The Polish Deal went into effect at the beginning of this year. Since then, and in fact even a few months back, echoes have not been silent about the reforms “written” on the knee, which have messed up a lot, both in the treasury itself and with taxpayers and business owners. But without paying attention to whether the tax changes introduced under the Polish Deal are good or bad, it is worth recalling what the law changes in general.
The Polish Deal. Tax Changes 2022
When considering the tax changes that the Polish Deal law introduced, one can generally mention the elimination of the tax deductibility of health premiums, the PIT exemption for large families, a higher tax-free amount, or the introduction of care capital and no tax for working seniors.
No tax deductibility of health premiums
One of the most controversial changes that came into effect at the beginning of this year is the lack of tax deductibility of the health premium. It currently amounts to 9 percent and is calculated from the tax base. However, it should be noted that until the end of 2021, 7.75 percent was still deductible, meaning that in real terms it was only 1.25 percent. Starting this year, the deduction is not possible, making the tribute to the state just 9 percent (an additional 9 percent, since you have to remember the PIT itself).
Tax-free amount increased to 30 thousand zlotys
Another change under the Polish Deal, but no longer controversial, but actually praised by most politicians, tax advisors and economists alike, is the tax-free amount raised to 30 thousand. Until the end of 2021, the tax-free amount was only 8 thousand, which was nearly 4-fold lower than what we have been facing since January of this year.
Higher limit on the second tax threshold
An important tax change introduced under the Polish Deal this year is an increase in the limit of the second tax threshold. Individuals who earn less than PLN 120,000 on an annual basis will pay 17 percent income tax. Until the end of last year, the ceiling was PLN 85,528.
Those taxpayers, on the other hand, who earn more than PLN 120,000 a year, or 10,000 a month, will be charged 32 percent tax.
Relief for the middle class
A rather interesting element of the Polish Deal is also the so-called relief for the middle class that has been introduced. According to the ruling party’s program, it is to be used by employees employed under an employment contract, whose annual income does not exceed PLN 133,692. In addition to “full-time” employees, the relief for the middle class is also to be used by sole proprietors. In their case, the amount of annual income must also be between PLN 68,412 and PLN 133,692.
Read also: Polish Deal and an apartment without a contribution
However, the relief for the middle class does not include pensioners (although, according to the government’s announcement, this is to change), people employed under a contract for specific work and a contract of mandate, i.e. civil law contracts. Many experts point out that the relief for the middle class is intended to be an element of coercion to change the form of contract to an employment contract. This is because the tax savings for full-timers are visible to the naked eye.
Zero PIT for working seniors
The Polish Deal also introduced zero tax on income earned by seniors. The condition, however, is that they must relinquish their pension benefit while working. In practice, this means that the state budget is expected to gain from the fact that the pensioner will not stay at home and perform professional work.
The PIT exemption for seniors is to apply to income not exceeding PLN 115,528 on an annual basis. It is worth noting that PLN 30,000 of this amount is the tax-free amount.
Tax exemption for large families
As part of the Polish Deal, the Law and Justice government has also proposed a solution to exempt large families from paying PIT up to the amount of PLN 85,528. It is worth mentioning that a large family is considered to be a household with a minimum of four children.
The tax-free amount is to apply to each parent / guardian of the children. Significantly, the relief is directed both to persons performing work on the basis of an employment contract, but also a contract of mandate or contract for specific work, i.e. typical civil law contracts. The relief for families with many children is also to be used by persons conducting business activity, as long as they settle accounts on the general basis.
Family Care Capital
Quite important from the point of view of families, the change introduced as part of the Polish Deal is also the establishment of the so-called Family Care Capital, from which parents of children aged 12-36 are to receive an additional benefit of PLN 12,000. The amount is to be paid in 12 or 24 monthly tranches, to be decided by the parents of the child for whom the money will be allocated.
The Family Care Capital is available to all families, regardless of income. Similar to 500 plus, the money will not be taxable.