Employment-related tax changes in Poland from a payer’s perspective

New regulations that significantly changed the Polish tax system for the second time in 2022 came into force on July 1.

Below is a summary of the main changes introduced by the Polish Deal 2.0 with regard to the taxation of earned income.

One of the main changes is the reduction of the lowest IRP rate from 17% to 12%, applicable to income up to PLN 120,000 ($26,000). The change concerns taxpayers who pay their taxes according to general rules; for example, employees, freelancers and board members. The new scale applies to income for the whole of 2022, while taxpayers apply it for the calculation of installments on wages paid from July 1, 2022.

Since January 1, 2022, the annual non-taxable amount for taxpayers receiving income taxed according to the general rules has been increased to PLN 30,000. Although the non-taxable amount remains unchanged, due to the reduction of the lowest tax rate, a new monthly amount of tax reduction is lower and amounts to 300 PLN (3,600 PLN per year).

Suppression of the bourgeois succession

With the entry into force of the Polish Deal 2.0, middle class relief was repealed. The relief was in effect from the start of 2022 and applied to employees who were within the appropriate income limit, both on a monthly and annual basis.

However, it has been widely criticized due to the complicated algorithms used for its calculation, different at the monthly and annual calculation stages. It is important to note that the removal of the relief applies to the whole of 2022. Taxpayers can still adjust their annual tax for 2022 according to the middle class relief, if this is more favorable to them.

Elimination of double counting of PIT advances

With the introduction of substantial tax changes on January 1, 2022, the tax burden for many taxpayers has increased significantly. This situation met with a firestorm of criticism. To remedy the situation, the Polish legislator introduced a mechanism for double counting IORP advance payments.

According to the obligation, a tax remitter paying income to employees and self-employed up to PLN 12,800 per month was supposed to calculate installments according to the binding rules in 2021 and the rules in 2022 and choose the most favorable option for the taxpayer. The Polish Deal 2.0 repeals the obligation to double count PIT advances.

Increase in the remuneration of the tax filer for one-time payment

Until July 1, 2022, the remuneration of the tax remitter for the timely payment of taxes to the state budget was 0.3% of the amount of collected taxes. The remuneration of tax remitters calculating monthly installments on income taxed according to the tax scale has been increased to 0.6% of the amount of taxes collected.

Statements affecting the calculation of IRP installments

The employer calculates PIT advances using the tax reduction amount if a PIT-2 statement is filed by the employee. In response to taxpayers’ problems with PIT-2 statements, the legislator has introduced a new solution. The taxpayer may present a PIT-2 declaration to a maximum of three taxpayers, indicating that a given taxpayer has the right to reduce the deposit by the amount constituting:

  • 1/12 of the decreasing amount;

  • 1/24 of the decreasing amount; Where

  • 1/36 of the deductible amount.

In addition, the Polish Deal 2.0 will provide for the possibility of monthly applying the amount of the tax reduction on the income of persons employed under a mandate contract or a specific employment contract. The possibility is reserved only for employees for the moment.

Furthermore, the possibility of asking the remitting party not to withhold PIT installments – which is accessible, among others, to contractors and persons carrying out specific work – will be extended to employees. Taxpayers have the right to apply if they expect their annual income subject to the tax scale to be no more than PLN 30,000.

The employment contract is one of the basic forms of employment in Poland. However, employees are increasingly choosing other forms of employment.

A B2B contract can be an interesting alternative to an employment contract. This is the trend in the IT sector in Poland, where more than a third of specialists work under B2B contracts, and generally pay a lower PIT than employees.

The Polish Deal 2.0 also introduced many changes for entrepreneurs. One of the main changes is the possibility of changing the form of taxation of business income (income) to the tax scale applied in 2022 during or after the end of the year.

In addition, the Polish Deal 2.0 introduced the possibility of partial deduction of health contributions, depending on the method of taxation chosen.

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