The Polish government has announced a reduction in PIT tax. The new regulations will apply to both employees and self-employed persons. They will also change health care contribution.

Prime Minister Mateusz Morawiecki is sending a draft of tax reduction from 17 to 12% for consultation. This is a rate that will apply to all taxpayers without exceptions.

At the press conference, the head of the government announced that taxpayers running a business and paying a flat PIT rate or a lump sum will be able to include the health insurance premium up to PLN 8,700 as costs.

“In the case of lump sum, half of the premium can be deducted from recorded income. We also assume that a single parent with a child will be able to have the possibility of full accounting”, said Morawiecki.

The tax-free amount will remain unchanged and it will still amount to PLN 30,000. The tax threshold of PLN 120,000 of annual income is also maintained and above it one must pay a higher 32% tax. The relief for the middle class is disappearing. In accordance with the regulations introduced by the Polish Deal, it was a deduction from the tax base calculated according to a complicated formula, which was due to taxpayers with annual revenues in the range between PLN 68,412 and PLN 133,692.01.

Presenting the new solutions, Deputy Minister of Finance Artur Soboń said that the project is universal, systemic and aimed at maintaining positive solutions of the Polish Deal, especially the tax-exempt amount and the tax threshold for the second PIT rate. The new regulations are even supposed to improve them.

“We are replacing the most controversial solutions, such as relief for the middle class, with new and systemic solutions. We are implementing them during the year, but the jurisprudence leaves no doubt that all changes favorable or neutral for taxpayers can be introduced in this way. In our opinion, there is no possibility that taxpayers will lose from these changes” assessed Soboń.

The deputy minister added that the ministry’s calculations show that in the case of 1 for 1000 taxpayers, the application of the middle-class tax relief in combination with other preferences may be more profitable. In such situations, the e-PIT system in the annual settlement for 2022 will enable taxpayers to use it.

“The maximum benefit for taxpayers is PLN 4,500 per year. Entrepreneurs, depending on the form of taxation, may gain approximately PLN 1,600 of tax per year for flat taxpayers and from PLN 200 to PLN 800 per year, depending on the tax rate”, said Soboń.

The total costs of changes in taxes are estimated at around PLN 15 billion and are to be more or less equally distributed between 2022 and 2023. The changes may increase the public finance deficit by about 0.5 % of GDP. The government bill will be submitted to the Sejm at the end of April. The regulations are scheduled to enter into force on 1 July.

Arkadiusz Słomczyński