“Polski Ład” [“The Polish Deal”] – major changes planned in the area of PIT, Social Security and VAT
This week, a bill of amendment to the Personal Income Tax Act, the Corporate Income Tax Act and some other acts was submitted for social consultations. The bill is the result of the social and economic plan announced by the Government, known as “the Polish Deal”.
PIT and social security
Major changes to the personal income tax
- the tax-free amount of PLN 30,000 – the value will change along with increasing income, and the mechanism of its adjustment is to be implemented. Spouses who account for the tax jointly will be eligible to double the amount
- the income threshold for the 32% tax rate will be increased to PLN 120,000
- the flat rate income tax for certain taxpayers will be reduced (e.g. IT specialists – 12%, physicians – 14%)
- the health contribution will no longer be tax-deductible, and its scope will be extended:
- the social insurance will be obligatory for members of management boards appointed to perform this function upon a resolution of the shareholders
- the contribution is to amount to 9% of the base for its assessment (same as now), but the base for those who are engaged in non-agricultural business activity will be their income within the meaning of the PIT Act
- for those who settle their taxes on a lump-sum basis, the contribution assessment base will be the monthly revenue from their business activity (reduced by social insurance contributions) The contribution is to amount to 1/3 of the assessment base. So in practice, a person paying the tax at the rate of 15% will be burdened at 20% of his/her revenues.
New tax preferences
- “middle-class relief” – applicable to taxpayers whose revenue from employment ranges from PLN 68,412 to PLN 133,692. The relief consists of deduction of an amount depending on the annual revenue from the income. The algorithm for calculation of the relief is very complex, and may be difficult to apply in practice, the more so that the relief is to be taken into account for calculation of PIT prepayments.
- “return relief” – for persons who have changed their tax residence to Poland, and who earned income from employment, from personally performed business activity, from non-agricultural business activity or from copyright. The eligible taxpayers would benefit from the relief for 4 successive tax years starting from the end of the year in which the tax residence was changed, and it consists of the possibility to deduct 50% of the tax payable for the year of the change from the income tax and further 50% of the tax due for each successive year of the relief applicability (applies to tax calculated according to the tax scale or linear tax).
- the lump-sum for HNWI (dedicated to persons who earn income from foreign sources amounting to at least several million PLN per year) – taxation is to apply to revenue earned by taxpayers outside Poland (revenues earned in Poland are to be taxed according to the general rules). The preferential treatment will apply to taxpayers who change their tax residence to Poland and incur expenses in the tax year for socially important goals (such as development of science) of minimum PLN 100,000. The preferential treatment, consisting of the possibility to pay the tax at PLN 200,000 on income earned abroad, irrespective of its amount, will apply for maximum 10 years.
- relief for taxpayers who conduct non-agricultural business activity and support sporting, cultural, educational and scientific activity – the relief is to consist of deduction from income of 50% of costs incurred for the goal indicated in the Act, related to the above areas
- payment terminal relief consisting of the possibility to deduct from income the costs of purchase of payment terminals or payment transactions services. The amount of costs eligible for deduction would be PLN 1,000 or PLN 2,500. The relief will apply for 2 tax years.
Changes to some revenues and costs relating to business activity:
- the initial value of assets used before they are entered in the fixed asset records is to be established according to the price of their purchase, but the price may not be higher than their market value
- taxation of new categories of revenue from business activity
- sale of movables used in business based on operating lease (e.g. a car) even if they were withdrawn from business prior to their sale in return for consideration, provided that less than 6 years passed from the 1st day of the month following the month of their withdrawal from business to the day of their sale; thusly, it will no longer be possible to sell, without tax, movables purchased for personal use after the end of their lease contracts (in practice one will need to wait 6 years and not 6 months so as not to pay the tax in this situation).
- receiving cash from reduction of a shareholder’s share in a company which is not a CIT payer.
- sale of assets obtained as a result of reduction of the share in a company which is not a CIT payer before the end of 6 years from the date of their obtainment.
- counteracting the “black zone” in employment – a regulation whereby the employer will have revenues assigned as a result of illegal employment or failure to show the accurate value of revenues from employment. In case of illegal employment, the employer will have to incur a portion of tax payable by the employee.
- an obligation to keep books and the register of fixed asset and intangible assets using computer programmes, and the obligation to send the same in a structured form to the tax authorities.
- the term “single parent” is to be made more precise in the PIT Act by indication that only one parent can have this status, which will eliminate situations where both parents who are not married and bring up their children on an alternating care basis benefit from the preferences.
- extension of the list of persons eligible to account for taxes jointly to include those who got married already in the year the marriage took place.
- elimination of the possibility to choose taxation on a “tax card” basis starting from January 2022. This manner of taxation will apply only to those taxpayers who used this form as at 31 December 2021 and will continue to do so.
- settlement of the tax from lease and rental will only be possible on a lump-sum basis on recorded revenues. As a result of this solution, it will not be possible to benefit from the tax-free amount and to deduct the deductible costs or depreciation The lump-sum for revenues in this respect will not be changed and will amount to 8.5% of revenues up to the amount of PLN 100,000 and 12.5% of revenues on the surplus above PLN 100,000
- reduction of the cash payment limit for entrepreneurs to PLN 8,000.
- imposing an obligation on entrepreneurs to ensure the possibility of cashless payment in each place where they operate their business (only those who are not obliged to keep sales records using cash registers are to be exempt from this obligation)
Major changes to VAT:
- introduction of VAT groups – the planned regulations will enable setting up a VAT group consisting of entities linked through their finance, economics or organisation. After the group has been set up, it will have the status of a VAT payer as a whole, rather than each of its members. Consequently, transactions between the group members will not be liable to VAT. Also settlements with the tax office will be made on a collective basis by a representative of the group rather than each of its members individually, which should lead to improved financial liquidity of the group members. This solution will be beneficial primarily for capital groups in the financial sector.
- the option of taxation of financial services – with the proposed regulations, exemption of financial services can be waived by the service provider in favour of other taxpayers, and a choice can be made of their taxation. It may often lead to improvement of the service providers’ financial liquidity, as they will be entitled to deduct the input VAT from purchase of goods and services related to provision of such services.
- tax preference in respect of VAT – shortening the time limit for VAT refund to 15 days for taxpayers who receive a considerable portion (at least 80%) of payments in a cashless form, and use online cash registers to tax their sales
Should you have any questions or doubts regarding the issues discussed here, we are ready to assist you.