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Renata Kabas-Komorniczak

Tax adviser (Poland)
Partner
Branch manager
Phone: +48 22 696 28 00
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No more PIT for the young under 26

New personal income tax regulations will come into force on 1 August 2019 to, among other things, abolish PIT for individuals until they turn 26 years of age.

The new act exempts from tax the income from a service relationship, employment relationship, outwork, cooperative employment relationship and contracts of mandate, which are currently the most popular forms of employment. The tax exemption will not apply to income from e.g. contracts for specific work or self-employment.

The exemption will have a ceiling:

  • from 1 August 2019, the exemption will apply to income of up to PLN 35,636.67;
  • from 1 January 2020, the annual ceiling will be PLN 85,528 (which equals the first tax bracket).

The bill stipulates that the exemption will come into force on 1 August 2019 and will apply to income earned from that day on.

Decisive for the exemption will be the taxpayer’s age on the date of earning the income, counted from the full date of birth (day, month, year). The ceiling will apply regardless of the number of contracts or payers.

The exemption will be available to individuals until they turn 26 and will be effected in the annual tax return which they file for 2019 (which means that income tax advances will still need to be paid from 1 August 2019 to 31 December 2019). 

An alternative for an individual under the age of 26 will be to submit a statement to the withholding agent saying that the income earned from 1 August 2019 to 31 December 2019 is entirely exempt from tax. Such a statement will exempt the withholding agent from the obligation to deduct income tax advances.

 

We would like to draw your attention to the effective date of the new rules: beginning of August. This means that employers have to quickly and efficiently adapt their HR and payroll systems to account for PIT advances properly. They have to take into account both the ceiling (different in 2019 and 2020) as well as the age of the employees (broken down into those under 26 and older). The liability for correct deduction of tax advances rests with withholding agents. 

Please note that the PIT exemption of individuals under 26 does not waive the employer’s obligation to pay mandatory social and health insurance contributions on their income.

Reduced tax rate and higher tax-deductible costs

Moreover, the new reduced PIT rate (from 18% to 17%) will become effective and personal tax-deductible costs of employees will at least double from 1 October 2019. The reduced PIT rate of 17% will be available to all taxpayers who follow the tax scale and will apply to income earned from e.g.:

  • an employment relationship;
  • work performed personally, including under contract of mandate and contract for specific work;
  • a business activity conducted by individuals, including in partnerships;
  • retirement and disability pension;
  • property rights.

Details of the new rules concerning the reduced PIT rate and labour costs (through higher employees’ tax-deductible costs) are laid down in the bill of 19 July 2019 amending the Personal Income Tax Act and the Act amending the Personal Income Tax Act and certain other acts (legislative work is currently pending in the lower chamber of the Polish parliament (Sejm). 

 

If you have any questions or doubts about the abolishment of PIT for the young under 26 years of age, the reduced PIT and higher tax-deductible costs of employees, Rödl & Partner will be glad to help.

 

Reduced tax rate and higher tax-deductible costs

Moreover, the new reduced PIT rate (from 18% to 17%) will become effective and personal tax-deductible costs of employees will at least double from 1 October 2019. The reduced PIT rate of 17% will be available to all taxpayers who follow the tax scale and will apply to income earned from e.g.:

  • an employment relationship;
  • work performed personally, including under contract of mandate and contract for specific work;
  • a business activity conducted by individuals, including in partnerships;
  • retirement and disability pension;
  • property rights.

Details of the new rules concerning the reduced PIT rate and labour costs (through higher employees’ tax-deductible costs) are laid down in the bill of 19 July 2019 amending the Personal Income Tax Act and the Act amending the Personal Income Tax Act and certain other acts (legislative work is currently pending in the lower chamber of the Polish parliament (Sejm). 

If you have any questions or doubts about the abolishment of PIT for the young under 26 years of age, the reduced PIT and higher tax-deductible costs of employees, Rödl & Partner will be glad to help.

01.06.2019