Polish Deal: Tax relief (PIT-2) vs middle-class tax relief
January 17, 2022
ATTENTION! The PIT-2 statement regarding the tax relief should not be confused with the middle-class tax relief. These are two different allowances that still raise doubts in the context of the Polish Deal. In this article, we explain the differences that can be introduced to employees at your company.
Tax relief (PIT-2)
A person employed under an employment contract may submit a PIT-2 declaration in order to calculate monthly advances for personal income tax. The employee submits the declaration only when information has changed due to: an income from business activity, income from retirement or disability pension, income obtained in connection with employment by another employer. There is no need to submit a PIT-2 statement in 2022, if none of the above information has changed.
In 2021, the amount reducing the income tax advance was PLN 43.76 per month. From 2022, the amount reducing the income tax advance is PLN 425.00 per month, i.e. 1/12 of PLN 5,100.00. To be effective, the PIT-2 declaration must be submitted by the employee before the first payment in a given tax year. However, the Minister of Finance announced that he would issue a regulation according to which the employee will be able to submit a declaration at any time and then the employer will be obliged to reduce the advance on income tax when calculating the first remuneration after its submission. If the employee does not submit a PIT-2 statement, the monthly advance income tax payment will not be reduced by PLN 425.00. The employee may reduce the advance income tax payment by an annual amount, i.e. PLN 5,100.00 in the annual tax return for 2022, i.e. in 2023.
Middle-class tax relief
As it is no longer possibile to deduct, from the tax, health insurance contribution in the amount of 7.75% of the calculation basis, the “Polish Deal” introduces instead a possibility of taking advantage of the tax relief for the middle class.
An employee with a monthly gross income of:
- not less than PLN 5,701.00,
- and not more than PLN 11,141.00.
and an annual income:
- above PLN 68,412.00,
- however, not more than PLN 133,692.00
may take advantage of the middle-class tax relief. The gross amount does not include sickness / care / maternity / rehabilitation benefits financed by the Social Insurance Institution. The middle-class relief reduces the taxable income by the amount calculated according to a special algorithm.
The monthly deduction of middle-class tax relief may in some cases result in a surcharge in the annual settlement. This happens when an employee achieves a lower or higher annual income, even though he assumed that this would not be the case at the beginning of the year. This mainly applies to people who:
- are employed on several positions,
- earn less than PLN 5701 gross and receive additional bonuses irregularly,
- only work for certain months of the year,
- have irregular income.
The amount of the aforementioned relief is changeable. The relief included by the employer in advance payments may be completely different from the relief in the annual settlement. The reason is that the payer provides in advance payments only the income obtained in a specific month, with a specific employer. The middle-class relief is applied automatically. If the employee does not want the relief to be applied, he / she should submit a request to the employer not to apply it. This application only applies to the middle-class tax relief during the year. The employee will still be able to apply the middle-class allowance in the annual settlement. To sum up, if we cannot predict whether the salary will exceed the threshold specified in the act, it is safer to withdraw from the middle-class tax relief and submit an application, and to settle this relief in the annual tax return. This way, we will avoid surcharges.
Author: Anna Pawłowska
Tags income tax relief Polish Deal, middle-class tax relief, tax relief PIT-2, ulga dla klasy średniej, ulga podatkowa PIT-2, ulga podatkowa Polski Ład
