The “Polish Deal” (Polski Ład)

10 tax changes important from the employers and individuals’ perspective

A number of changes, collectively referred to as the "Polish Deal" (Polski Ład), was announced on May 15, 2021. We present below a list of these proposals that may have the greatest importance from the perspective of employers and individuals in Poland.

At the moment, the relevant draft acts have not been published, therefore the list is prepared on the basis of the program’s assumptions presented during the conference, information available on the website of the Ministry of Finance and our own analyzes.

1. The health insurance contribution of individual entrepreneurs is to be calculated based on the income actually earned

This is a breakthrough change in the Polish mandatory health insurance system. Until now, individual entrepreneurs had the option of paying the contribution based on a specific self-declared assessment basis, which in fact led to the settlement of the health insurance contribution in a lump-sum manner (in 2021 the contribution generally amounts to PLN 382 per month, i.e. PLN 4 584 per year). The announced change is to introduce the obligation to pay health insurance contributions for individuals running a business activity according to the same rules as in the case of employment contracts (in proportion to the income actually earned). 

The impact of this change on entrepreneurs declaring income from business activity is presented in the following table.

Business activity income
[in PLN]

Net income 2021*
month / year
[in PLN]

Net income 2022*
month / year 
[in PLN]

Difference
month / year
[in PLN]

8 000 monthly /
96 000 annually

5 556 / 66 668

4 986 / 59 827

-570 / -6 842

12 000 monthly /
144 000 annually

8 796 / 105 548

7 866 / 94 387

-930 / -11 162

20 000 monthly /
240 000 annually

15 276 / 183 308

13 626 / 163 507

-1 650 / -19 802

* For the estimation purposes, the potential costs of earning revenues from business activity were not taken into account. The calculated amount of net income takes into account only the burden of social security (ZUS) contributions and personal income tax reconciled with 19% lump-sum tax without the tax free  amount and no possibility to deduct the health insurance contribution from the tax in 2022 (see point 2 below).

2. Elimination of the possibility to deduct health insurance contribution from tax

This change basically applies to every person insured and paying social security contributions, but it will be most noticeable for individual entrepreneurs running a business activity and earning significant income. In the case of taxpayers with progressively taxed income (tax scale: e.g. employees, contractors, individuals employed under the basis of managerial contracts or running business activities taxed under general rules), the change will be noticeable even at gross income above PLN 6 000 per month. At the same time, the Polish Deal indicates plans to introduce an additional tax relief for employees earning income under a contract of employment in the range between PLN 70 000 and 130 000 per year.

The simulation below shows the effects of the proposed changes for highly paid specialists (with an income above PLN 130 000 per year) employed under employment contracts.

Employment income
[in PLN]

Net income 2021
month / year
[in PLN]

Net income 2022
month / year
[in PLN]**

Difference
month / year
[in PLN]

12 000 monthly /
144 000 annually

8 066 / 96 803

8 114 / 97 371

+ 47 / + 568

16 000 monthly /
192 000 annually

10 579 / 126 951

10 340 / 124 083

- 239 / - 2 868

20 000 monthly /
240 000 annually

13 183 / 158 206

12 642 / 151 709

- 541 / - 6 497

** For estimation purposes it was assumed that the tax-free amount of PLN 30 000 would apply to all taxpayers (regardless of the amount of income).

3. Tax-free amount of PLN 30 000

The new tax-free amount for all taxpayers was also announced under the Polish Deal. Currently, in the case of persons whose income is subject to progressive taxation, the tax free amount is progressively decreasing and no longer applies to individuals with an income above PLN 127 000. Unfortunately, it was not confirmed that the new tax free amount would apply to income from business activities settled in a linear manner.

 

4. The tax threshold for 32% of the tax rate is PLN 120 000

The 32% tax rate would apply to income over PLN 120 000. Currently, it applies to the income exceeding PLN 85 528.

 

5. Restrictions on the use of "junk contracts"

The program announces that the use of civil law contracts will be limited by introducing the obligation to pay full social security contributions on the personal service contracts, followed by the introduction of one contract of employment in the future. In addition, since the tax relief for people with incomes between PLN 70 000 and 130 000 (see section "Elimination of the possibility to deduct health contributions from tax") is intended only for employees, the conclusion of a personal service contract may turn out to be unfavorable - with comparable amounts of income, it may lead to to significantly lower net remuneration received under the mandate contract.

 

6. Regulating remote work, which is to enter the labor code permanently

It is planned to implement provisions enabling the performance of work from any place, using the equipment provided by the employer. To facilitate the organization of remote work, a lump sum formula for remote work is to be proposed and health and safety issues in remote work conditions are to be properly regulated. The principles of performing remote work will be defined in an agreement concluded between the employer and company trade organizations, and if such an agreement is not concluded or there are no trade unions at the employer - in the regulations established by the employer. The regulations will also apply to the costs related to the provision of remote work by an employee.

 

7. Close the gender pay gap

A commitment for large companies to justify - upon the employee's request - the reason for the payment of the specified salary within 30 days. Employees will also have the right to request information on the average earnings of people of the opposite sex performing the same or similar duties.

The government also plans to strengthen anti-discrimination education.

 

8. Capital return program

A program for Poles who have assets or hidden income abroad. As a part of the program, the abolition law allowing for the return to Poland with property and income, is to be introduced.

 

9. Tax relief on return from emigration

Poles returning to the country from 2022 will be able to increase the taxable basis in their tax returns by PLN 50 000. A similar possibility is also expected for 2023.

 

10. Lump sum tax on foreign revenues

This is a solution for non-residents who decide to transfer their tax residence to Poland. In such a situation, the non-resident is to pay a fixed lump sum tax in Poland on foreign income.

Contact us

Katarzyna Komorowska

Katarzyna Komorowska

Partner, PwC Poland

Tel: +48 519 504 001

Jadwiga Chorązka

Jadwiga Chorązka

Director, PwC Poland

Tel: +48 502 184 056

Joanna Narkiewicz-Tarłowska

Joanna Narkiewicz-Tarłowska

Director, PwC Poland

Tel: +48 22 746 4764

Katarzyna Rzeżnicka

Katarzyna Rzeżnicka

Senior Manager, PwC Poland

Tel: +48 519 504 406

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