order programme, especially in the scope of tax system.

“There has never before been such support for investment projects related e.g. to roads, infrastructure or modernisation of heating networks as under our administration,” stressed Prime Minister Mateusz Morawiecki.

For local governments, a new part of the general subsidy intended for investment projects, called “developmental”, will be introduced. The local government income system will also be improved so that the income is more stable. At the same time, the Government, by the end of 2021, will provide local government units with additional PLN 8 billion in support to help them carry out their tasks.

Introduction of the Polish Order and the Government’s support for local governments will lead to a significant improvement in the financial situation of local governments. Their income will increase by 4.3 percent. In 2022, local government income will reach approx. PLN 146 billion (from personal income tax, corporate income tax and general subsidy). Taking into account the financing from the Polish Order Fund, income will increase by an astounding 9.6 percent.

Apartment without own contribution

Currently, many families can afford to take out a housing loan, but the requirement to provide own contribution is an obstacle. For this reason, we would like to offer Poles the opportunity to take advantage of a state-guaranteed housing loan. Bank Gospodarstwa Krajowego (BGK) will guarantee up to 20 percent of the loan amount, not more than PLN 100 thousand, through a period of at least 15 years. Importantly, once the family has their second child, BGK will repay a part of the debt.

• The loan without own contribution will be a mortgage housing loan that meets the conditions specified in legislation and will be granted by banks which join the programme under an agreement with BGK.
• Both married couples and those who live alone will be able to take advantage of the solution, but only if they own no other apartment.
• BGK will make a one-time repayment of a portion of the guaranteed housing loan in relation to the birth of a child. This will constitute a so-called “family repayment” of:
  • PLN 20,000 – when the family has their second child,
  • PLN 60,000 – when the family has their third or subsequent child.

Easier building of houses with a footprint area of up to 70 m2 

We want to make it easier for Poles to build single-family houses with a footprint area of up to 70 m2. Building such a house will no longer require a building permit, appointment of a building site manager and keeping of a building site logbook; it will be possible via a simpler  procedure of “notification with building design”.

• It will be possible to build single-family residential houses with a footprint area of up to 70 m2 without a building permit, appointment of a building site manager and keeping of a building site logbook.
• These buildings should be detached and have no more than two floors. This means that these structures should in principle be small and have a simple design, which facilitates adherence to safety requirements.
• The footprint area of the houses was set at up to 70 m2. The number of designed buildings may not exceed one per each 500 m2 of plot surface area. This condition will guarantee that the design will serve individual purposes only, and will not be used to build multi-structure estates. At the same time, it is permissible for the plot to have a surface area of less than 500 m2.
• Building the house will require notification to building supervision authorities and project architect’s supervision over the compliance of building works with the design with a specified date for commencement of building works.