"Polish Deal" - the main assumptions of the announced changes in taxes

On the 15^th of May, 2021, the main assumptions of the so-called "Polish Deal", which is to be a "tax reset" i.e. changes to tax regulations were presented.

PIT changes:

1. Increasing the tax-free amount to PLN 30,000 (previously for most Poles it was PLN 3,091). The free amount is to apply to all persons employed on the basis of employment contracts, and its settlement is to be made in the annual PIT tax return,
2. Raising the threshold of the tax scale - to PLN 120,000 (previously it was PLN 85,528) while maintaining the applicable rates of the tax scale, i.e. 17% (for income up to PLN 120,000) and 32% (for income over PLN 120,000),
3. Abolishing the possibility of deducting health insurance from tax (so it can be concluded that in practice this will result in an increase in tax by 7.75%). In extreme cases, the reform will result in an increase in the total fiscal obligations of employees and entrepreneurs the equivalent of non-deductible health insurance up to 9%,
4. Joint tax settlements by spouses already in the year of entering into marriage (currently it is only possible if the spouses have been in a relationship throughout the previous tax year),
5. Retirement pensions up to PLN 2,500 per month will be entirely exempt from taxation. It should also be noted that a change is planned, according to which if pensioners do not receive a retirement pension, they will be able to work without deducting tax,
6. Higher tax-deductible costs for those earning from PLN 6,000 to PLN 10,000,
7. PIT relief for people employed under a contract of employment with an annual gross salary in the range PLN 68,600 - 133,600. Tax relief in the form of a deduction from income will be settled in the annual tax return,
8. Tax relief for people returning from emigration, which would be up to PLN 50,000 reducing the tax base of these people,
9. Full premiums of mandate contracts, which are to be withdrawn in the long term for one work contract,
10. Introducing diets/lump sum for remote work. However, no details are known, in what form they would be paid and whether they would be subject to taxation and contributions,
11. Introduction of a lump sum for income/income for non-residents who decide to change their tax residence to Poland.

Changes related to ZUS:

1. Elimination of the possibility for entrepreneurs to pay lump-sum health insurance, which currently amounts to approx. PLN 382. The rules for calculating it 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.

So far, there is no information as to whether the reform will apply only to persons running a business subject to entry in the Central Register and Information on Economic Activity (including self-employed), or also e.g. partners of limited partnerships, general partnerships, sole proprietorships.

Changes related to CIT:

There were no particulars in this matter, apart from the "good climate for companies", by which, according to the government, should be understood, among others:

1. expansion of the R&D relief and the IP-Box relief,
2. expansion of Estonian CIT for more companies,
3. introducing new allowances, such as: automation and robotization allowances and allowances for entering the stock exchange.

Changes regarding VAT:

1. no VAT on transactions within capital groups,
2. the possibility of VAT taxation of financial institutions.

It is worth bearing in mind that no details of the proposed solutions were disclosed during the presentation of the tax changes. Legislative work, which is to start in July 2021, will be of key importance in this matter, while the voting on the bills in the Sejm is planned for the fall. The planned changes to income taxes would enter into force from the beginning of 2022.

Downloads

• PKF Alert - Polish Deal - the main assumptions of the announced changes in taxes.pdf [PDF]