NEW ORDER in Poland - Key assumptions

In October 2021, the Polish parliament adopted a new package of laws related to economic activity. The package was called the New Deal. The act was signed by the President of the Republic of Poland in November 2021.

What’s new: tax-free amount of 30,000 PLN, the required insurance premium of an individual entrepreneur in the amount of 4.5%, but not less than 9% of the minimum wage (3050 PLN), no taxation of the minimum wage for 2/3 of pensioners is crucial changes to this act. The new tax rules also aim to foster innovation, external expansion, investment and business development. The tax system should become (according to the government’s plan) one of the engines of economic growth. It should also have a positive impact on the labor market, reducing employment costs and encouraging the return of Poles living abroad. The new decisions should enter into force on January 1, 2022.

Tax changes

The most important changes to IBs in terms of taxation include:

• The amount of tax-free income is increased to PLN 30,000 PLN
• The tax threshold was raised from PLN 85,00. PLN up to 120,000 PLN
• private entrepreneurship fee in the amount of 4.5%, but not less than 9% of the minimum wage (3,050 PLN)
• Decline in one-off rates, incl. for engineers and specialists in the medical industry from 17 to 14%, and IT specialists from 15 to 12%
• Retirement pension without tax up to 2,500 PLN
• Zero personal income tax for large families 4+
• Tax reboot of the economy – a package of solutions for entrepreneurs – is still ahead of us

Pros:

About 70% of the country’s population will pay lower taxes. Almost 9 million people, including people with the lowest income, as well as 2/3 of disability pensioners, will not pay personal income tax. The number of people paying the tax in the amount of 32% will also decrease – from 1.24 million to 620,000.

The reform will benefit people working under a contract of employment with a monthly income of approx. 6,000 PLN gross, and employees with an income of 13,000 PLN gross thanks to the application of an additional mechanism in the form of a correction tax.

Minuses:

Individual entrepreneurs will suffer if they have to pay an insurance premium of 4.5%, but not less than 9% of the minimum wage (3,050 PLN). Replacement of the flat-rate insurance premium for entrepreneurs (currently 381.81 PLN) by 9% flat rate. The transition of employees with higher incomes, who already pay 32%, to the so-called an activity taxed with a 19% flat tax would no longer be so attractive, and the collection of taxes and levies of 28% (19% income tax and 9%) is particularly unfair and unjustified.

Employed under a contract of employment with a monthly income of approx. 6,000 PLN will have to bear the burden of up to 45% of remuneration.

Investments

The new program provides for investment financing from two sources:

• From the created fund of Bank Gospodarstwa Krajowego (BGK) and the issue of bonds
• PLN 770 billion under the Cohesion Policy and the Reconstruction Fund – EU funds

The program lists investments in almost every category of infrastructure in the country – roads, ports, airports, central communication port, digital infrastructure and more. The BGK Foundation should also provide an impulse for development.

In addition, it will be a set of rules that should significantly facilitate Polish companies’ participation in the investment process. On the one hand, they will increase the availability of funds for investments, and make it easier for investors who have money to contact Polish enterprises that urgently need it to increase productivity or introduce new products and services. On the other hand, they will simply make corporate investments cheaper. Thanks to this, for the same amount, with the same capital, it will be possible to implement even more ambitious projects.

Real estate issues

Flat without own contribution – this program should facilitate the financing of own flat for those groups of citizens who:

• They want to buy their first apartment in the primary real estate market
• Searching for a flat on the secondary market, ie a social flat
• They want to build a house

Basically, it is an aid to those who cannot save and pay for real estate. Own contribution to this program will be guaranteed, provided or reimbursed by the state. The state guarantees a maximum of 100,000 PLN. Own contribution for people taking out a loan or offering co-financing up to 160,000 PLN for people using social housing or large families (the more children, the greater the help). In total, approx. 80 thousand people will be able to use the program “Apartment without own contribution”. people aged 20 to 40. The housing subsidy will depend on the number of children in the family –  20,000 PLN for the second child, 60,000 PLN for the third, 20,000 PLN for each subsequent child.

In addition, the New Deal proposes to pass a law that will allow the construction of single-family houses up to 70 m2 without a building permit, management and construction logbook, and only on the basis of a notification.

Summary

The New Deal has its pros and cons. One of the biggest negatives is the rush to change. Tax authorities are not ready to explain the New Deal and a number of legal uncertainties will emerge. Business and tax officials take time to understand the procedure.

Not all entrepreneurs, and especially individual entrepreneurs, support this package of innovations and events. Many of them consider this package to be populist. We are confident that the tax cuts will only affect people who are not much affected by it, while the rest will have to pay more. Professionals, especially computer scientists and other high-paying professionals, will look for their own solution to this problem.

If you have any questions or need advice, write to us at office@progressholding.pl.