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Advicero Nexia | TAX ALERT | Polish Order 2.0 – summary of planned changes

Dear Sirs,

We hereby present you a summary of the most important changes, in the tax law provisions related to the Polish Order 2.0. On 12 May 2022 Polish Order 2.0. was passed by the Parliament and sent to legislative work in the Senate. The bill has now been forwarded to the President and the Speaker of the Senate. The vast majority of the changes are to come into force as of 1 July 2022.

We encourage you to contact us to discuss the detailed impact of these changes on the tax settlements of your companies.

Polish Order 2.0 – summary of planned changes

1. Reduction of the PIT rate and elimination of middle class relief

2. Further changes to the health contribution

3. Child allowance

4. Harmonisation of deadlines for filing annual PIT returns (PIT-28, PIT-28S) and another declarations

1. Reduction of the PIT rate and other related amendments

According to the new regulations, the PIT rate in the first tax threshold  (i.e. up to PLN 120 000) will be reduced from 17% to 12% for taxpayers taxed according to general rules (tax scale).  The second tax threshold will remain unchanged. This is to “compensate” for the planned elimination of the middle class relief and other changes.

The middle class relief was supposed to be a favourable solution for taxpayers with incomes between PLN 5,701 and PLN 11,141 per month, who thanks to it were not to lose out on the Polish Lada. In practice, however, it has proved troublesome for both employees and employers. From 1 July this relief will be abolished, while taxpayers are expected to gain through a reduced rate of tax. Also linked to the abolition of the middle class relief is the “hypothetical output tax” that will be calculated by the tax office. This institution will apply if the tax due for 2022 resulting from the submitted annual return under the new rules, effective from 1 July, is higher than the hypothetical tax due for 2022, the head of the tax office will reimburse the taxpayer the amount of the difference. According to the Ministry of Finance, this is to apply to people who could lose out from the elimination of the middle class relief.

The free amount, currently PLN 30 000, will remain unchanged. With no change to the free amount and the change to the tax rate, the monthly income tax reducing amount will be reduced from PLN 5,100 to PLN 3,600.

From 1 January 2023, taxpayers who receive income from several contracts will be able to authorise up to three payers (employers, principals, Social Security, so-called multi-employed persons) to reduce their PIT advances

by the monthly deduction. This amount in total (as for one contract) will not be allowed to exceed PLN 3,600 per year. This solution is to apply also to working pensioners or pensioners who receive benefits from several disability pension funds. It should be emphasized that this does not mean that each of the indicated payers will apply 1/12 of the tax reducing amount. The taxpayer will have to indicate accordingly in the declaration in which part a given payer is entitled to reduce the advance payment.

Moreover, as from 1 January 2023, the PIT-2 declaration will also be filed by taxpayers who receive income from civil law contracts (mandate or contract of specific work), managerial contracts, enterprise management contracts, as well as by persons performing social and civic duties.

2. Further changes to the health contribution

One of the significant changes introduced by the Polish Deal was the abolition of the possibility to deduct health premiums from tax. According to the Polish Order 2.0, this possibility will be partially restored for entrepreneurs, who will be able to reduce the tax base by the health contributions paid up to a certain limit. These limits will be for individual taxpayers accounting for:

  • flat rate – PLN 8 700 (reduction of income);
  • with lump sum from registered incomes – 50% of health premiums paid (reduction of income);
  • in the form of a tax card – 19% of the premium paid (tax deduction).

The Polish Order 2.0 , unlike the previously introduced Polish Deal, which brought about a significantly unfavourable change for entrepreneurs settling according to the tax scale and persons employed on a permanent basis, did not introduce any changes for them in the area of health contributions. The unfavourable rules have therefore not been removed or adjusted in any way to the benefit of the above taxpayers. 

3. Child allowance

Under PPL 2.0, lone parents will regain the right to file a joint tax return with their child and will benefit twice from the 30 000 PLN tax-free personal allowance. The child will be treated as a separate taxpayer.

The amount of the earnings limit for an adult studying child will also be increased. The limit applies to certain sources of earnings of such a child. Under the changes, the limit will increase from PLN 3,089 to twelve times the amount of the social pension (as of March 2022, the amount of the social pension is PLN 1,338.44, so its twelvefold amount is PLN 16,061.28).

4. Changes in annual PIT returns (PIT-28, PIT-28S) and other declarations

It is planned to extend the deadline for filing annual PIT-28 and PIT-28S tax returns (concerning taxpayers settling their accounts in accordance with the lump-sum tax on registered income) to 30 April of the year following the tax year. This deadline will apply to annual returns submitted for 2022. The deadline for payment of the lump sum for December and the last quarter of the tax year has also been changed to 20 January (i.e. the same as for taxpayers using the tax scale). Currently, the last lump sum for the tax year (for December and the fourth quarter) must be paid by taxpayers by the deadline for filing the return, i.e. by the end of February.

According to the Polish Order 2.0, the deadline for mandatory keeping of books in electronic form and sending them to the tax office will change. The electronicisation of accounting records will involve 3 stages:

  • from 2024 CIT taxpayers, whose revenues for the previous tax year exceeded the amount of EUR 50 million,
  • from 2025, CIT taxpayers (other than those mentioned in item 1) obliged to send JPK_VAT records, and PIT taxpayers obliged to send JPK_VAT records
  • from 2026 remaining PIT and CIT taxpayers.

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