Zero Personal Income Tax coming in August

Polish government officials announced their plans to introduce zero percent personal income tax a few months ago, and it appears the promise is slowly becoming reality. This week, Government Legislation Centre published a draft version of the bill amending the income tax legislation accordingly.

However, the new provisions will not apply to all taxpayers. Zero tax rate will only be used in case of individuals who are no older than 26 and earn revenue from service relationship, employment relationship, cooperative work relationship, home-based work and contracts of mandate. Moreover, the government decided to introduce a threshold above which income will be taxed according to the regular fiscal scale. The limit is 85 528 PLN a year. An important thing to note is that the zero rate will not apply to revenue subject to lump sum tax.

The Ministry of Finance wants the new PIT rate to be effective starting from August 2019.  Marian Banaś, who chairs the government department, said that the goal of the new provisions is to provide stimulus for young people to seek legal employment, stay in the country and to give Polish economy a boost. It was decided that the limitation embedded in the new fiscal provisions will be equal to the first income tax threshold. This means that next year a person earning minimum salary (2250 PLN) will save approximately 133 PLN a month.

It is estimated the new PIT rate will cost approximately 476 million PLN in the first year and 1.3 billion PLN in the following years. In Poland there are currently 2 million people who are under 26 and are employed. They will be able to submit a statement about tax exemption to their employers so that the company they work for does not make monthly advanced income tax payments. If they don’t submit the statement, the payments will be refunded to them after the end of the year.