On 13 April 2022, the latest revision of the draft bill amending the act on personal income tax and certain other acts bringing changes to the Polish Deal package (“Bill” or “Draft Bill”) was published on the Government Legislation Centre’s website. The proposed changes primarily originate from extensive public consultations launched in this regard.
A review of the proposed amendments can be found below.
Tax scale for taxpayers using the lump-sum tax on recorded revenue or flat tax scheme in 2022
Due to reduction of the PIT rate for the first personal income tax bracket from 17 percent to 12 percent, already applicable to income earned in 2022, the Bill allows the taxpayers who in 2022 apply flat tax or lump sum tax on recorded revenue to switch to taxation with tax scale. Selection thereof will be possible:
- ex post (after the end of the tax year 2022) for the entire tax year for entrepreneurs who have opted for flat taxation;
- after the end of the tax year or until 22 August 2022 - for the second half of the year - for taxpayers who have opted for lump sum taxation.
Setting the deadline for all annual PIT settlements for 30 April
The deadline for personal income tax payers is to be unified to make PIT-28 and PIT-28S annual settlements due until 30 April of the subsequent tax year. Deadline extension is to apply already to PIT-28/PIT-28S annual returns submitted for 2022. Consequently, the deadline for settling lump-sum tax on recorded revenue for December and the last quarter of the tax year is also to be extended.
Tax-free allowance in advance payments for specific task contracts from 1 January 2023
A major change related to reducing the advances by 1/12 of the tax-reducing amount is to make it available to all remitters, based on a declaration received from a taxpayer. The tax-reducing amount may be also applied by principals and other remitters making payments in the context of personally performed activities, pursuant to Article 13 the PIT Act, as well as remitters collecting advances on income from property rights. According to the Bill, the amendments are to come into effect on 1 January 2023.
Uniform template of PIT-2 declaration
Under the Draft Bill, Article 31a is to be added to the PIT Act to systematize regulations on declarations submitted to income tax remitters (such as employers, principals, or pension agencies) by taxpayers. Under the Bill, declarations and applications listed in Articles 31b(1), 32(3, 6, 9, and 10) of the PIT Act can be submitted according to a pre-fixed template or (which is a new solution) in line with a method adopted by a given payer. Employers are to be allowed to use the template specified and made available by the Minister of Finance via Public Information Bulletin, to use their own template or to provide the declaration through the electronic HR and payroll system applied.
Monument relief - up to the amount of renovation expenses
Starting from 1 January 2023, expenses incurred in relation to acquisition of a historic real estate entered in the register of monuments or participation in such a real estate will not constitute the basis for reducing taxable income.
As of 1 January 2023, the “monument relief” can be applied to expenses:
- incurred in the tax year in the form of contributions to the repair and renovation reserve of a housing community or housing cooperative established, in accordance with separate regulations, for a historic real estate entered in the register or list of monuments;
- incurred for conservation, restoration or construction works related to historic real estate entered in the register or list of monuments.
The Draft Bill preserves taxpayers’ right to deduct expenses listed in Article 26hb(1)(2)(3) (i.e., conservation, restoration or construction works related to historic real estate and purchase thereof) of the PIT Act, incurred until the end of 2022.
Automatic refund of health insurance contributions
According to the Bill, the Polish Social Security Administration (ZUS) will automatically refund the overpaid health insurance contributions (via annual return), provided that the following conditions are jointly satisfied:
- no arrears on contributions collected by ZUS or arrears for unduly collected social security benefits, which the contribution remitter was obliged to return;
and
- applying for a refund no later than within the deadline specified in the Act.
Other amendments
It should be reminded that the latest revision of the Bill amending the act on personal income tax and certain other acts provides for a raft of significant changes to provisions initially set forth by the original version thereof. The most changes include:
- reducing the PIT rate for the first personal income tax bracket from 17 percent to 12 percent;
- eliminating the middle-class relief;
- introducing a limited deduction of the remitted health insurance contributions from the taxable base available to flat-tax, lump-sum tax and fixed amount tax payers;
- eliminating the obligation of double calculation of advances for 2022;
- introducing a compensatory mechanism for public benefit organizations;
- repealing a mechanism commonly referred to as “tax abolition”;
- extending the deadline for JPK_PIT and JPK_CIT forms.
The essential provisions of the proposed Draft are to enter into force on 1 July 2023.
The Draft Bill can be accessed at: Draft Bill
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