From 1 July 2022, the revised provisions of the Polish Order are in force – the act that caused considerable controversy among taxpayers. The Act aimed to reduce social inequality and create better living conditions for all citizens. However, the original version contained a number of errors and inaccuracies. Polish Deal 2.0 is an Act amending the provisions of the Personal Income Tax Act and some other laws. Below is a collection of the most important changes.
- PIT rate reduction
One of the most significant and widespread changes was the reduction of the basic PIT rate from 17% to 12%. This solution applies to taxpayers taxed according to the general rules (tax scale), i.e. those employed under an employment contract, contract of mandate and certain entrepreneurs.
- Reduction of the tax-reducing amount
In connection with the reduction of the PIT rate to 12 percent, the tax-reducing amount was also reduced from PLN 5100 to PLN 3600 per year. This resulted in a reduction in advance income tax payments by PLN 300, instead of the previous PLN 425.
- Abolition of the so-called middle class relief
Another of the main changes, is the repeal of the so-called relief for the middle class. The said relief caused numerous problems. The employer was obliged to calculate it according to complicated algorithms. However, the possibility was left for a taxpayer to account for the middle-class relief, if such a taxpayer were to lose out on the new changes.
- The possibility of deducting tax by a part of the health premium
In the original version of the “Polish Deal,” all taxpayers were deprived of the right to deduct health premiums. It was decided to make a change in this regard, however, not for all taxpayers. Only entrepreneurs who have opted for flat tax, lump sum and tax card are allowed to partially deduct the health premium paid. Accordingly:
- taxpayers settling a flat tax – will deduct from income the health insurance premiums paid, up to a maximum of PLN 8700 per year. This limit will be valorized annually.
- taxpayers paying a flat rate – will deduct from income half of the health premiums paid.
- taxpayers settling in the form of a tax card – will reduce tax by 19% of the health premiums paid.
- Possibility to change the form of taxation to a tax scale
The Polish Deal 2.0. also introduced the possibility of changing the form of taxation to a tax scale during the year for those who have chosen a lump sum or flat tax. Accordingly, taxpayers who chose a lump sum as a form of accounting could switch to a tax scale and account for the second half of 2022 according to the scale.
- Harmonization of deadlines for filing PIT forms
As part of the Polish Deal 2.0, the deadline for filing the annual tax return was unified. After the amendment, taxpayers have until April 30 of the year following the tax year in question to file their tax returns. The deadline for filing tax returns has been unified for all taxpayers, regardless of the form of taxation.
- Tax preferences for parents, guardians and children
The new legislation introduced additional preferences for parents and guardians of children:
- raising the child’s income limit for parents to benefit from tax preferences – from PLN 3089 to PLN 16061.28 in 2022 (12 times the social pension),
- separation of the child’s survivor’s pension up to age 18 from the parents’ income, so that minor children collecting them can benefit from their own tax-free amount of PLN 30,000,
- eliminating the health contribution on minor children’s pensions,
- extending tax exemptions for young people, for return, for 4+ families and working seniors also for people on maternity benefits (granted to parents and guardians taking their children for upbringing).
- Joint settlement option with a child for single parents
The next major change is the restoration of the option, eliminated on 1 January 2022, for single parents to settle together with their child. The provisions of the Polish Deal 2.0 assume that single parents will still be able to settle with their child under the rules in effect before 2021.
- Modification of the relief for monuments
The so-called Palace plus relief remained among the tax preferences for 2022. However, the relief has been modified. As 1st of July, the preference applies not to the purchase of a historic property, but to its renovation. Taking advantage of the tax deduction for renovation costs requires obtaining approval from a conservationist as to the expenses incurred in renovating an owned historic property.
- 5% OPP deduction in PIT
Public Benefit Organizations have also benefited from the reform, as 1.5% of tax can be paid to them, instead of 1% of tax as before.
