Provisions governing postponement of the deadline for prepayment collection to be included in the Act
Several days ago, the Sejm enacted changes to the Personal Income Tax Act. They are now awaiting the signature of the President. The main changes consist of making the Regulation of the Ministry of Finance on postponing the date for collection of personal income tax prepayments for some taxpayers equivalent to an act of law. The principal aim of the regulation was to reduce prepayments collected by remitters from some employees and contractors so as to make their net monthly income comparable to that earned last year, despite implementation of the Polish Deal. The regulation issued at the beginning of this year raised considerable controversies regarding its conformity with the law. Moreover, remitters’ systems were not prepared to effect the new provisions. This meant that a number of remitters calculated prepayments in accordance with the provisions of the Polish Deal only.
What is to be expected after the changes have taken effect?
PIT-2 – applying the tax-free amount
According to the new regulation, employees can file their PIT-2 returns with their employers at any time and not, as was the case before, prior to payment of the first salary in the tax year. Filing PIT-2 is necessary for the employer to be able to reduce the monthly tax prepayment by 1/12 of the tax free amount – PLN 425.
Calculation of the monthly tax prepayment
After the changes, remitters will be obliged to calculate the monthly tax prepayment twice. If, after calculation of the prepayment according to the current regulations (consistent with the Polish Deal), the prepayment is higher than it was last year, the remitter will collect the lower amount. This will continue until the month when the prepayment calculated according to the Polish Deal is lower than last year. At this point the remitter will collect the difference.
The above regulations are applicable for the period from February to December 2022, which is somehow controversial, because it is March now, and prepayments for February have already been collected. This applies to employees and contractors, as well as retirement and disability pensioners whose monthly income does not exceed PLN 12,800. Taxpayers may file an application requesting that the above regulations are not applied.
The new mechanism will undoubtedly make the tax settlements, which are already complicated, even more difficult. Employees may have concerns that using reduced prepayments (calculated according to last-year regulations) will necessitate a considerable additional payment of the tax in the annual return. Obviously, this depends on the individual situation of the taxpayer and the amount of his/her income, i.e. both monthly and annual income. To simplify the matter, we can assume that those taxpayers whose average monthly remuneration for work does not exceed PLN 12,800 should not suffer any losses as a result of implementation of the Polish Deal. Given the current wording of the regulations, this applies only to those employees who are hired under a standard employment contract. Contractors, pensioners, employees who rely on 50% deductible costs may incur some losses. However, it should be noted that the Ministry of Finance is currently working on an amendment to the Polish Deal. Only after is has been published, can the final impact of the Polish Deal on salaries be assessed.
Although the President still has some time, it seems that the act will be signed.
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