Polish Deal planned to be changed
At the end of last week, the government announced modifications to the Polish Deal applicable to natural persons. From the very start, the Polish Deal was criticized for its fast pace and lack of an in-depth analysis of the changes. It was the reduction of monthly remuneration for some employees, caused by flawed “middle class relief”, that made the cup of bitterness overflow. Following a controversial regulation (subsequently included in the Act), which was to mitigate the adverse effects, some more significant changes are planned.
Presented below are the major changes proposed in this respect. The new regulations are to take effect on 1 July this year. Some of them, affecting this-year taxes, are to take effect retrospectively from 1 January 2022, while other changes are to become effective in 2023.
What changes are planned?
- Reduction of the PIT from 17% to 12%. The amount free of tax (PLN 30,000) and the income bracket (PLN 120,000) remain unchanged. Changes are to be beneficial for all taxpayers paying their taxes according to the tax scale.
- Cancellation of the middle-class relief
- Single parents will still have a right to account for their taxes together with their children, although the conditions to be satisfied are to change slightly.
- Entrepreneurs who pay their income tax at 19% may deduct PLN 8,700 of paid healthcare contributions as their deductible cost. This amount is to be adjusted on an annual basis.
- Entrepreneurs who pay flat-rate tax can reduce their revenues by 50% of the healthcare contribution they paid.
- Entrepreneurs who are taxed according to the “tax card” will be entitled to deduct 19% of the healthcare contribution from their tax.
- 1/12 of the tax-free amount will be settled on a monthly basis also by those who provide services personally (contractors); the taxpayer will have the possibility to make deductions with max. 3 remitters (1/3 of the amount with each). Remitters will not collect prepayments for tax if requested by the taxpayer whose income is lower than PLN 30,000.
- The tax credit for historical buildings will no longer apply in 2023.
Generally, the changes (which are to take effect already this year) are to be favourable for taxpayers. However, contrary situations may also occur. Therefore, the mechanism for comparing tax burdens calculated according to the current and amended regulations is to be introduced. The mechanism will only apply to those taxpayers who are eligible to benefit from the middle-class relief. The relevant conversions are to be made by tax offices. If the amount of tax calculated according to the current regulations proves to be lower than that after the amendment, the surplus is to be automatically refunded to the taxpayer.
The amendment is also to apply to the healthcare contribution. The contribution will have to paid by proxy holders. They were to pay it already this year, but this requirement is not effective due to unclear regulations. The healthcare contribution is to be paid by general partners in limited joint-stock partnerships.
Please note that works over the amendment are just starting, so the above changes may be modified or other changes may emerge. We will keep you informed about them.