"Polish Deal" - main changes in taxes - update

Changes regarding tax reliefs

The draft of the new PIT and CIT provisions offers an introduction of new solutions as well as changes to the already existing tax reliefs:

1. The proposed changes will make it possible to deduct (both to the taxpayers with the status of a Research and Development Centre and others) the eligible expenses in the amount of 200% of the costs incurred for some of the so-called eligible expenses under the R&D relief.
2. 2.     The taxpayer will also have the possibility to make deductions with R&D relief from the so-called qualifying intellectual property rights under the IP Box. This means that it is planned to introduce the possibility of simultaneous use of the R&D tax relief and the IP Box relief within the same project.
3. A relief on the prototype is to be introduced which will allow for a deduction from the tax base (specified in the draft act) of the costs of trial production of a new product or of launching a new product. The value of the deduction cannot, however, exceed 30% of the costs incurred, not more than 10% of income from non-agricultural business activity.
4. From the beginning of 2022, a discount for robotization will be introduced, which will be available to entrepreneurs who automate their production, e.g. by purchasing and implementing an industrial robot. As a result of the robotization allowance, the entrepreneur will be entitled to deduct an additional 50% of "eligible costs" allocated to robotization from the income. To benefit from this relief, the expenses should be incurred after January 1^st, 2022.
5. The next of the new reliefs, the relief for innovative employees, will apply to companies which conduct research and development activities (R&D activities) and hire employees to carry them out. Entrepreneurs taking advantage of this relief will be able to reduce advance payments for income tax, which are deducted from income (revenues) from an employment relationship or civil law contracts obtained by innovative employees.

PIT changes

1. Tax relief for people who transfer their place of residence to Poland and become Polish tax residents.
2. Introduction of a flat-rate taxation scheme in PIT of non-residents classified as High net worth individuals.
3. Increasing the tax-free amount to PLN 30,000.
4. Raising the tax scale threshold - up to PLN 120,000.
5. Abolition of the possibility of deducting health insurance from the tax due.
6. Joint tax settlements by spouses to be applicable starting from the year of marriage
7. PIT relief for persons employed under a contract of employment with an annual gross remuneration in the range of PLN 68,412 - 133,692.
8. Flat-rate taxation rates on recorded revenues will be reduced.
9. The rules of taxation of the use of company cars for private purposes will be changed.
10. The possibility of taxing revenues obtained from lease on general terms will be abolished.

Changes related to social and health security

1. Elimination of the possibility for entrepreneurs to pay lump-sum health insurance, which currently amounts to approx. PLN 382. The principles of its calculation are to be similar to those that apply to an employment contract, therefore entrepreneurs would pay approx. 9% health insurance premium depending on the income earned. At the same time, this contribution would not be tax deductible.
2. Full premiums for mandate contracts, which are to be withdrawn in the long term to the benefit of employment contract.
3. Contribution to the salaries of persons appointed to perform functions under the act of appointment.

Other tax - related changes

1. Reduction of cash transactions limit in trade between entrepreneurs from 15,000 PLN to 8,000 PLN. Therefore, from January 1^st, 2022, all payments above PLN 8,000 PLN in B2B relations, in order to constitute tax deductible costs, will have to be cashless.
2. A limit will be introduced for cash transactions for the C2B sector in the amount of PLN 20 thousand PLN. Entrepreneurs will be obliged to provide customers with the possibility of making payments on-line. This obligation will apply to entrepreneurs who are required to use cash registers.
3. An entrepreneur buying a car after lease to private property from January 1^st, 2022 will be obliged to pay VAT on the market value of the vehicle. In addition, the period in which the sale of such a car is subject to income tax will also be extended from 6 months to 6 years.

When analyzing the drafted amendments to the tax acts, particular attention should be paid to the tax reliefs for innovative entrepreneurs and to the new mechanisms aimed at tightening the tax system. When analyzing tax incentives encouraging to change the residence to Polish, it is also necessary to verify the exit tax regulations in the country of the current tax residence.