On 1st January, 2022, the Polish Order regulations come into force, which will affect the manner and amount of taxation of both employees and contractors. Thus, they will affect the net amount of remuneration received by such persons.
It is worth preparing for these changes as early as possible. Below we present the most important information regarding additional burdens and reliefs which may be taken advantage of by taxpayers.
- What types of reliefs can be applied for as a PIT taxpayer?
- How will the health contribution change for individual PIT taxpayers?
- What type of income qualifies for middle class relief?
- When will a taxpayer be entitled to apply middle class relief?
- Do I have to submit an application to claim the middle-class relief?
- Can I claim middle class relief under all contracts or just one of them (which one)?
- What conditions does a taxpayer have to meet to benefit from the return relief?
- What type of income does the return relief apply to?
- Do I need to make a declaration to take advantage of the return relief?
- Over what period should the return relief be applied?
- Is the return relief cumulative with other reliefs? If so, up to what amount?
- What should not be included in the return relief?
- What conditions do I need to meet to qualify for pensioner relief?
- Do I need to make a statement to qualify for pensioner relief?
- Does pensioner’s relief combine with other reliefs? If so, up to what amount?
- If I am the legal guardian of a child, can I take advantage of taxpayer relief for a taxpayer with four or more children?
- Can I claim tax credits for taxpayers with four or more children if my child is an adult?
- What statement do I need to make to claim tax credits for taxpayers with four or more children?
- Does the tax credit for a taxpayer with at least four children apply to both parents?
- Who is eligible for single parent relief and how much?
- Can I still take other reliefs if I already take single parent relief?
- The tax-free amount – when will it be applied and how?
- Do I have to make a statement to benefit from the tax-free amount?
- Will the Polish tax settlement introduce a tax on contract of mandate?
- What changes will affect contractors?
- What changes will affect on contractor of performance of a specific task?
- Is a board member required to pay a health contribution?
- May a board member deduct his health premium from his income tax?
- When is a board member not obliged to make a health contribution?
- How to determine the mandatory health contribution for a board member?
1. What types of reliefs can be applied for as a PIT taxpayer?
A PIT taxpayer may benefit from the following tax credits, among others:
- middle class relief,
- relief for return,
- relief for pensioners,
- relief for a taxpayer with at least four children,
- single parent relief.
2. How will the health contribution change for individual PIT taxpayers?
As a rule, the basis for calculating the health contribution is to be the actual income (also in the case of economic activity – instead of a fixed lump sum payment). A novelty is the lack of the possibility to deduct health contributions from tax.
|Taxation||Flat rate tax||Progressive scale||Fixed amount tax||Lump sum|
|Rate||4,9% (not less than 270 PLN)||9%||9% (approx. 270 PLN)||60% (annual revenue up to 60k PLN) / 100% (annual revenue up to 300k PLN) / 180% (annual revenue over 300k PLN)|
|Basis for calculating health contribution||Income (minimum: minimum salary)||income||the amount of the minimum wage in force on 1 January of the year in question||Average monthly salary|
3. What type of income qualifies for middle class relief?
To qualify for middle class relief, you must receive income from the following sources (alternatively):
- public service relationship,
- employment relationship,
- outwork (home based work),
- cooperative employment relationship,
- taxable under the tax scale,
- revenues of businesses taxed according to the tax scale (JDG)
(including income of creators and artists who apply 50% author’s deductible costs).
However, there is no middle-class relief for those employed under civil law contracts (contract work, work) and pensioners.
4. When will a taxpayer be entitled to apply middle class relief?
A taxpayer will benefit from the middle-class relief if his/her total annual income is between PLN 68,412 and PLN 133,692 (between PLN 5,701 and PLN 11,141 per month), taking into account income from various sources (cf. point 3)).
5. Do I have to submit an application to claim the middle-class relief?
No, the allowance is calculated automatically, i.e. without a request from the taxpayer.
On the other hand, a taxpayer may submit a request not to reduce his income by the amount of the deduction in the case where, for example, he has more than one employment relationship and is not sure whether his income will not exceed the statutory limit for taking the deduction. In this case, the payer does not apply the deduction at the latest from the month following the month in which the application was received. Such an application shall be submitted separately for each tax year.
6. Can I claim middle class relief under all employment contracts or just one of them (which one)?
Middle class relief can be used under any employment contract – the taxpayer only takes into account his own wages paid when calculating the amount of middle-class relief. The taxpayer is not required to inform the payer of earnings under other contracts – middle class relief can be applied under any of them.
If the threshold is possibly exceeded, the taxpayer will have to make a tax surcharge in the annual return. However, the application of relief by individual taxpayers will not result in tax arrears. In such cases, as a precaution, it will be possible to request that the income is not reduced by the amount of the relief (cf. point 5)).
7. What conditions does a taxpayer have to meet to benefit from the return relief?
The return relief is available to individuals in the following cases:
- Due to transfer of residence to the Republic of Poland that person is subject to unlimited tax liability, and
- has no residence in the territory of the Republic of Poland during the period covering:
- three calendar years immediately preceding the year in which that person changed his or her place of residence in the territory of the Republic of Poland, and
- the period from the beginning of the year in which he changed his residence in the territory of the Republic of Poland to the day before the day on which he changed his residence in the territory of the Republic of Poland, and
- has Polish citizenship, the Card of the Pole or citizenship of an EU, EEA or Swiss Confederation country, or
- had a place of residence:
- continuously for at least 3 years before the year in question and for the period from the beginning of the year to the day before the change of residence – in an EU country, the EEA, the Swiss Confederation, Australia, the Republic of Chile, the State of Israel, Japan, Canada, the United Mexican States, New Zealand, the Republic of Korea, the United Kingdom of Great Britain and Northern Ireland or the United States of America, or
- in the territory of the Republic of Poland for an uninterrupted period of at least 5 calendar years preceding the period referred to above, and
- holds a certificate of residence or other proof of tax residence for the period necessary to establish entitlement to that exemption, and
- has not previously benefited, in whole or in part, from that exemption – in the case of taxpayers who transfer their place of residence back to the territory of the Republic of Poland.
8. What type of income does the return relief apply to?
To qualify for the return relief you must receive income from the following sources:
- public service relationship,
- employment relationship,
- outwork (home based work),
- cooperative work relationship,
- from contracts of mandate,
- from non-agricultural business activities subject to the tax scale,
- on a flat rate basis, or
- income from qualified intellectual property rights (5% PIT),
- taxed as a lump sum on registered income.
9. Do I need to make a statement to take advantage of the return relief?
Yes, a written statement must be made to the payer that the conditions for applying the exemption have been met, together with an indication of the year in which the payer’s exemption began (from the beginning of the year of transfer of residence or from the following year) and the year in which the payer’s exemption ends.
10. Over what period should the return relief be applied?
The relief must be applied in four consecutive tax years, counting from the beginning of the year in which the taxpayer transferred his place of residence or from the beginning of the following year.
The relief may be applied only once – it may not be used in a situation where the exemption has already been settled, wholly or partially, and the taxpayer transfers his place of residence to the territory of the Republic of Poland again. The unused exemption limit is forfeited, it does not transfer to subsequent years and it cannot be used when changing the tax residence again.
The relief applies to taxpayers who have transferred their residence after 31 December 2021.
11. Is the return relief cumulative with other reliefs? If so, up to what amount?
The amount of tax-free income is up to PLN 85,528 per year including the following allowances (during the tax year):
- for persons up to 26 years of age,
- in connection with upbringing of 4 and more children,
- for working pensioners
12. What should not be included in the return relief?
In calculating the amount of income subject to tax exemption, no account shall be taken of:
- income subject to the flat-rate income tax PIT,
- exempt from income tax, and
- on which tax collection has been abandoned under the provisions of the Tax Ordinance Act.
13. What conditions does a taxpayer have to meet to benefit from the pensioner relief?
The relief is available to those who meet all of the following conditions:
- economically active pensioners,
- a taxpayer over 60 years of age (female) and 65 years of age (male),
- the taxpayer is subject to social insurance by virtue of obtaining this income,
- the taxpayer does not receive:
- an old-age or survivors’ pension referred to in the Act on Social Insurance of Farmers,
- an old-age or survivors’ pension referred to in the Act on pension provision for professional soldiers and their families,
- old-age or survivors’ pensions referred to in the Act on old-age pensions for officers of the Police, Internal Security Agency, Foreign Intelligence Agency, Military Counterintelligence Service, Military Intelligence Service, Central Anti-Corruption Bureau, Border Guard, Marshal’s Guard, State Protection Service, State Fire Department, Customs and Penitentiary Service and their families,
- pensions or family pensions referred to in the Act on Pensions from the Social Insurance Fund,
- on account of cash benefits received after dismissal from service by officers of uniformed services and soldiers, in connection with their dismissal from permanent service on the basis of separate acts, for a period of one year every month or for a period of one year at a time or every month for a period of three months – in the amount of 20% of the amount due
- retirement or family emoluments referred to in the Act on the Common Court System.
14. Do I need to make a statement to qualify for pensioner relief?
Yes, you must provide the taxpayer with a written statement that you meet the conditions for applying the exemption (statement made under pain of criminal liability)
15. Does pensioner’s relief combine with other reliefs? If so, up to what amount?
The sum of tax exempt income includes up to PLN 85,528 per year including the following allowances (per tax year):
- for persons up to the age of 26,
- in connection with the upbringing of 4 and more children,
- for taxpayers taking advantage of a return allowance.
16. If I am the legal guardian of a child, can I take advantage of taxpayer relief for a taxpayer with four or more children?
Yes, the relief is available to a person who:
- has parental responsibility,
- acts as a legal guardian if the child resided with him/her, or
- performs the function of a foster family on the basis of a court decision or an agreement concluded with a starost,
- in the case of children of full age who are in education, performs the existing maintenance obligation or performs the functions of a foster family.
17. Can I claim tax credits for taxpayers with four or more children if my child is an adult?
Yes, but under certain conditions. To benefit from the relief, the child must be:
- a minor (up to 18 years of age),
- an adult who, under separate regulations, receives a nursing allowance (supplement) or social pension
- adults up to the age of 25 years studying at schools referred to in national or foreign regulations governing the educational system or higher education, if during the tax year these children:
- do not apply the provisions on:
- flat-rate taxation, or
- the Lump-sum Income Tax Act, with the exception of Article 6(1a) of that Act [income from letting, subletting, leasing, subleasing and other contracts of a similar nature,].
- in respect of income earned, deductible expenses incurred, liability or entitlement to increase or reduce the tax base or revenue, liability or entitlement to make other additions or deductions during the tax year,
- were not subject to taxation:
- under the rules resulting from the Act of 24 August 2006 on tonnage tax, or
- the Act of 6 July 2016 on activation of the shipbuilding industry and complementary industries,
- have not earned income that is taxable under the rules:
- under the rules resulting from the Act of 24 August 2006 on tonnage tax, or
- gaining income from paid sale of securities or derivative financial instruments, including from exercise of rights arising from these instruments, from paid sale of shares, from paid sale of shares in a co-operative and from acquisition of shares or contributions in a co-operative in exchange for a contribution in kind, as well as from income earned from paid sale of virtual currencies subject to 19%,
- income received by the taxpayer up to the age of 26 (exemption up to PLN 85,528) – relief for the young,
- income received by a taxpayer who has transferred his place of residence to the territory of the Republic of Poland, up to an amount not exceeding the amount in the tax year (exemption up to PLN 85 528) – the “new” return relief.
- do not apply the provisions on:
- – in the total amount exceeding PLN 3 089, with the exception of survivor’s pension (up to point c).
18. What statement do I need to make to claim tax credits for taxpayers with four or more children?
You have to submit a written statement to the taxpayer that you meet the conditions for applying the exemption. In addition, you must submit information in your annual return containing details of:
- the number of children,
- their PESEL numbers,
- in the absence of PESEL numbers, the forenames, surnames and dates of birth of the children.
On the other hand, if the tax authority requests explanations, it is necessary to present a statement/certificate/ or other evidence – in particular:
- a copy of the child’s birth certificate,
- a certificate from the family court on the appointment of a legal guardian of the child,
- a copy of the court decision on appointing a foster family or an agreement concluded between the foster family and the starost,
- a certificate of attendance of an adult child at school.
The taxpayer, on the other hand, is not obliged to submit the information in the annual return, if in the submitted tax return, in which the taxpayer made a deduction related to the child allowance (Article 27f of the PIT Act), the taxpayer declared that at the same time the taxpayer benefited from this exemption and the right to apply this exemption and this deduction was granted in relation to the same children.
19. Does the tax credit for a taxpayer with at least four children apply to both parents?
The relief applies to each parent separately. Each of them will deduct PLN 85,528 from their income. Taking into account the additionally raised amount of tax-free income to PLN 30,000, in case of parents settling according to the tax scale, the exemption per parent will amount to PLN 115,528, and in case of parents settling jointly – PLN 231,056.
20. Who is eligible for single parent relief and how much?
The single parent allowance provides for a tax deduction of PLN 1,500 per year. The deduction is available to one parent or legal guardian (the deduction is not divided into months or days of care for the child of each parent). In the absence of an agreement between taxpayers, the deduction is applied by the taxpayer with whom the child resides.
The existing single parent deduction does not apply from 2022.
21. Can I still take other reliefs if I already take single parent relief?
Yes, it is possible to take advantage of the lone parent allowance and the combined allowance:
- to take a family allowance for each of the children you are raising,
- to receive a refund of the unused family allowance (the lone parent allowance is used first, then the family allowance and the unused family allowance is refunded),
- to apply a tax exemption for families with four or more children (if a lone parent raises this number of children, he/she is entitled to be exempted from tax first, and if he/she has taxable income of more than PLN 85,528 per year – to apply the relief).
22. The tax-free amount – when will it be applied and how?
From 2022, an increased tax-free amount of PLN 30,000 applies, which means a tax-reducing amount of PLN 5,100.
The tax-free amount of PLN 30,000 will already be applied when calculating advance payments for income tax by deducting an amount equal to 1/12 of the tax-reducing amount (1/12 of PLN 5,100 = PLN 425 per month). This applies to advance payments from the beginning of the year, calculated on a cumulative basis, i.e. taking into account income earned.
23. Do I have to make a statement to benefit from the tax-free amount?
Yes, the employee must submit a statement for the purpose of calculating monthly advances for personal income tax (PIT2), in which he must indicate that:
- does not receive a retirement or pension through a payer,
- does not earn income as a member of an agricultural production cooperative or other cooperative engaged in agricultural production,
- does not earn income on which he is obliged to pay advances pursuant to Article 44 (3) of the PIT Act,
- does not receive cash benefits paid from the Labor Fund or the Guaranteed Employee Benefits Fund.
The scope of information has not changed from the current requirements.
24. Will the polish tax settlement introduce a tax on contract of mandate?
The initial assumptions of the Polish Order assumed that all mandate contracts would be subject to social security contributions. However, this provision was abandoned in further proceedings of the draft, so currently the Polish Order does not include any changes in the rules of levying social insurance contributions on mandate contracts or changes in the rules of being subject to social insurance in the case of concurrence of titles.
25. What changes will affect contractors?
For contractors, the following changes will be significant:
- increasing the tax-free amount to PLN 30,000 and using it already during the year,
- increase of the second tax threshold to PLN 120,000,
- health contribution will not be tax deductible.
In addition, it is possible to request not to take advances during the year under two conditions:
- annual income must not exceed PLN 30,000
- in the same year you cannot earn income from other sources on which advance tax payments are made taking into account the free amount (e.g. employment contract or business activity).
Before submitting such a declaration, a taxpayer should predict his income and if it is higher than PLN 30 000, he cannot apply for non-collection of advance payments. Thus, only contractors earning less than PLN 3,000 per month or earning sporadic income would have the right to submit this document for a standard contract of mandate (20% costs).
26. What changes will affect on contractor of performance of a specific task?
For contractor of performance of a specific task, the following changes will be significant:
- higher free amount (application for free amount can be made in the same way as for contract of mandate – see point 25)),
- increase of the second tax threshold (application for taxation at 32% rate has to be made in the same way as for mandate agreement).
If the person performing the specific task does not submit a written request for not collecting advance tax payments, then the benefits of the higher free amount will be felt not during the year, but only after the PIT return, when the tax overpayment is returned.
27. Is a board member required to pay a health contribution?
The Polish Order introduces a mandatory health contribution of 9% of the collected remuneration for management board members remunerated by virtue of a resolution, i.e. it applies only to persons performing their functions on the basis of an appointment who receive remuneration on this basis. Such obligation applies to income of management board members of not only Polish but also foreign companies, provided that the person is subject to Polish social security legislation.
28. May a board member deduct his health premimum from his income tax?
No, the health contribution will not be deducted from income tax. This will result in an increased tax and social security burden on the board member.
29. When is a board member not obliged to make a health contribution?
Board members/ proxies will not be required to pay a health contribution when:
- performs duties of board members in Polish companies, but at the same time is subject to the social security system in one of the EU/EEA countries or in another country with which Poland has concluded a social security agreement (e.g. USA, Canada or Australia). In order to confirm this, it is necessary to have an A1 form issued by a foreign insurance institution confirming that he/she is subject to the social insurance system abroad,
- performs an unpaid function.
30. When is a board member not obliged to make a health contribution?
When determining the obligatory health contribution, the amount corresponding to the amount of remuneration collected for the appointment of members of the management board should be taken into account. The health contribution is monthly and indivisible, so there is an obligation to submit monthly Social Security declarations (if the remuneration is not collected in a given month – a zero report should be submitted).
If you would like to find out more answers in connection with the changes introduced by the Polish Order, we invite you to our webinar “The Polish Order – detailed issues important from the perspective of employees and contractors”, which will be held on 7 December, 2021.
We invite all interested parties to register at: firstname.lastname@example.org