From 1 July, the mechanism of rolling over the income tax advances will no longer function. The Polish Deal 2.0, which will come into force in July, changes the rules for collecting advances.
The Polish Deal introduced a lot of confusion in taxes and has been criticised a lot. The enormous reform, passed hastily, contained a series of errors that are not to be rectified until July 1. One of the changes introduced by the Polish Order was the mechanism of the so-called rollover of advances for income tax.
Who was affected by the “rollover of advances”?
The new system applied to people who obtained income: from an employment relationship, employment relationship, homework or a cooperative employment relationship. And also those who receive cash benefits from social insurance paid by work establishments or payments for participation in the balance surplus in labor cooperatives. The provisions on rolling down advances applied when the employee’s monthly income did not exceed PLN 12,800.
After changes to the regulations introduced by the Polish Governance, HR and payroll teams had to perform double work. They were required to calculate PIT advances for employees according to two methods. According to the rules of the Polish Order and the rules in force until December 31, 2021, the employer was required to compare and check which tax advance payment was lower.
If the PIT advance payment calculated according to the rules in force in 2021 was lower than the one calculated according to the rules from 2022, only the lower advance payment was deducted from the employee. The difference in advances had to be “rolled up” .
“If the advance payment calculated according to the old rules, i.e. with the reducing amount of PLN 43.76 and with the tax threshold85 thousand PLN 528 is lower than the advance payment calculated on the basis of the new rules – i.e. with the decreasing amount of PLN 425 and the tax threshold of PLN 120000, respectively. PLN – then a “surplus” is created, which is not collected in the month of its calculation, but only when the “negative difference” occurs. This “negative difference”, i.e. the advance payment calculated according to the rules of 2022, being lower than the advance payment calculated according to the rules of 2021, is collected either in the month of the negative difference – but only up to the amount of this difference in a given month, or – if such a situation does not occur – settled independently by the taxpayer in the annual tax return” – explained Monika Smulewicz, managing director of accounting, human resources and payroll outsourcing at Grant Thornton in a comment to the regulations.
These regulations meant that each employee situation had to be carefully and individually analysed .
What will change from July with the Polish Deal 2.0?
On July 1, the act amending the Polish Deal 2.0 will come into force. With it, the advance rollover system disappears. “From July, only one system will apply. The employer will withhold tax at the rate of 12%. for people whose income has not yet exceeded 120000 PLN or 32 percent. for those who have already crossed this border” points out Małgorzata Samborska, partner, tax advisor at Grant Thornton.
Changing the tax rate also means changing the so-called tax-reducing amount . By the end of June 2022, this amount is PLN 5,100, which translates into a tax reduction of PLN 425 every month (provided that PIT-2 has been submitted). From July 1, the tax reduction amount will be PLN 3,600 (i.e. PLN 300 per month).
Małgorzata Samborska reminds that the employer will not settle advances, the payment date of which has been postponed as part of rolling advances, but there will also be no adjustment of advances for the periods from January to June, despite the fact that the rate of 12%. will apply from the income earned from the beginning of the year.
“Any differences, most often tax refunds, but there will also be additional payments, will be settled only in the annual tax return” she says.
She adds that the reduction in the tax rate means that in the case of those people whose advance tax has been rolled over, in many cases there will be no reduction in net remuneration in the last months of the year, when, without introducing changes from July, we would have to pay definitely higher tax advances.
The expert calculated what the salary of a single person under a contract of employment will look like, who uses basic tax deductible costs, does not belong to the PPK and has submitted PIT-2 Changes of such an employee in the net salary from July compared to the salary from June will be as follows: