Year 2022 abounded with fundamental tax changes, announced since May 2021 and introduced at an express pace, given the serious nature of the modification of tax laws, which has caused a number of controversy expressed in the public debate. The end of the year is summary time. Therefore, we present selected key changes in the personal income tax introduced Act dated 29 October 2021 – so-called Polish Deal and Act dated 9 June 2022 – so-called Polish Deal 2.0.
New tax scale, increase of tax-free amount
Ministry of Finance decided to increase to 120,000 PLN income threshold from which it starts second income threshold to which it applies 32% tax rate. Consequently, 12 years have changed the income threshold on a tax scale – from 85,528 PLN to 120,000 PLN income per year. As stressed by the Ministry of Finance in the justification for the project Polish Deal: „The income threshold will be adapted to the new reality in which wages in Poland have doubled over the years".
Another positive issue was the increase to 30,000 PLN „tax-free amounts’ for the total taxable persons taxed by individuals clearing tax on a tax scale (previously this amount was 8,000 PLN). Therefore, the tax reduction amount has increased to 3,600 PLN (30,000 PLN x 12% = 3,600 PLN, instead of earlier 8,000 PLN x 17% = 1,360 PLN).
No possibility to deduct the health premium from tax, new rules for the settlement of health contributions
On the basis of the amending law, the provisions on which the income tax deduction of health insurance contributions was based were abolished 7.75% the basis of its dimension. As a result, not only employees but also traders accounting for general rules (tax scale) currently pay it at the same rate 9% from the tax base. On the other hand, the health contribution to the liner tax now amounts to 4.9% the income of the entrepreneur.
From 1 January 2022, the basis for the contribution to the health insurance of persons engaged in economic activities who apply flat-rate taxation on recorded income depends on the annual income level achieved. The contribution is 9% dimension base:
- for revenue up to amount 60,000 PLN is the amount 60% the average monthly remuneration;
- taxable persons with income from 60,000 PLN to 300,000 PLN They will pay a contribution on the amount 100% the average monthly remuneration;
- taxpayers with revenues above 300,000 PLN must count with the base of the dimension in height 180% an average monthly salary.
Average monthly remuneration refers to the enterprise sector In the fourth quarter of the previous year, including payments from profits announced by the President of the Central Statistical Office in “Polish Monitor”. For the fourth quarter 2021 was 6,221 PLN. Revenue less social contributions shall be taken into account for determining the scope of the business.
In each of the above-mentioned cases, there is no longer the possibility of deducting the health contribution from the tax. The contribution is monthly and indivisible.
Termination of the tax card for new taxpayers
In addition, according to the amending law, the basis for the health contribution for companies accounting on a tax card basis is now the amount of the minimum monthly remuneration applicable in a given year. In this case, also the amount of tax cannot be deducted from the health contribution.
Consequently, 2022 the amount of the health contribution for this form of settlement was therefore monthly 270.9 PLN (3,010 PLN gross x 9%). The value is also the overall amount of the minimum health contribution to be paid even though income is not earned in a given month.
Importantly, taxation in the form of a tax card can no longer choose new taxpayers. In addition, if the taxpayer loses his right or resigns from this form of tax settlement, he will not be able to return to it.
Relief for the middle class and its liquidation, lower tax rate In the first tax threshold
The lack of the possibility of deducting the health contribution from the tax has resulted in a number of further consequences. The Ministry of Finance introduced a so-called middle class relief to compensate for the inability to deduct the health contribution from the tax.
The relief was intended to cover taxable persons employed on the basis of a business relationship, employment relationship, placement work, cooperative employment relationship as well as taxable persons gaining income from non-agricultural economic activities carried out on a tax scale basis (not included in the original project).
The credit was to be deducted from the income of an amount on the basis of a formula that was subject to annual income levels. i.e. given the range from 68,412 PLN to 133,692 PLN Annual 5,701 PLN to 11,141 PLN monthly.
However, the relief has been criticised for its complexity and the lack of possibility to apply to some of the revenues (retirement, some contractors or taxpayers in the contract for the work could not benefit from it). Consequently, the relief was eliminated. In her place, the legislator decided to reduce first the tax threshold of 17% to 12% for all taxpayers accounting on general terms.
Introduction of the possibility to deduct part of health contributions on other grounds
In order to minimise the effects of the lack of the possibility of deducting the health contribution from the tax, the legislature in the law Polish Deal 2.0 provided for the possibility of deducting the health contribution paid on the following basis:
- from the tax base for taxable persons accountable for linear taxation to the limit 8,700 PLN (loss of income),
- for taxable persons accounting for a lump sum on registered income, of 50% contributions paid (recollection of revenue) and
- for taxable persons accounting for a tax card, 19% contributions paid (repeal of tax).
No similar preferences were introduced for taxable persons accounting under the general rules due to the reduction in the rate of tax mentioned above In the first tax threshold with 17% to 12%.
Selection of the tax scale by taxpayers taxed in 2022 linear tax or lump sum on recorded revenue (transitional provisions)
Due to positive changes in the tax scale, the tax threshold and the increase in the free amount, taxpayers who 2022 taxing their income with a linear or flat-rate tax on recorded revenue, they were given the option to opt for income taxation on a general basis after the end of the tax year (in annual accounting).
Amendment of the rules on the application of the tax-free amount at the advance stage
After entry into force Polish Deal 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 amount of remuneration for each employer is too low to use the total free amount.
Polish Deal 2.0 introduced 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.
The total deduction applied by all payers in a given month shall not exceed the amount constituting 1/12 (a monthly) tax reduction amount. The amount available is one and applies to all the taxable person's combined income and not separately for each source of earnings.
Possibility to include 1/12 the amount reducing the tax already at the time of the collection of the advance on income tax also included payers, other payers paying benefits from the activities performed in person 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.
Introduction and abolition of tax abolition
Tax Abolition was addressed to PIT and CIT taxpayers. It was intended to apply to revenue not declared in particular in connection with the non-disclosure of income or the origin of revenue.
According to standard rules, the revenue withheld and detected by the tax is taxed at a rate 75%. In turn, the rate of taxation on income subject to tax abolition was to be 8% the tax base. The regulation was intended to be temporary and the deadline for submitting the application was set for a period from 1 October 2022 to 31 March 2023
In connection with the provisions in question, the President asked the Constitutional Court to examine their compatibility with the Constitution. Consequently, the Ministry of Finance, without waiting for the Court to decide, decided to repeal this regulation.
Introduction and subsequent reduction of relief for the protection of monuments
From 1 January 2022 a relief has been introduced to protect monuments. It now consists of third Pillars – deductions from the tax base (general rules, linear tax, flat-rate income tax):
50% payments to the community renovation fund or housing cooperative created for the historic property in the tax year,
50% This appropriation is intended to cover the following:
expenditure on acquisition of historic immovable property up to the amount 500,000 PLN (provided that a minimum expenditure is incurred in respect of point No. 2).
It should be pointed out that the greatest benefit of this relief is for those with high earnings who have considerable investment resources. They can be the ones that can significantly reduce their income tax. In view of the public criticism of the solutions under consideration, the Ministry of Finance has decided to waive the possibility of deducting property acquisition expenses. Changes will enter into force from 1 January 2023
Deferment of the introduction of PIT JPK and CIT JPK
From 1 January 2023 The taxpayers were to be burdened with an additional duty. This is the need to regularly transfer tax books to the tax office. Thanks to this type of tax office, it will be able to verify the tax settlements in the scope of CIT, PIT and lump sum.
This will be analogous to the already existing VAT JPK. Polish Deal 2.0 postponed the date of entry into force of the new obligations. This is intended to allow taxpayers to better prepare for electronic transmission of accounting data. The new obligations will begin to apply:
- from 2024 – for CIT taxpayers whose revenue for the previous tax year exceeds the amount 50,000,000 EUR,
- from 2025 – with regard to PIT and CIT taxable persons obliged to draw up a VAT JPK declaration,
- from 2026 – for other taxpayers of PIT and CIT keeping tax books.
- 1.5% PIT tax on OPP instead of equalisation mechanism
Reduction in income tax rate from 17% to 12% In first the tax threshold also led to a risk of reducing revenues to the Public Benefit Organisation from 1% tax.
Therefore, a levelling mechanism is provided for containing two ways of allocating additional resources from the State budget to individual organisations:
- by algorithm – the money would be distributed between OPP in the proportion in which they participate in the distribution of revenue from 1%;
- through an open tender competition.
The solution guaranteed that at least 30% the funds will be divided by the algorithm, and 30% by a contest. The Minister of Finance, in agreement with the Chairman of the Committee on Public Use, would decide on the exact proportions of this, and now the Deputy Prime Minister and Minister of Culture Piotr Gliński will decide each year. Details would be set out in the Ministry of Finance Regulation.
The proposed mechanism therefore assumed that at least 30% the funds will be transferred through the algorithm and 30% by an open tender. The regulation of the Minister of Finance would already specify the exact proportions that can be achieved e.g. 50% / 50% or 70% / 30% in favour of an algorithm or competition mode solution.
The Senate, in its explanatory memorandum to the amendments, stated that the equalisation mechanism was incompatible with the Constitution, as it provided for an independent annual standardization in the Regulation of Cases of fundamental importance for the exercise of the powers of the OPP i.e. to receive the amount of compensation for the financial damage and, therefore, authorises the implementing authority to lay down legal standards which go beyond the framework of the provisions issued only for the purpose of implementing the Act.
The Senate therefore managed to push through the solution of not introducing a equalising mechanism, instead increasing support for OPP from 1% to 1.5%.
In summary
This article only deals with some of the changes in personal income tax. Tax experts themselves may have a problem keeping up with the transformation of the tax system so far ahead one A year, not to mention non-professionals. As you can see, the rush to prepare a significant amendment to tax law is not advisable.
The government explained the need to act quickly with the need to introduce solutions to support recovery after the coronavirus epidemic. Fixing Original Version Polish Deal the introduction of a package of amendments in the middle of the year, i.e. the so-called Polish Deal 2.0.
Fortunately, everything indicates that the number of tax changes in 2023 will be much smaller – more pleasant on the basis of PIT.
Mateusz Krawczyński. About the author: 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.