Changes in the Polish Order [DRAFT ACT]

• the total amount of the reduction applied by all taxpayers in this month does not exceed the amount representing 1/12 of the amount reducing the tax, and
• in the tax year, the taxpayer, through the payer, did not use the full amount of the reduction of the tax-reducing amount specified in the first range of the tax scale, including when he submitted an application for not collecting advances in a given tax year, referred to in the added art. 31c.

In the draft act, it is proposed that the taxpayer, having in mind the choice of the best solution, could "divide" 1/12 of the tax-reducing amount into a maximum of three amounts and therefore authorize up to three taxpayers to use it. The taxpayer will be able to indicate in the statement submitted to the payer that this payer is entitled to reduce the advance payment by an amount equal to:

1. 1/12 of the amount reducing the tax (after the change by PLN 300),
2. 1/24 of the amount reducing the tax (after the change by PLN 150),
3. 1/36 of the amount reducing the tax (after the change by PLN 100).

The second significant change is that it is the payer who enters into a new employment relationship (e.g., employment relationship or orders, enterprise management contract, management contract) that will be obliged to initiate the submission of an application (declaration) by the employed taxpayer on the rules for applying by the payer 1/12 of the tax-reducing amount and the deduction of health insurance contributions when calculating the tax advance. So far, such an obligation has not been formulated in the PIT Act.

Another fundamental change in the scope of accounting for 1/12 of the tax-reducing amount by payers is the possibility of its use by all payers, after they receive an application (declaration) from the taxpayer.

Therefore, this amount will also be able to be used by the ordering party and other payers who pay benefits from the activities performed in person, referred to in Art. 13 of the PIT Act and payers collecting advances on income from property rights. All payers referred to in Art. 41 paragraph. 1 of the PIT Act, and additionally payers referred to in Art. 35 sec. 1 point 9 of the PIT Act.

Employers will therefore be required to ask if employees want to take advantage of the new solutions regarding the use of 1/12 of the amount reducing the advance tax.

No reaction from the employee (until June 30, 2022) will mean his decision to remain on the current terms. On the other hand, the new employee's declaration on the application of 1/12 of the amount reducing the advance tax will apply from July 1, 2022.

In addition, until June 30, any other taxpayer obtaining income through the payer will be able to submit an application to his payer on the application of 1/12 of the amount reducing the advance tax. The declaration will apply from July 1, 2022 (Article 14 of the draft act).

Releasing the payer from the obligation to collect advance tax - art. 31c of the PIT Act

The draft act contains regulations under which the taxpayer will be able to authorize his payer, through a written application, not to collect advance payments referred to in Art. 31, art. 33-35 and art. 41 paragraph. 1 of the PIT Act. The taxpayer will be able to submit such
an application if he foresees that the taxable income obtained by him on the tax scale will not exceed the amount of PLN 30,000 (i.e., the tax-free amount) in the tax year.

Restoration of preferences for single parents - Art. 6 sec. 4c-4g of the PIT Act

As we can read in the explanatory memorandum to the bill, the replacement of preferential income taxation with a PLN 1,500 relief was perceived by single parents as unfavourable and tax-discriminatory for their incomplete families.

Since the entry into force of the Act of October 29, 2021 (Polish Order), demands were made to restore the possibility of using this method of taxation. After the draft act enters into force, taxpayers will be able to submit declarations to payers of their intention to benefit from preferential income taxation.

Change in the income criterion of an adult child who is a learning child, which determines the possibility of preferential taxation of the income of a single parent, taking advantage of PIT-0 exemption for 4+ families, or tax relief for children

In the current legal situation, the PIT Act provides for tax preferences for families bringing up children, such as the possibility of using PIT-0 for families 4+ and a tax relief for children.

The act proposes to change the amount of the income criterion for an adult learning child. The draft proposes that this amount should be twelve times the amount of the social pension specified in the Act of 27 June 2003 on the social pension (Journal of Laws of 2022, item 240), in the amount applicable in December of the tax year.

From March 2022, the amount of the social pension is PLN 1,338.44, therefore twelve times the amount is PLN 16,061.28. This principle will also apply to the reinstated preference for single parents.

Repeal of the mechanism for extending collection and making advance payments for income tax in 2022 - repeal of Art. 53a of the PIT Act

The draft act provides for the repeal of the obligation imposed on payers to calculate advances during 2022 also according to the rules applicable until the end of 2021, i.e., the repeal of the so-called ‘advance rollover mechanism’ implemented into the legal system by the regulation of the Minister of Finance of January 7, 2022 on the extension of collection dates and the transfer of advance payments for personal income tax by certain payers - Journal Of Laws, item 28. This mechanism is now governed by Art. 53a of the PIT Act.

Amendments to the Act of October 29, 2021, the so-called Polish Order (Article 8 of the draft act)

As part of the tax changes provided for in the Act of October 29, 2021, a solution was implemented consisting in the obligation to keep accounting books, tax book of revenues and expenses, records of revenues, records/list of fixed assets and intangible assets (simplified tax records) in electronic form and sending them in this form to the tax office.

The draft changes the date of entry into force of the regulations on keeping tax records using computer programs, as well as the obligation to send them in a structured form to the tax office.

The largest CIT taxpayers, whose revenues for the previous tax year exceed the amount of EUR 50 million, will be required to keep accounting books using computer programs in the tax year starting after December 31, 2023 and starting from this tax year, they will be required to send these books in structured form.

In the case of entities that are required to send the records referred to in article 1. 109 paragraph 3 of the VAT Act, in accordance with Art. 109 paragraph 3b of this Act, such
an obligation will apply from 2025, while other entities will apply from 2026.

Pursuant to the provisions on the PIT tax, entities will keep tax records using computer programs and send these records in electronic form, starting from 2025, however, this obligation will cover those entities that are obliged to send the records referred to in art. 109 paragraph 3 of the VAT Act, in accordance with Art. 109 paragraph 3b of this act. Other entities will be required to send tax records for the first time from 2026.

Tax abolition

On January 1, 2022, the provisions on the so-called "Tax abolition" came into force. These provisions provide for the possibility of taxation with a transitional lump sum on income, income that is subject to income tax in Poland, but has not been declared by the taxpayer or by the payer for taxation in whole or in part. Pursuant to the provisions of the introduced regulations, the transitional lump sum rate on income was set at the level of 8% of the tax base, i.e. generally at a level lower than the income tax rate applicable to CIT taxpayers and PIT taxpayers.

In connection with the content of these provisions, the President of the Republic of Poland submitted to the Constitutional Tribunal, under the procedure of subsequent control, a request to review their compliance with the Constitution of the Republic of Poland.

The bill proposes to repeal these provisions.

Change in the catalogue of types of economic activities that are subject to the health insurance contribution

The draft act adds new types of economic activity which will constitute the title to be covered by health insurance. Economic activity conducted in the form of a limited joint-stock partnership by a general partner and economic activity conducted in the form of a simple joint-stock company by a shareholder contributing to the company, the subject of which is the provision of work or services and the performance of creative or artistic activity by persons referred to in Art. 81 sec. 2a.

In addition, general partners in a limited joint-stock partnership will have to start paying contributions to the Social Insurance Institution (amendment to Art. 8 (6) of the Act on the Social Insurance System). The draft shows that this provision is to enter into force on January 1, 2023.

The draft act also provides for a number of clarifying/reorganizing changes in the field of the act on health services, including:

• obligation to pay health insurance contributions by proxies (mentioning them directly in the regulations);
• lowering the calculation basis of the health insurance contribution for persons cooperating with persons conducting non-agricultural activity;
• clarification of the rules for the payment of health insurance contributions by creators and artists.

Summary

The proposed changes to tax regulations should be assessed as an attempt by the legislator to draw conclusions from the not fully successful tax reform (related to the adoption of the so-called Polish Deal). According to the government's announcements, the changes are to be neutral or beneficial for taxpayers.

Nevertheless, the final shape of the regulations is still to be seen, as the currently drafted act is only at the stage of public consultations (according to information from the Ministry of Finance, they will last until April 2, 2022). The regulations are planned to enter into force on 1 July 2022.

Downloads

• PKF Alert - Changes in the Polish Order [DRAFT ACT].pdf [PDF]