On May 13, 2022 the Government bill amending the Personal Income Tax Act and certain other acts (the so-called Polish Deal 2.0.) was submitted to the Senate (the upper house of the Polish parliament) for debate. The amendment to the PIT Act is a response to signals from taxpayers regarding the clarification of regulations and the introduction of beneficial solutions for those groups that have suffered from the regulations in force since January 1, 2022.

In this article we outline the principal provisions of the draft law.

1. Reduction in the personal income tax rate from 17% to 12% for taxpayers paying their taxes according to the standard tax scale

The proposed solutions envisage lowering the personal income tax rate for taxpayers settling their taxes according to the tax scale from 17% to 12%. The tax rate will be applicable only up to the tax threshold, i.e. up to PLN 120,000 of income. In consequence, the tax allowance will be significantly altered (from PLN 5100 to PLN 3600).

2. The eligibility for partial deduction of health insurance premiums

The right to deduct partially the health insurance premium is a solution intended only for taxpayers paying a flat tax, lump sum on registered revenues or a tax card. The deduction of health insurance premiums will consist in:

• reduction of the taxable income by the amount of health premiums paid, up to the limit of PLN 8700 - for those on a flat tax rate;
• reduction of revenues by 50% of the health premiums paid - for those paying lump sum tax;
• reduction of income tax by 19% of the health premiums paid - for those on a tax card.

3. Single parents able to be taxed jointly with their child again

According to the existing regulations, single parents raising a child may apply for a relief of PLN 1,500 per year. Under the proposed changes, this deduction is to be removed, and the possibility of a joint settlement between a parent and a child to be restored on the terms applicable before the entry into force of the New Deal. The income threshold for an adult child, which determines the right to make a joint settlement, is also to be altered.

4. Removal of ‘middle class’ relief

The proposed amendments provide for the liquidation of the so-called ‘middle class’ relief. Due to a complicated algorithm and a limited scope of entities eligible, the relief in question has raised a number of objections. Pursuant to the explanatory memorandum to the bill, the abolished relief is to be compensated for by the lower 12%personal income tax rate.

5. Unification of deadlines for filing PIT forms

The draft extends the period for filing tax returns for lump-sum taxpayers. The taxpayers would have time to submit their tax returns until 30 April of the year following the tax year (until now, the obligation to submit returns expires on the last day of February). This deadline will already be in effect for tax returns filed for 2022.

6. Modification of heritage relief

The so-called ‘heritage relief’ for historical sights will consist in the deduction from the tax base of expenditure for renovation and payments into the renovation fund of a housing association or cooperative. The preference will not be applicable to expenditures for the acquisition of a building. Furthermore, the bill envisages an additional condition for the deduction. The deduction will be possible if at the moment of incurring the expense, the taxpayer is in possession of a written permission from a Provincial Monument Conservator, and after incurring the expense, the taxpayer obtains a certificate from the Conservator confirming that the works have been performed.

7. Clarification of provisions relating to health insurance coverage for those appointed to perform functions under a nomination

Due to the ambiguous wording of the provisions, the legislator has decided to make more precise the provisions relating to the payment of health insurance premiums by those appointed to perform a function under a nomination by expressly stating that health insurance premiums will have to be paid by companies’ authorised representatives. Furthermore, the bill provides for an exemption from the obligation to pay health insurance premiums for those obtaining revenues on account of performing social or civil duties and of those commissioned to perform certain actions by a state or local government authority or administration, court or prosecutor. The exemption will apply where such annual remuneration does not exceed PLN 6,000.

The bill also provides for a tax allowance in the case of contracts of mandate at the stage of calculating income tax advanced and a possibility of re-election of the tax scale for those taxpayers who have opted for a lump sum or flat tax. The bill is currently being debated in the Senate.

Katarzyna Czerwińska-Sabała, Tax Consultant, ATA Tax Sp. z o.o.

Interested in the topic?

katarzyna.czerwinska-sabala|atatax.pl| |katarzyna.czerwinska-sabala|atatax.pl