Lower PIT and no middle class relief from July 2022

Changes to the tax system

The government introduces amendments to the Polish Order and proposes a number of significant changes to the current tax system. The presented solutions are a response to the demands of entrepreneurs and taxpayers, as well as the current situation related to the armed conflict in Ukraine. The changes are intended to simplify the tax system and at the same time protect taxpayers from any negative impact of the war on the Polish economy.

The most important ideas are certainly the lowering of the basic PIT rate and the resignation from the middle class relief, but the reform is to cover much more areas. Below, we present the solutions proposed by the Ministry of Finance which are of key importance from the taxpayer's point of view.

Proposed key changes to the tax system:

1. Reduction of the basic PIT rate from 17% to 12% - the lower tax would be paid by taxpayers falling within the 1st tax threshold (income up to PLN 120 thousand per year), settling according to the tax scale, including entrepreneurs, employees, contractors, retired persons and disability pensioners.
   
   
2. Abolition of the so-called middle class relief (middle class relief was introduced on 1 January 2022 as part of the Polish Order).
   
   
3. Option to deduct a part of the health contribution from the tax base for entrepreneurs who settle under a flat tax, lump sum or tax card - reduction of the tax base by the health contributions paid up to a certain limit:
   
   
   • for a flat tax - PLN 8 700 (reduction of income);
   • for a lump sum, 50% of the health contributions paid (reduction of revenue);
   • for those on a tax card - 19 per cent of the contribution paid (tax deduction);
     
     
4. Advance tax payments for persons with several employers - an employee working for several employers (PIT-2 submitted to 2 or 3 payers) will be able to authorise up to 3 payers (employers, contracting parties, ZUS) to reduce advance tax payments by PLN 3 600. In the case of one contract, the amount reducing the tax will be PLN 300, in the case of two contracts - PLN 150 each and in the case of three contracts - PLN 100 each.
   
   
5. Joint return with a child for single parents - a return to joint returns with a child, the joint return will replace the PLN1500 single parent relief introduced in January 2022.
   
   
6. Tax preferences for children and parents:
   
   
   • Increased child tax relief - increasing the amount of earnings a child can obtain without losing the parents' tax preferences - from PLN 3 089 to PLN 16 061.28 in 2022 (12 times the social allowance),
   • Extended tax reliefs - the young person's relief, the return relief, the 4+ family relief and the working seniors' relief will also include maternity allowance given to parents and carers taking children into care,
   • Child with tax-free amount - family allowances of minor children will not be added to parents' income, the child as a separate taxpayer will also benefit from the tax-free amount of PLN 30 thousand,
     
     
7. JPK_CIT and JPK_PIT with deadline until 2025 - new deadline for submitting JPK on accounting books postponed until 2025.

Tax changes as from July 2022

The new tax solutions are to enter into force on 1 July 2022. For this to happen, the draft bill will first be consulted with, among others, the Social Dialogue Council, the Accountants Association in Poland, the National Chamber of Tax Advisers and representatives of entrepreneurs. Consultations will last from 24 March to 2 April 2022.