The tax turmoil that the Polish Deal caused us this year is not over yet. The moment is rapidly approaching when it will turn out which form of taxation will be more beneficial for us. Regular taxpayers will move between the four PIT versions, and companies will have to check as many as five to decide what is more profitable for them.
In Polish Deal 2.0 it is guaranteed that taxpayers will have the right to choose a form of taxation that is more favourable to them. You will have to choose between the settlement on the principles from January this year, i.e. the so-called relief for the middle class and the version of taxation in force from July. The decision depends on which way will leave more money in our wallets.
For a moment, it even seemed that the choice for settlement would be between three tax systems:
- including from 2021,
- the ones from the first half of 2022 with a relief for the middle class,
- those from the Polish Deal 2.0 in force from July without tax relief, but with a rate of 12 percent. the first tax threshold
Ultimately, however, the provisions only allow for the last two options. This, however, raises some problems, let’s call it “logistic” and time-consuming.
A more favourable form of taxation. Which one is it?
In order to find out which tax system will be more beneficial for us, we must count and compare the different versions. In the case of entrepreneurs, this means the need to fill in PITs in five versions, and in the case of natural persons – in four. Why so many?
First, there are two types of taxation: the first and the second half of the year . Secondly, we can settle accounts individually or with our spouse . In the case of entrepreneurs, this set also includes a selection of taxation rules from the set: tax scale, flat tax or lump sum on revenues.
Theoretically, the matter is to be partially resolved, because the tax office is preparing an improvement for taxpayers that will solve some of the above-mentioned problems. We will submit one PIT tax return, and the office will return the overpayment to the version that is best for us.
Why “theoretically”? First of all, you have to remember that tax offices are also wrong, and secondly, entrepreneurs still have to choose the form of taxation. The tax office will not do it for them. Or differently: it will do, but without looking at what is most beneficial for a particular taxpayer.
“This year, the taxpayer earning income according to the scale will not have two types of settlement (from the first or second half of 2022 – ed.). If the tax due shown by the taxpayer in the PIT-36 declaration (business activity settled in PIT – ed.) Or PIT- 37 (salaries of natural persons – ed.) Will be higher than the hypothetical tax – which the National Revenue Administration will calculate itself, applying the “old” tax scale with rates of 17% and 32% to the income shown by the taxpayer, and the so-called middle class relief – the taxpayer will receive a refund of the resulting difference , informs the press communication department of the Ministry of Finance.
It was indicated that work is currently underway on the development of software that will automate the process of converting tax amounts and possible returns so that the taxpayer does not lose the so-called liquidation. allowances for the middle class .
After the tax office is received by the tax office, the income from the service relationship, employment relationship, homework, cooperative employment relationship and non-agricultural business activity will amount to PLN 68,000. PLN 412 to PLN 133 thousand PLN 692 (the limits of the middle class relief – ed.), The IT tool currently under development will automatically calculate the hypothetical output tax. If the hypothetical output tax calculated by KAS is lower than the tax payable indicated by the taxpayer in the tax return, the taxpayer will receive a refund of the tax difference.
The Ministry indicated that within 21 days of submitting the tax return, we will receive information from the tax office about the amount to be refunded. In other words, the taxpayer does not have to worry and count, she/he sends PIT from one form, and the tax office will calculate everything. Provided that he/she has confidence in the calculations of the tax office and is not an entrepreneur.
Five PIT forms for entrepreneurs
– There have already been cases of incorrect calculations of tax offices. However, it is better to check it just in case – tells us Piotr Juszczyk, chief tax advisor at the inFakt accounting and technology company.
He also points out that in the case of entrepreneurs, individual checking of the optimal version will be necessary before submitting the tax return, because the choice of PIT: PIT-36 (general rules), PIT-36L (linear) or PIT-28 (flat rate) is also the choice of a specific form of taxation: on a tax scale, flat or flat rate tax. And it cannot be undone.
– Entrepreneurs paying flat tax and lump sum tax may, after the end of the year, change the form of taxation for 2022 to a tax scale. In addition, lump sums could change their form of taxation in the middle of the year, settling their income for the first half of the year on a lump sum, and for the second half – on the scale – describes Piotr Juszczyk.
– It is definitely worth noting that you should not rush to file your PIT for 2022. Submitting your PIT closes the way to choosing a tax scale – suggests an inFakt expert.
At the same time, companies operating in the legal form of a natural person will have a choice of five settlement options . In other words, they will have to complete five PITs to see which ends up with the lowest burden.
The first thing is the possibility of choosing the version of taxation from the first or second half of 2022. The second is that both PITs must be considered for the version of joint settlement with the spouse and individual. Finally, the entrepreneur has to consider switching from one form of taxation to another, which will be more advantageous, i.e. from a tax scale to a flat or flat rate, from a flat rate to a tax scale or a lump sum, and finally from a flat rate to a flat rate or tax scale.
Only by completing all types of PITs, the entrepreneur will be sure which form of taxation will be optimal for him. All this is the result of the great confusion with the reform of the tax system to one that will enable self-financing of the health care system from contributions.
The epic of the Polish Deal
This year, a lot has happened in terms of income tax and a lot of bad stuff. First, we had the Polish Deal 1.0 with the free amount of 30,000. PLN and a tax threshold of 120 thousand PLN , but with the inability to deduct most of the health insurance premium (9 percent) from the tax. The Ministry decided to compensate for the losses with relief for the middle class.
When it became clear how controversial the way tax withholding was collected, teachers showed their payslips and the internet ridiculed the complicated formula for calculating middle-class tax relief, the first patch was introduced.
One week after the debut of the Polish Deal 1.0, the provision on the possibility of settling tax advances according to the rules of 2021 was introduced. Teachers’ salaries showed that the issue of advances during the year was ill-considered. When those collected according to the new rules turned out to be unfavourable, then the tax office returned the overpayment.
Since July, the Polish Deal 2.0 has been repairing the relief for the middle class, specifically throwing it into the dustbin of the tax system , introducing a lower rate in the first tax threshold (from 17 to 12 percent) and restoring the possibility of deducting half or 19 percent of the health contributions of entrepreneurs.
Ultimately the system took shape and we have income burdens at the following levels:
- up to 30 thousand PLN – 9 percent (health care contribution),
- 30 thousand – 120 thousand PLN – 21 percent (12% tax and 9% health insurance),
- 120 thousand PLN – PLN 1 million – 41 percent (32% tax and 9% health insurance),
- over PLN 1 million – 45 percent (32% tax, 9% health insurance, 4% solidarity levy).
Changing the form of taxation will not be profitable for everyone and there are many additional circumstances.
Lump sums will deduct half of the health insurance premiums paid from your income. Companies will deduct 19 percent on the tax contributions.
People who pay with a linear taxation pay a fixed 19% tax on income, however, they will be able to pay a health insurance premium of 4.9 percent operating income, and not 9 percent. Additionally, they will be able to deduct the premium from their income or count it towards tax deductible costs. The deduction limit is 8700 PLN per year and above this amount, contributions can no longer be deducted/recognized as costs.
The second method, i.e. including health insurance premiums in costs, will be important especially when the taxpayer has low income or even losses, because then the loss thrown into the costs of premiums can still be accounted for in the profits from the next five years.
Get an accountant to help you out
But as always it is a very good idea to get an accountant to help you out because the Polish tax system is very complex as you can see. You can fx for free via Business in Poland Mastermind group on Facebook get accountan recomendations and much more business in Poland relevant information there – all for free!