Polish Deal. Employment – tax changes

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The adopted package of amendments to tax laws referred to as the „Polish Deal” introduces significant changes in the taxation of income from employment contracts and business activity of natural persons. The new regulations enter into force as of the beginning of 2022. Below we present the most important changes for employees and persons cooperating on B2B contracts, which in our opinion deserve your attention.

General Provisions

HIGHER TAX ALLOWANCE

As announced before, the tax allowance for all PIT taxpayers will increase to PLN 30 000
(currently it is PLN 8000).

RAISING THE TAX TRESHOLD

The next change is to raise the tax threshold for entering the higher income tax bracket
from the current amount of over PLN 85 000 to PLN 120 000 p.a. Currently, taxpayers who
earn up to PLN 85 000 annually pay tax at a rate of 17%. Income exceeding the annual limit
of PLN 85 528 is taxed at 32%. After the amendment, the 32% rate will apply to income
above PLN 120 000.

HEALTH INSURANCE CONTRIBUTION DEDUCTION

In exchange for the higher tax-free allowance and the increased second tax threshold, the
government announced changes to the rules for deducting health contributions. After the
amendments, the contribution will still be 9%, but it will not be in any part tax deductible
as it is now. For high earners, this will mean a tax increase of 7.75 percentage points – the
Ministry of Finance has announced a relief for the middle class to offset the higher tax.

TAX RELIEF FOR MIDDLE CLASS

Tax relief for middle class is intended for individuals with income from 68.4 thousand PLN up
to 133.6 thousand PLN per year. It will mean that these people, despite the inability to
deduct health insurance contributions, will not pay a higher income tax.
An amendment was also introduced, according to which the tax relief for the middle class
will be available to entrepreneurs who settle according to the tax scale (originally it was
planned only for employees).

HEALTH CONTRIBUTION FOR THE MEMBERS OF THE BOARD OF DIRECTORS AND COMMERCIAL PROXIES

Pursuant to the new regulations, the obligation to pay health insurance has been extended
to persons appointed to perform functions under a deed of appointment and who receive
remuneration on this account. This means that from 1 January 2022 such persons are
obliged to pay health insurance premiums in the amount of 9% of the basis, which is the
amount of remuneration specified in the act of appointment.
This results in the necessity to register members of the management board and proxies with
ZUS institution and to submit monthly ZUS reporting. As the payer of the health insurance
premium is the company, if it does not currently perform this role, it will be necessary to
submit application documents in order to register it as a premium payer. It is also
recommended to create an information profile in the PUE ZUS tele-information system, as
the new regulations impose an obligation for all payers to have it starting from 1 January 2023.

It should also be emphasized that the legislator has not provided for any exemptions in this
respect. Non-residents residing outside Poland will also be subject to the above obligation,
unless they present a document confirming their affiliation to the insurance system in
another EU/EEA country or in a country with which Poland has concluded an agreement on
social security. For persons from EU countries, such confirmation will be the current A1 form
issued by a foreign social security authority.
As with other groups, here too the health insurance premium will not be deductible from
personal income tax.

TAX EXEMPTIONS

From 2022, there are new tax exemptions referring to:

  • parents of at least four children
  • senior citizens who, despite being 60 years old (women) and 65 years old (men), resign
    from receiving a pension or an annuity in order to continue working or running
    a business
  • people returning from abroad.

These persons, after meeting the conditions set out in the act, will not pay tax on income
amounting to PLN 85 528 annually. The total sum of income exempt from tax cannot exceed
PLN 85 528 in a tax year.

NEW DEADLINES FOR THE PAYMENT OF ZUS CONTRIBUTIONS

For most payers, the deadline for submitting ZUS reporting and paying health insurance and
social security contributions will change. For budgetary units and local government
budgetary establishments the deadline will remain unchanged – until the 5th day of the
following month.
For other contributors, the deadline will depend on whether they have a legal personality or
not:

  • by the 15th day of the following month will pay and settle for a given month among
    others capital companies (joint stock companies and limited liability companies),
    cooperatives, associations, foundations
  • other payers, e.g. those paying contributions only for their own insurance, partnerships
    (general partnerships, limited partnerships, limited joint-stock partnerships) will be
    obliged to do so until the 20th day of the following month.

COMPANY CARS

The lump sum allocated to an employee for using a company car for private purposes will no
longer depend on the engine capacity, but on its power. A lower lump sum of PLN 250 will
be charged to employees using vehicles with a power of up to 60 kW, electric cars and
hydrogen-powered cars. A higher amount of PLN 400 will apply to all other vehicles.
As a result of the changes, there will be an increase in the number of employees for whom
the binding monthly rate of declared income will be PLN 400, rather than PLN 250. This will
translate into higher income tax and social security contributions to be paid by these
persons. The income added for the use of a car will be the basis for calculating social
insurance contributions and non-deductible health insurance contributions.
It should be emphasized that the lower lump sum (PLN 250) applies only to electric cars and
does not include hybrid cars.

ILLEGAL EMPLOYMENT

The new regulations contain provisions aimed at combating illegal employment of workers
(„black economy” employment), including mainly cases of providing work without a signed
contract. From the new year, employees will not bear the consequences of illegal
employment. The provisions of the „Polish Deal” transfer the legal consequences to the
dishonest employer. The employer will have to add the employee’s salary to his business income and pay tax on
it. There is also an additional sanction in the form of additional income, i.e. for each month in
which the employer hired an employee illegally, he will have to charge income in the amount
of the minimum wage (next year it is to be PLN 3 010 per month). This income will arise on
the day when the illegal employment is established. The rules for the settlement of
insurance premiums are also changing. From 2022, the principle is introduced that the entire
burden of ZUS contributions in the case of illegal employment is borne by the employer. In
addition, these premiums will not be able to be classified as tax costs by the employer.
The new legislation also introduces incentives for employees to disclose illegal employment.
According to the new tax regulations, the employee’s income from illegal employment and
the income in the part in which the employer did not disclose it to the competent state
authorities will be exempt from tax. The exemption comes into force on 1 January 2022, but
according to the transitional provision introduced, it also applies to cases occurring before
that day.

Natural persons running a business

HEALTH CONTRIBUTION TO ENTREPRENEURS

Entrepreneurs, including sole proprietorships (self-employed persons) and partners of
partnerships await large and unfavorable changes in the rules of paying health insurance
contributions. This contribution will be calculated in the same way as for employees, i.e.
depending on the total income in a given month. Additionally, just like for employees, the
health insurance premium will not reduce the tax. Compared to the current solution, where
the contribution is flat-rate (regardless of income) and is tax deductible, it means an increase
in the effective burden on entrepreneurs. The Ministry of Finance also announced that it is
not working on changes to tax deductible costs or social security contributions.
Flat taxpayers will pay a health insurance premium of 4.9% income, but not less than
PLN 270 (the minimum amount of the health insurance contribution depends on the
minimum wage).

For people who settle with a flat-rate tax (lump sum on recorded income) thresholds will be
set, according to which people with annual income up to 60 thousand PLN will pay
a premium of 9% from 60% average wage in the enterprise sector in the fourth quarter of
2020. For companies with revenues between PLN 60 000 PLN and 300 thousand PLN, the
premium will be calculated from 100 percent of average salary, and for companies with
revenues over 300 thousand PLN from 180% of average salary.

NEW SOCIAL INSURANCE INSTITUTION (ZUS) FORMS FOR ENTREPRENEURS

Due to changes in the basis for the assessment of the health contribution for persons
conducting business activity from January 2022, the templates of the ZUS DRA and ZUS
RCA settlement (reporting) documents will change. In these documents, entrepreneurs will
provide additional information, such as the form of taxation in a given month, revenue or
income.

Other changes

  • In 2022, the amount of the limitation of the annual basis for the assessment of
    contributions for pension and disability insurance will increase from the current
    PLN 157 770 to PLN 177 660.
  • The basic allowance for the Social Benefits Fund in 2022 per employee employed under
    normal working conditions will increase from PLN 1550,26 to PLN 1662,97.
  • The minimum remuneration for work in 2022 will amount to PLN 3010 gross (increase
    by PLN 210, i.e. 7.5%). The minimum hourly rate in 2022 will amount to PLN 19,70
    gross per hour.
  • Elimination of preferential settlement for single parents and replacing it with a deduction
    of PLN 1500 per year from tax.

In case of further questions regarding this alert, please contact our TPA experts directly.

Łukasz Korbas
Partner, Accounting & Payroll Outsourcing

lukasz.korbas@tpa-group.pl


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