The package of tax acts known as the Polish Order has been signed by the President of Poland on 16 November 2021. The act will introduce a number of revolutionary changes to the tax system, the majority of which will take effect from 1 January 2022.
Polish Tax Order - the most important changes in PIT
The Polish Order contains a number of solutions addressed to taxpayers paying personal income tax. The most significant changes regarding PIT are as follows:
- an increase in the personal income tax free amount to PLN 30 000 (currently the free amount is PLN 8 000),
- an increase in the amount of the second tax threshold, above which the 32% tax rate applies - this will be the amount of PLN 120 000 (currently: PLN 85 528),
- PIT-0 relief for returnees (before the decision to return to the country, a minimum of three years of residence and work abroad, relief is to be valid for a period of 4 years),
- PIT-0 relief for families of 4+ (for persons who in the tax year for at least four children held parental authority, the function of legal guardian, or if the child lived with such a person, or for persons who held the function of a foster family),
- PIT-0 relief for retired persons and recipients of disability benefits up to an amount not exceeding PLN 2 500 per month,
- PIT-0 relief for seniors who, although entitled to an old-age pension, resign from receiving it and continue to work (applies to people employed on a permanent basis, those working on a freelance basis and entrepreneurs settling tax under the tax scale, flat-rate tax and lump-sum tax),
- change in the lump sum rates for doctors, dentists, nurses, midwives and engineers, (reduction from 17% to 14%) and for IT, programmers and other IT professions (reduction from 15% to 12%),
- the introduction of the so-called middle class relief,
- introduction of the option to take advantage of a PLN 1 500 tax deduction for a person bringing up a child (children) on their own (this deduction will replace the current joint tax return with a child),
- for PIT and CIT taxpayers, lack of the possibility to treat as tax deductible costs depreciation write-offs on fixed assets and intangible assets such as residential buildings, residential premises constituting a separate property, the cooperative ownership right to a residential unit and the right to a single-family house in a housing cooperative (read also: Polish Order – Houses up to 70 m2 without a building permit),
- taxation of income from lease, sublease, tenancy, subtenancy and other contracts of a similar nature, if the contracts are not concluded within the framework of a non-agricultural business activity, solely in the form of a lump sum from registered income.
Polish Order - changes in the calculation of health contribution for PIT and CIT taxpayers
The change to the rules for determining health contribution rates in 2022 will cover:
- the lack of the possibility to deduct the amount of the health contribution paid (collected by the payer) in a tax year from the amount of the PIT due for that year or the flat-rate income tax on some incomes earned by natural persons,
- a uniform contribution rate of 9% for employees and entrepreneurs who settle under the general rules, with no option to deduct it from tax,
- health contribution at the rate of 4.9% of the generated income for entrepreneurs who settle on the basis of a flat tax (also no possibility of deduction from PIT),
- for lump sum entrepreneurs, a 9% contribution calculated on the income base:
- for annual income up to PLN 60 thousand - the monthly contribution base is 60% of the average remuneration,
- for income up to PLN 300 thousand - 100% of the average remuneration
- for income higher than PLN 300 thousand - 180% of the average remuneration.
Polish Tax Order - key changes for entrepreneurs
The act, known as the Polish Tax Order, will also have a significant impact on corporate tax settlements, and most of the solutions presented will come into force from 1 January 2022.
After the entry into force of the Polish Order, entrepreneurs will be facing the following changes:
- the introduction of a minimum (corporate) income tax of 10% of the tax base,
- introduction of changes in the so-called Estonian CIT ( abolishing the income limit and extending Estonian CIT to limited partnerships and limited joint-stock partnerships, simple joint-stock companies and cooperatives),
- the introduction of taxation in the form of a tax card only for taxpayers continuing to be taxed in that form after 31 December 2021 and those who did not resign from taxation in that form after that date and did not lose the right to tax in that form after that date,
- new VAT group taxation rules,
- new rules on investing through venture capital,
- the introduction of a tax on large companies, corporations (learn more: Polish Order - a new tax for large companies),
- the introduction of new taxation rules for holding companies (new holding law).
Polish Order - reliefs for entrepreneurs and pro-investment solutions
The Polish Tax Order does not only include changes in the taxation for PIT and CIT taxpayers, but also a number of reliefs and solutions aimed at attracting foreign investors to the Poland.
The pro-investment solutions of the Polish Order are, among others, as follows:
- the introduction of a solution that makes it possible to deal with all matters concerning strategic investments at a single window, with a single negotiator and based on a single decision, and with matters concerning key investments directly at the Ministry of Finance (the so-called Investor Desk),
- the implementation of the so-called Interpretation 590 (it will be a single interpretation defining all tax consequences of a planned investment issued directly by the Minister of Finance),
- the introduction of an incentive for corporations to invest in Poland through the option to VAT financial services and to offer attractive conditions for the operation of holding groups.
Moreover, once the Polish Order comes into force, entrepreneurs will have access to the following reliefs:
- a sponsorship relief for taxpayers who support cultural and sporting activities as well as higher education and science,
- R&D relief covering conceptual work on a new product,
- relief for prototype,
- relief for hiring innovative employees, learn more: The Polish Order: Relief for innovative employees,
- relief for robotisation,
- IP Box relief,
- IPO relief,
- consolidation relief for companies which decide, by merging with another entity, to save inter alia their contractor, supplier or other business in need of support,
- relief for expansion, which covers expenditure on the search for new markets for Polish products ( can be deducted twice).
To sum up, the Polish Tax Order will introduce many revolutionary changes which will affect the settlements of all groups of taxpayers and will change the current shape of the Polish tax system. Time will show how the market, investors and the economy will react to these changes. However, many taxpayers, both PIT and CIT taxpayers, will certainly feel the effects of these changes in their wallets from the January of the coming year.