Polski Ład 2.0. The most important changes for the tax scale

Starting with 1 July 2022, changes regarding the tax rate are being implemented, including:

Reduction of the tax rate from 17% to 12%.

Change in the tax-reducing amount (the free amount remains unchanged).
Possibility of tax settlement as a single parent.
No settlement for health insurance contribution.
Removal of middle class tax relief.

Reduction of the tax rate from 17% to 12%

The tax rate change takes effect on 1 July 2022. It benefits employees, contractors, pensioners and entrepreneurs who settle their taxes according to the general rules. What’s worth noting is that:

– those who are already self-employed in their income statement for June 2022 or Q2 2022 may apply the 12% rate,

– salaries paid after 1 July will be calculated at a rate of 12% (even if they are for June).

IMPORTANT NOTICE: The 12% rate applies for the entire 2022 period, even though the legislation comes into force starting with 1 July 2022.

Change in the tax-reducing amount (the free amount remains unchanged)

The tax-free amount (PLN 30,000 a year for taxpayers with tax-rate-settled income), already introduced on 1 January 2022, remains unchanged.

The outcome of the reduction in the PIT rate is a new tax-reducing amount, which on an annual basis is: 30 000 x 12%. = PLN 3 600

For those who work as employees or on commission, the tax-reducing amount is PLN 300 per month, instead of the previous PLN 425.

Possibility of tax settlement as a single parent

As part of the Polish Deal 1.0 package, the new legislation introduced a solution that enabled single parents to do their tax settlements as such. However, the new solution was unfavourable for the selected few. Therefore, in order to meet the demands, the Polish Deal 2.0 package partially returns to the old solution.

In the case of the income of a single parent or legal guardian who is an unmarried woman or man, widow, widower, divorcee, a person with respect to whom a separation has been pronounced in accordance with separate legislation, or a person whose spouse has been deprived of parental rights or is serving a sentence of imprisonment, if that parent or guardian is raising children alone during the tax year:

minors,
adults who, in accordance with separate legislation, have received an allowance or social pension,
adults up to the age of 25, studying at schools recognised by the education system regulations or regulations of higher education within the Republic of Poland and in another country

– tax is set at a doubled rate which is based on the half of a single person’s income.

IMPORTANT NOTICE: This settlement mechanism is not applicable for a person raising at least one child jointly with the other parent or legal guardian.

Preferential taxation does not apply in the case of a single person raising a child or their child abiding by the following rules of:

Article 30c (flat tax) or the Flat-rate Income Tax Act, with the exception of Article 6(1a) of the PIT Act (private hire)

– in respect of income earned in the tax year, deductible expenses incurred, liability or entitlement to increase or reduce the tax base or income, liability or entitlement to make other additions or deductions;

subject to taxation according to the Tonnage Tax Act or the Act on Activation of the Shipbuilding and Complementary Industries.

No settlement for health insurance contribution

As part of the Polish Deal 2.0 package, it is possible for some business owners to settle part of their health insurance contributions as deductible income costs and it is as follows:

for persons conducting business activity taxed at a 19% flat rate – the maximum deduction is PLN 8,700 in 2022. ,
for self-employed persons taxed on a flat-rate basis – the deduction is 50% of the amount of health insurance contributions paid,
for self-employed persons taxed with a tax card – the deduction is 19% of the amount of health insurance contributions paid.

IMPORTANT NOTICE: There is no provision for general taxpayers to settle their health insurance contributions.

Removal of middle class tax relief

As part of the Polish Deal 2.0 package, it has been decided to reduce tax rates from 17% down to 12% and remove the middle class tax relief. The change applies to the entire year of 2022.

Those who applied the relief between January and June 2022, after the current changes upon preparing their annual tax return, they will settle it without the said relief and any differences shall be covered by them or refunded to them.

Polish Deal 2.0 has also introduced changes to the settlement regarding young adults up to the age of 25, studying at schools recognised by the education system regulations or regulations of higher education within the Republic of Poland and in another country. It is necessary that the young adult in question has not achieved:

income covered by the return relief or up to the age of 26,
income, with the exception of family pensions, subject to taxation according to the tax rate or to a flat-rate income tax coming from the disposal of securities and derivatives of any other financial instruments

– in a total amount which exceeds twelve-fold the amount of the social pension specified in the provisions of the Social Pension Act, in the amount which is applicable in December of the fiscal year. As of March 2022, the amount of the social pension is PLN 1,338.44 and its twelvefold amount is PLN 16,061.28.