In connection with the Act amending the Income Tax Act on individuals and certain others Act dated 9 June 2022 (so-called Polish Deal 2.0) the rules for charging advances for income tax have changed significantly. In order to increase the discretion to apply the tax-free amount as newly added Article 31b PIT Act, the payers will be required to reduce the advance on income tax by an amount not exceeding 1/12 the tax reduction amount, however, provided that the taxable person pays to that payer (and in total not more than 3 to the payers) a statement of the application of the reduction.
After entry into force Polish Deal 1.0 (Act dated 29 October 2021) It turned out that taxpayers who are employed by many employers for fractional part-time jobs (e.g. teachers) could not actually benefit from the full amount free at the advance stage. PIT-2 they can only submit one the employer, and the remuneration of individual employers is too low to use the total free amount.
Polish Deal 2.0 introduces the possibility of simultaneous submission PIT-2 two or even three employers. If PIT-2 will be submitted to two employers, each employer will reduce tax by 1/24 the tax reduction amount. If PIT-2 will receive three employers, each with a lower tax by 1/36 that amount.
Application procedure
The following payers will be affected by the applicable method of taking into account the tax reduction amount (application):
- employers in the calculation of income tax advances on revenues from the business relationship, employment relationship, overhead work or cooperative employment relationship, social security benefits paid by employers, and in labour cooperatives on advances charged on balance sheet surplus payments,
- legal persons and their organisational units on advances charged to foreign pensions paid,
- universities, federations of entities of the higher education and science system, scientific institutes of the Polish Academy of Sciences, research institutes, international scientific institutes operating in the territory of the Republic of Poland, workplaces and other organizational units on advance payments for income tax calculated on paid scholarships,
- detentions of investigators and criminal establishments on advance payments on work due on temporary and convicted persons,
- social inclusion centres from advances calculated from integration benefits and incentive integration premiums granted on the basis of Act dated 13 June 2003 Social employment.
More contributors and taxpayers will benefit from the changes
Moreover, in connection with a direct appeal to Article 33-35 and Article 41 The PIT Act, the possibility of taking account of the tax reduction amount, will also cover payers and other payers paying personal benefits (Article 13 PIT Act) and payers collecting advances on income from property rights. The payers concerned have not yet been able to apply a reduction in the collection of advance payments on tax, so that in taxable persons obtaining revenue from the sources indicated, the tax reduction was only taken into account in the annual accounts.
Legal procedure
To second the group of payers obliged to take into account, this time by law (and therefore without the taxpayer's request) the amount of tax reduction:
- agricultural production cooperatives and other cooperatives involved in agricultural production, when calculating advance payments for income tax on members of cooperatives or their household payments for accounting days, share in the income of the cooperatives, as well as on social security benefits received from them,
- the pension authorities on advances directly paid by those pension authorities, pre-retirement benefits and pre-retirement benefits, teacher compensation benefits, social security, structural, social and parental supplementary benefits,
- employment authorities from advances calculated on benefits paid from the Labour Fund,
- provincial labour offices from advances on benefits paid from the Guaranteed Workers' Benefits Fund,
- the enforcement authority or entity that is not the legal successor of the undertaking of employment, taking over its obligations arising from the business relationship, employment relationship, overhead work and cooperative employment relationship making the benefits in question as the undertaking of employment under Article 12(1) PIT Act.
„Breakdown’ of the free amount
In this statement (application) PIT-2 the taxable person should indicate that he authorises the payer to reduce the advance on the tax by an amount which represents:
- 1) 1/12 the tax reduction amount, or
- 2) 1/24 the tax reduction amount, or
- 3) 1/36 tax reduction amount
- - depending on the number of ‘stages’ from which it generates revenue.
Where the taxable person in a given month has obtained revenue from the same payer from different titles, the payer shall apply to these revenues a declaration of application of a reduction, the total amount of deduction applied by that payer during that month shall not exceed the amount indicated in that declaration.
The total deduction applied by all payers in a given month shall not exceed the amount constituting 1/12 (monthly) tax reduction amount (free amount one and applies to all the taxable person’s combined income and not separately for each source of earnings.)
Non-collection of advances on tax with an expected non-excess of the amount available in the tax year
In addition, due to the content of the newly added Article 31c The PIT Act, the payers will not be obliged to collect advances on income tax, provided that the taxpayer receives a request not to collect them in a given tax year.
The taxpayer shall be entitled to submit the application where it provides that the tax-based income obtained by him does not exceed, in a given tax year, the tax-free amount, 30,000 PLN.
Where the taxable person who made the application obtains taxable income on a tax scale that exceeds that payer in the tax year 30,000 PLN, the payer calculates the advance payments in a further phase without any reduction in the amount referred to under Article 31b (deduction of the advance on tax by an amount not exceeding 1/12 the tax reduction amount).
The amendments discussed above are to enter into force on the day 1 January 2023 They should be assessed as positive for taxpayers, but they are introduced to repair Polish Deal 1.0 applicable from 1 January 2022, which – as it was introduced at an express pace – now requires many amendments.
About the author: Mateusz Krawczyński. Junior tax consultant in Russell Bedford Poland. Graduated from bachelor's degree in Logistics and Master's degree in Finance and Accounting. He is currently studying the Law at Lazarski University. Previous professional experience in one of the so-called Big Four companies. He specializes in tax on goods and services, in particular with regard to VAT settlements in local government units.