Reduction of the personal income tax rate in Poland to 12%. Additional changes

As of 1 July 2022, the previous personal income tax rate in Poland of 17% was reduced to 12%. At the same time, the rules remained, according to which the amount of annual non-taxable income from that year was increased to PLN 30 000 and the threshold of higher 32% taxable income was raised to PLN 120 000. I.e. income up to PLN 120,000 will now be taxed at a rate of 12% (less the amount free of deductions). Income above this amount will be taxed as follows – 12% will be levied on PLN 120 000, while everything above this amount will be taxed at the rate of 32%. This measure should lead to an increase in income for individuals, including foreigners who are legally employed in Poland. According to calculations by the Polish Ministry of Finance, the lower rate will mean a tax reduction of 29%, or almost one third. The change affects taxpayers whose personal income tax is calculated according to the so-called tax scale – employees, pensioners, entrepreneurs (sole proprietors) and contractors. Around 25 million taxpayers are expected to be affected by the changes.

Personal income tax for single persons

From 1 July 2022, the possibility for single persons to settle their tax affairs jointly will also be renewed. This will allow single parents to claim the non-taxable minimum of £30,000 twice. However, it should be noted that the joint settlement will replace (abolish) the tax exemption of PLN 1,500, which was introduced from 1 January 2022.

Change in the amount of the health contribution

This solution is intended for entrepreneurs with a flat tax, as well as a lump sum and a tax card. The tax base can be reduced on account of health insurance premiums paid, but up to a certain limit:

– For a flat tax – the limit will be PLN 8,700 (reduction of income)

– For a flat tax – 50% of the health insurance premiums paid (reduction of income)

– For taxpayers paying by card – 19% of the amount paid (tax relief)

Change of the form of taxation during the year

At the request of the entrepreneur, it will be possible to change the form of taxation during the year. Such an opportunity will be given to those who have chosen a flat or flat-rate tax as their taxation for 2022. Taxpayers will be able to change the form of taxation on a general basis.

Changes can be made until the following dates:

– 30 April 2023- for taxpayers using a flat or line calculation.

– 22 August 2022- for flat-rate taxpayers, which will only be settled on a general basis in the second half of the 2022 tax year.

The change of taxation form only applies to the 2022 tax year. In subsequent tax years, the entrepreneur will have to choose the taxation form as usual at the beginning of the year.

Double counting when calculating advance personal income tax payments

These changes are of interest to those who are involved in calculating advance tax payments themselves (sole traders as well as employers). As of 1 July, double counting of advance tax payments is no longer mandatory. Thus, it is no longer necessary to calculate advance tax payments for personal income tax in accordance with the rules in force for the 2021 tax year and the changes introduced by the Sejm in January 2022.

More favourable rules for the application of the free amount for advance payments

The Ministry of Finance has resolved the problem of taxpayers with several different sources of income at the same time (e.g. several employment contracts or an employment contract and two mandate contracts, or combining work and a pension). Thanks to the decisions adopted, these taxpayers may authorise up to 3 taxpayers (employers, managers, Social Insurance Institution) to reduce advances for personal income tax (up to the amount of PLN 3,600).

– In the case of one agreement, the amount of tax reduction will be PLN 300.

– In the case of two agreements, it is PLN 150.

– In the case of three agreements, it is PLN 100.

As a result, taxpayers who combine employment contracts can fully benefit from the deduction amounts already at the advance tax payment stage. The double tax return filing obligation for 2022 has also been abolished and a unified advance tax return system has been introduced.

The unified tax return filing deadline is until 30 April.

For all taxpayers, regardless of the form of taxation, there is a single deadline for the receipt of returns – 30 April. Therefore, by the end of April, not only taxpayers who file PIT-36 or PIT-37, but also other return forms will be required to file.

IMPORTANT: This applies to entrepreneurs, but not to salaried employees.

If you have any questions, please email office@progressholding.pl