As part of its wider social spending programme, in July 2019 the Polish government passed a bill which effectively abolished income tax for the majority of young workers in the country. The bill was endorsed by Poland’s parliament in early July, and will come into effect from 1 August 2019.
Addressing Labour Challenges
The exemption bill was a campaign promise of Poland’s ruling Law and Justice Party. Prime Minister Mateusz Morawiecki recently stated that Poland had “demanded too much from young people and… not helped them enough”, while Finance Minister, Marian Banaś argued that making it easier for businesses to employ workers on relatively lower wages would “allow young people to have an easier start on the job market.''
In contrast, some critics have labelled the bill a populist measure designed to win votes without addressing the main obstacles to young people entering the workforce: mainly a lack of qualifications and poor family/work-life support.
Dealing with a Skill Exodus
The new tax regime isn’t just a measure to stimulate the employment market, but also a response to the economic migration of skilled workers from Poland to western Europe, which began in the late 20th century with the fall of communism. In 2019, the exodus of young workers is threatening to damage Poland’s long-term economic growth as demographics are unbalanced and employees struggle to find personnel for critical roles. Research by the United Nations suggests that Poland’s population could drop by 40% by 2050 if the trend continues,
The tax legislation is set to benefit around two million Polish workers but, with the August deadline on the horizon, employers in Poland will need to adapt quickly to implement the new rules…
How Does the New Tax Rule Work?
Essentially, under the new rules, all workers in Poland under 26 years old are exempt from paying income tax. In more detail:
● Eligible employees are exempt from paying the standard 18% personal income tax on gross annual earnings up to 85,528 Polish zlotys (equivalent to €20,072 or around £18,000).
● Income over 85,528 zlotys will be taxed at the normal rate of 32% regardless of the employee’s age.
● Poland’s average income is estimated at around 60,000 zlotys, meaning the potential savings for young workers are significant.
● Polish entrepreneur business-owners under the age of 26 will not benefit from the income tax exemption.
Claiming Tax Exemption
Although everyone under the age of 26 qualifies, young workers won’t be adjusted to tax exempt status immediately - unless they complete an administrative process before 1 August 2019:
● To exercise their right to tax exemption immediately, employees must submit a statement to their employers that their wages for the year won’t exceed the 85,528 zlotys threshold.
● In 2019, that statement will cover the remainder of the year: accordingly, employees must declare that their wages from 1 August to 31 December will not exceed 35,636.67 zlotys (5/12 of the 85,528 zlotys allowance).
● Once the employer receives the statement they can direct their payroll to cease the deduction and withholding of income tax from the employee’s remuneration.
Alternatively, eligible employees can continue to be taxed as normal, and wait to the end of the year to receive an income tax refund after completing their 2020 tax returns. Employees who do not submit a wage statement on time will receive their exemption refund in this way.
Find out more about Polish tax and social security rules by browsing activpayroll’s dedicated Global Insight Guide to Poland.
FAQs
Personal income tax – rates. The tax rates applicable for income derived in 2023 are: annual taxable income up to PLN 120,000 is taxed at 12% annual taxable income above PLN 120,000 tax is PLN 10,800 + 32%
What is the new tax rule in Poland? ›
Entrepreneurs who in 2022 decided to settle taxes according to flat tax or lump sum, will be exceptionally able to change this form of taxation to the general rules during the year. This results from the change in the amount of the first tax threshold (a decrease from 17% to 12%).
What is pit 2 in Poland? ›
The PIT-2 employee's declaration, which authorizes the employer to reduce PIT advances by the amount that reduces the tax, is submitted at the time of commencement of employment with a given employer, before the first payment is made. This declaration is valid until revoked by the employee. It is not folded every year.
How much tax do I pay on rental income in Poland? ›
The tax rate is 8.5% for rental income up to 100 000 PLN, and 12.5% for income over 100 000 PLN. In the past, the income tax rates ranged from 17% to 32% under the progressive scale method. You won't be able to deduct any expenses. Before 2023, you were able to deduct all applicable expenses.
What to expect in 2023 taxes? ›
Changes for 2023
When you file your taxes this year, you may have a lower refund amount, since some tax credits that were expanded and increased in 2021 will return to 2019 levels. The 2023 changes include amounts for the Child Tax Credit (CTC), Earned Income Tax Credit (EITC), and Child and Dependent Care Credit.
Will income tax be different for 2023? ›
There are seven tax rates: 10%, 12%, 22%, 24%, 32%, 35% and 37%, the same as in tax year 2022. The income thresholds for the 2023 tax brackets were adjusted significantly — up about 7% from 2022 — due to the record-high inflation. This means that some people might be in a lower tax bracket than they were previously.
How much income is tax free in Poland? ›
Personal income tax rates. * In the case of income up to PLN 120,000, the tax is 12% minus the amount decreasing tax, which is PLN 3,600 (i.e. 12% of PLN 30,000, which is the tax-free amount of income). The tax-free amount is set at PLN 30,000 and was introduced as of 1 January 2022.
How much tax will I pay in Poland? ›
The basic tax rates applicable in Poland are 12% and 32%. The 12% rate is used if the tax base does not exceed PLN 120 000. The 32% rate is used if the tax based exceeds this amount. The tax 12 % is additionally reduced by a degressive tax-reducing amount 3600 zl.
How is tax calculated on salary in Poland? ›
If you make 50 000 zł a year living in Poland, you will be taxed 12 973 zł. That means that your net pay will be 37 027 zł per year, or 3 086 zł per month. Your average tax rate is 26.0% and your marginal tax rate is 36.2%.
What can you do with pit-11 in Poland? ›
Payers are obliged to submit PIT-11 electronically to the tax office by the last day of January. In 2023, the deadline is 31 January. An employee, on the other hand, should receive a PIT-11 from the payer by the last day of February, this can be done electronically or on paper, and in 2023 the deadline is 28 February.
There are various PIT forms marked with different numbers but the most common form is PIT-37 for employees who do not run their own business and did not have any income from other countries in 2022. Detailed information on taxes is published in English on podatki.gov.pl.
What is pit 36L in Poland? ›
Form PIT-36 – for income obtained abroad; own business activity taxed on general principles; non-registered work activity (plus the income mentioned above, if applicable). Form PIT-36L – income from business activities taxed with the 19% flat tax.
Do you pay property taxes in Poland? ›
Poland Property taxes ongoing for the property investor
The tax rate for an individual is between 18% - 32%. Individuals have the choice of paying a progressive taxation, which is applied to income minus expenses or a lump sum method, which is levied at a lower tax rate, but applied to the income.
Is there capital gains tax in Poland? ›
There is no separate capital gains tax in Poland.
Capital gains are taxed with corporate income tax at rate of 19%. Nonetheless profits derived from capital gains and ongoing operating incomes are subject to Corporate Income Tax in Poland separately.
What is the new 2023 income tax? ›
There are seven federal income tax rates in 2023: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. The top marginal income tax rate of 37 percent will hit taxpayers with taxable income above $539,900 for single filers and above $693,750 for married couples filing jointly.
What is the economic situation in Poland 2023? ›
Over the next two years, economic growth will be relatively low. We expect the Polish economy to grow by just 0.8% in 2023 and 2.2% in 2024. The period of higher inflation will be longer than we anticipated in December. The average price increase in 2023 will amount to 12.6%.
What is the CIT rate in Poland 2023? ›
Corporate Tax Rate in Poland is expected to reach 19.00 percent by the end of 2023, according to Trading Economics global macro models and analysts expectations. In the long-term, the Poland Corporate Tax Rate is projected to trend around 19.00 percent in 2024, according to our econometric models.
What is the projected annual change in GDP 2023 Poland? ›
Poland's economic growth is projected to decelerate to 0.7% in 2023, from 4.9 % last year.
